Tag: ChannelWatch

Channel consolidation causes headaches for resellers

Woodridge, IL, USA --- Great White Shark Opening Mouth --- Image by © Denis Scott/Corbis

Woodridge, IL, USA — Great White Shark Opening Mouth — Image by © Denis Scott/Corbis

Channel consolidation has stepped up and leading resellers are worried about pricing and procurement costs.

The latest CONTEXT ChannelWatch Survey, which profiles the views, activities and intentions of 7,500 global resellers, revealed that over 30 major distributor M&A deals have taken place in Western Europe in the past 18 months.

Across 20 EMEA countries there was a three percent year-on-year reduction of active resellers in the 90 day period in March to May 2017, according to CONTEXT’s Reseller Count Metrics tracking.

The report warns that if this carries on the reseller landscape will soon be unrecognisable.

The average number of distributors which resellers are buying from has also dropped from the five to 10 range in the last report period to just two to three this year, partly driven by the rise in purchases from retailers, according to CONTEXT.

Many more distributors have ceased trading altogether across the globe, while those that survive are being forced to move away from box-shifting towards holistic strategies focused on services and solutions.

Where margins used to reach double figures, half a percentage point now matters and this increases the importance of controlling costs, having well-oiled logistics, and looking for new, higher-margin opportunities, the report claims.

CONTEXT global managing director Adam Simon said that most consolidation has occurred in the long tail of smaller players and those in consumer channels, but larger resellers and retailers are merging too.

“This activity can also be viewed in the context of increasing reseller churn, especially associated with transitioning business models linked to cloud adoption.

“The main concerns of resellers are focused around rising pricing and procurement costs, which many believe will be the natural outcome of a consolidating market”, Simon added.