How Distributors Conquer New Markets

The heyday of electronics distribution expansion was undoubtedly the 1990s, when top-tier players {complink 453|Arrow Electronics Inc.}, {complink 577|Avnet Inc.}, and VEBA made acquisitions that positioned them around the globe. North America-based Arrow and Avnet moved into Europe and Asia; Germany's VEBA moved into the US.

A second wave of expansion has been happening more slowly and with less fanfare in the past 10 years as companies round out their global presences. Distributors expand primarily in two ways: by greenfielding (opening offices in foreign locales); or by acquisition. Asia's World Peace Group, which has opened offices in North America; {complink 2164|Future Electronics} and {complink 12888|TTI Inc.}, which have expanded into Europe and Asia; and catalogue distributor {complink 12816|Mouser Electronics Inc.} are among those that use the greenfield approach.

Mouser, for example, opened six new offices in 2011 to bring its global total to 19. “We've opened offices in Sweden, the Netherlands, the Czech Republic, Taiwan, India, and Thailand in 2011,” says Kevin Hess, vice president of technical marketing for Mouser. “Those are areas where we already have customers and see the greatest opportunity for growth.”

Mouser focuses intensely on the design and engineering market. A classic catalogue distributor specializes in low-volume, high-mix orders for design, engineering, and prototyping. In theory, a catalogue can support a global customer base through a single mega-warehouse location staffed by sales and support personnel 24/7.

Mouser is taking a different approach. Each of its offices is staffed with sales and marketing staff and technical support. These staffers work in the same time zones, the same language, and in the same currency as their local customers. “We want to support our customers during the hours they are working,” says Hess. “They don't have to figure out what time it is somewhere else so they can place an order before the close of the business day.”

Mouser's Website also provides foreign language and foreign currency options, but the company feels strongly about having a local presence. “We feel that we should engage with our customers anywhere and at any time they need,” says Hess. “Particularly when it comes to technical support.”

Orders are managed through Mouser's central warehouse in Mansfield, Texas, which provides expedited delivery options. Since the company is committed to having new products on its shelves before the products are even announced, maintaining inventory carries some risk: Mouser sometimes announces three or four new products a day. “We realize that it is a value to our suppliers that we focus on and carry their new products,” says Hess. “Maintaining good relationships with our suppliers means that sometimes inventory has to be moved around or returned. That's a risk we are willing to take.”

The global aspect of electronics distribution is becoming increasingly complicated as foreign companies compete with indigenous distributors in all regions of the world. In the next few months, EBN will be looking at how the channel is shaping up in the globe's major electronics regions and how those profiles may change over the next 10 years.

14 comments on “How Distributors Conquer New Markets

  1. _hm
    February 23, 2012

    If these distributors take support from freelancers, they can accelerate their growth in this emrging market.


  2. mfbertozzi
    February 24, 2012

    Well, _hm, going further and in line with your approach, while we are living in the “Internet era”, do you think “Internet-Freelancers” ecosystem could help distributors in achieving their target on the market?

  3. t.alex
    February 24, 2012

    _hm, how can distributors engage freelancers? Helping customers choose the components?

  4. Barbara Jorgensen
    February 24, 2012

    Distributors in foreign markets sometimes engage the help of manufacturers reps, which might be the channel's equivalent of freelancers. The reps do focus on a few, select lines, but don't have the same competitive issues as distributors, that carry competing lines. Those relationships usually work well for both parties, becuase reps don't awlys carry stock. So, if the rep makes a sale, the distributor ships the stock.

  5. Eldredge
    February 24, 2012

    I like Mousers' approach – it seems very customer service oriented, and I think it will work well for them.

  6. bolaji ojo
    February 24, 2012

    Barbara, The blog discussed distribution's growth strategy from the parts business. What are they doing to expand business globally in the areas of value-added service? How effective do you think they have been or will be in this area?

  7. Barbara Jorgensen
    February 24, 2012

    Funny you should mention that! I've actually prepared a blog on that topic. Briefly, though, most of the value-added efforts are taking place on the front-end of the relationship: providing design and engineering assistance to OEM customers. This is in addition to the standard order fulfillment and logistics services distrbutors already provide. And they are working on strategic supply chain prodcuts and packages, whihc I will blog about next week.

    Most of these services are being rolled out globally, BTW. Distributors want to provide the same expereince for their customers whether they are in Dallas or Beijing.

  8. _hm
    February 24, 2012

    Basically, these freelancers are accomplished designer, application engineer with very good inclination towards marketing and commerce. They can provide all services similar to Arrow or Avnet and others – parts selection, refernce design, design check, debug etc.


    Basically they are all-in-one sales, FAE and design expert. Only limitation is they can serve few tens of customers local to them. Advantage is that, thier response is very quick, low in cost and more genuine.

    This will work very well and it should be explored more.


  9. Mr. Roques
    February 24, 2012

    While I like your idea, I see it hard for them to adopt them. They talk so much about the identity and culture that by definition, a freelancer is not going to share or know.

    You might use them to do some BUA but for more complex projects, you need someone that can relate and have the same goals as the company.

  10. t.alex
    February 25, 2012

    Typically the freelancers might have used certain components before and they are very familiar with these. How can we ensure that these guys will recommend your parts, but not competitors' ones. Some incentive schemes have to be worked out.

  11. _hm
    February 26, 2012

    For freelancers, this is the most source of income. Hence they are more sincere compare to salaried engineer. They work odd hours, 18 hrs a day and on weekends. For them, retaining customer in of paramount importance.

    As regarding parts, they will employ most appropriate part and first look after customer's interest. Else, they can tell customer upfront that they will use specific vendor part because he has good support for them.


  12. elctrnx_lyf
    February 27, 2012

    With the great advancements in information technology and the expansion of engineering development centres into varios parts of the world it has become essential for the distributors to open the local offices and also provide support during local business hours. Certainly this expansion will help them to make more profits with in a year after the investment.

  13. Barbara Jorgensen
    February 27, 2012

    @t.alex: in the rep model, which I think is comparable to “freelancer” their charter is to push their suppliers' products. Reps do not carry directly competing lines. A typical rep will carry Molex lines, but not TE, or vice versa. It is up to the reps to convince the customer of the value of the products. Distrbutors, on the other hand, will recommend the device that best fits their customers' application. That is a change from the way things used to be done, when a distributor was incentivized to favor one supplier over another. Suppliers are beginning to accept that their technology wins a spot on the board, not just the efforts of their sales channel.

  14. t.alex
    March 3, 2012

    Barbara, that is a good point. Thanks for your explanation.

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