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Startup Distributor Set to ‘Score’

The environment is challenging, the two biggest players in the market exceed $20 billion each, and the industry has been consolidating for two decades. It doesn't seem to be an optimal time to launch an electronics distribution company. But Score Electronics is open for business, has six franchises, and is shipping product to customers.

“The best argument for a company such as Score Electronics is a supplier base that is not at the top of the food chain,” says Ken Bloom, the San Francisco company's president. “Within the big global distributors, these lines are underrepresented to the customer base. In many cases, they may be on the linecard, but customers don't know they even exist.”

Score's franchises are ZMDI, Richtek, ConnectOne, connectBlue, InnoDisk, and Harting. These are small, highly technical product lines that command a healthy price tag and profit margin.

“We haven't always been happy with global distributors' ability to provide focus and support for our products,” says connectBlue North America president Bill Saltzstein. “This is a better match for us — a distributor that can spend more time with the customer.”

Saltzstein's complaint is not new. Global distributors carry hundreds of component lines, so providing the same sales and design support for each and every line can be a challenge. Competitive pressure dictates that these distributors focus on lines with the highest return on investment. Price competition is also intense. Domestic suppliers continually pit themselves against low-cost producers in the Far East.

“Our target customer base is in North America — companies that are building 1,000 [units] of their product and require a lot of technical support,” Bloom says. “The high-volume production customers are typically not in North America.”

The niche distribution model also is not new. VEBA, once one of the world's three largest channel players, ran a number of highly focused distribution companies under the Memec, Insight, and EBV brands. Each was highly profitable, but customers were increasingly looking for a one-stop shop that could support all products and services worldwide. The VEBA companies were eventually parceled up and sold to {complink 453|Arrow Electronics Inc.} and {complink 577|Avnet Inc.}

Score is not starting entirely from scratch. It is backed by the German distributor Spezial-Electronic. Christopher Wuttke, Score's CEO, owns Spezial and is one of the owners of Score, which has a warehouse in North America and can draw on Spezial's inventory, logistics, and engineering capabilities.

The product lines are targeted at three major segments: industrial automation, medical, and healthcare. The design cycle in these industrial markets is much longer than in consumer electronics, and the lifespan of the end product can be measured in decades. The distribution industry's practice of demand creation — in which a distributor receives a high level of compensation for getting a component designed into an OEM's product — works well with highly specialized brands. For one thing, the parts aren't easy to swap out in manufacturing lines.

Score executives say they are confident there is room in the North American market for a niche distributor. “We have the ability to know these products inside and out. We can articulate their value person-to-person, and we feel there's a need for these technologies,” said chief technology officer Peter Cornelius.

Bloom and Wuttke founded Score in 2011, and Cornelius joined the team in 2012. The company operated in stealth mode while acquiring franchises. “We are open for business. We are actively spending money to develop our customer base and filling the inventory pipeline,” says Bloom. “We are taking purchase orders and have already fulfilled dozens of POs. We look forward to continued growth.”

10 comments on “Startup Distributor Set to ‘Score’

  1. _hm
    April 13, 2012

    Yes, I agree with this Barbra. This is also true for Space and Defence Electronics. You have many specilized marketing organization and they do wonderful job with high profit margin. It takes long time to develop customer base with this type of product. This is also good for small innovative organization as they get due importnace for their products.

     

  2. _hm
    April 13, 2012

    If this distributor becomes very successful, big distributor will take them over and again customer and chip manufacturer will face same problem of big distrubutor and poor or no servcie.

     

  3. ITempire
    April 13, 2012

    I like Score's idea. The only way to secure distribution chain in the era of intense competition is to find the specialized industries where both, technical competencies are a barrier and distribution chain in certain geographics have room for new entrants.

    However, to sustain the advantage, the customer segments need to be captured smartly and quickly before the market is explored by big players who have the ability to hire people and develop setups required for specialized products.

  4. t.alex
    April 14, 2012

    Definitely for these niche distributor. If the parts are not easy to be swapped out, they would take very long time to get order from the customer as well. Maintaining trust and quality is equally important during the contract. 

  5. itguyphil
    April 15, 2012

    Exposure is the most important factor when getting started. If the right eyeballs can be on your product or service, things can become a hit very quickly!

  6. FLYINGSCOT
    April 16, 2012

    I reckon it is akin to shopping at a specialist deli versus a big supermarket chain.  If you value the service then it might be worth paying extra for. 

  7. Ariella
    April 16, 2012

    @Flyingscot or like a boutique shoe store versus DWS warehouse. People are sometimes willing to pay for the value added in such places.

  8. Barbara Jorgensen
    April 17, 2012

    I've always been convinced of the value of a boutique distributor for suppliers. It is really difficult for a non-marquee line to stand out amongst 50 or 100 competitors on a line card. The consolidation of the distribution market has had that effect–even specialty distributors such as TTI are carrying a lot of lines. For customers, though–I wonder if, after getting the attention of a Score, you end up buying from a big broadline because a one-stop shop is just easier. I would hope not, but sometimes, the reality of the market prevails.

  9. rohscompliant
    April 17, 2012

    …..Or offer SCORE a sweetheart deal and buy them out……….remember where u heard this 1st

  10. Barbara Jorgensen
    April 18, 2012

    rohscompliant: do I sense a touch of cynicism here? 🙂 It's true that all the specialists have been swallowed up, but maybe the industry is ready for, well, the old model. I guess it depends on if there is enough business to sustain specialists and broadlines.

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