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What’s in a Name?

Digi-Key's announcement that it will no longer be printing catalogues raises an interesting question: Should Digi-Key continue to be referred to as a “catalogue” distributor?

This particular dilemma isn't unique to Digi-Key. During recent interviews for EBN's Top 25 Distributor supplement, I've spoken with several companies traditionally classified as catalogue distributors: {complink 12966|Allied Electronics Inc.}, {complink 12799|Digi-Key Corp.}, {complink 12816|Mouser Electronics Inc.}, and {complink 12800|Newark Corp.} Although all but Digi-Key are still printing catalogues, the term doesn't necessarily reflect their business model.

The typical catalogue business model — which caters to design engineers — is low-volume, high-mix, premium-component-price orders. But increasingly it seems that some customers want to engage with their catalogue partners beyond just the engineering order into the production stage. Production orders move into the high-volume, low-mix, price-is-negotiable phase of a supply chain relationship.

Here's the distributors' dilemma: Do you not serve that customer because your business model doesn't support production sales?

This has become a more common occurrence as the design community faces increasing time-to-market pressure with fewer resources. Catalogue distributors typically offer just about every product designers will need, along with various levels of engineering assistance ranging from 24/7 online resources to live telephone support. If a distributor takes the time to help with a design, the customer can reward that effort by engaging with that distributor through volume production (which is where the big bucks come in.)

There are a number of hurdles catalogue distributors must overcome:

  1. Their pricing model.
  2. Catalogue houses can charge top dollar for components because of the high level of services they provide, the low volumes they ship, and their ability to deliver orders overnight almost anywhere in the world.

  3. Their supplier relationships.
  4. Some catalogue distributors don't participate in design registration programs that let suppliers know who provided engineering assistance with a design. These programs require a lot of information, and catalogue distributors don't want to burden time-pressed engineers with a lot of questions.

  5. Negotiation.
  6. Volume distributors typically negotiate with both customers and suppliers to reach a price all parties can live with. Catalogue distributors don't have the manpower or the infrastructure for this: Most charge a single price worldwide for components. Engineers typically don't want to bargain over an order for a half-dozen components valued at a couple hundred bucks — they have designs to complete.

So, catalogue distributors are responding in a number of different ways: Some are supporting a production-level business separate from the catalogue. In addition to the pricing and profit challenges this brings, executives at catalogue houses find that “catalogue” no longer describes their business model effectively. “We like to call ourselves a 'high-service' distributor,” one executive told me, “but we don't want to imply that other distributors don't provide a high level of service.”

Distribution isn't the only industry facing this dilemma: Check out what Technology Forecasters is proposing for the EMS/ODM industry.

Any ideas, readers?

14 comments on “What’s in a Name?

  1. AnalyzeThis
    April 8, 2011

    Barbara, you bring up a lot of different issues here… but yes, the catalogue business model has certainly changed over the last decade or so.

    But to focus on the simplest question here: is it OK to continue to refer these companies as catalogue distributors even though they no longer print catalogues? I believe it's perfectly fine and not strange at all!

    After all, Digi-Key's site still offers what is essentially an online version of their traditional catalogue. The fact that it is no longer offered in print format is irrelevant. I think a very similiar comparision is what happened with various traditional print magazines which have since transitioned to online-only: they continue to keep the “magazine” name even though they are neither a print magazine nor even utilize the traditional magazine format.

    Same deal with newspapers: if the New York Times stopped doing their print edition, I think most people wouldn't think it was weird to refer to them as a newspaper, even though technically their news is no longer on paper.

    Besides, if you really do miss the paper format… print out some web pages from Digi-Key. There. Mini-catalogue.

  2. Barbara Jorgensen
    April 8, 2011

    Good points all. I'm still for “catalogue” for the record–the distributors suggested the term may not fit the business model. If nothing else, I'm for keeping the word because it's one of the keywords we use all the time ūüôā

  3. Nemos
    April 8, 2011

    About “catalog distributor classification” and if it describes exactly how the company works. I see no impropriety or wrong if it does not describe exactly how a company serves their clients.Because everything evolves and changes and the Digi changed their catalog from print version to electronic version. This move improves two areas:¬† the Eco profile of the company (and saves a lot of trees) and the service profile of the company, providing to their customers via the Internet detailed electronic catalog.

  4. Ashu001
    April 9, 2011

    Barbara,

    All these companies operate in a very difficult and competitive marketspace.
    Digi-Key's current move may/may not be the right one.

    Only time will tell for sure.But its important that have a strategy in place to differentiate
    themselves effectively from the competition as well as not alienate existing Users.

    So my question to you is,Do they have such a strategy in place? And do you see it as being
    effective?

    Regards

    Ashish.

  5. Hardcore
    April 9, 2011

    Hi Barbra,

    I think it would depend on your relationship with the distributor, in many cases a single distributor handles a range of component manufacturers, for an established company there is the 'samples' path, but for private engineers or hobbyists there is little chance of such people gaining the volume required to enable the delivery of 'freebie' parts.

    I used to order SMT components for a reasonably large company, usually before a delivery the sales exec would ask if I required any development parts and these would usually be delivered for free.

    I dont see anything strange with the way Digi-key is running its business, after all if it works and they make money then fine, but I would suspect that they would make the real money on volume parts, becasue in this case it becomes an issue of picking single reels of components rather than having to continually cut count and re-pack.

    Then there is the sticky issue of trying to retain you  industry standards and qualification when dealing with low cost low volume parts, ultimately if it is not a mechanized process or high throughput, there is a danger that a company an easily loose money , but it would be hidden within the complexity of the paperwork system (very few companies can actually do a realistic actual cost breakdown), even a highly computerized system may have  weaknesses that prevent true costings being provided.

    Only Digi-Key would have the answers.

    HC

     

     

     

     

  6. Anand
    April 9, 2011

    is it OK to continue to refer these companies as catalogue distributors even though they no longer print catalogues?

    Why cant we just rename them as “Digital catalogue distributors” ?

  7. itguyphil
    April 9, 2011

    howabout just distributors? I mean, that's what they are. The methid to accessing them really isn't too relevant.

  8. Ariella
    April 9, 2011

    I have the same view on the name as anandvy. They could be called “digital catalogue distributors” or “virtual catalogue distributors.”

  9. Anna Young
    April 9, 2011

      

    What's in a name? Whether these companies are still catalogue distributors or online, services haven't changed, they are only just moving with the times

    Why not 'Service distributors'?

     

  10. eemom
    April 10, 2011

    I am not sure the actual name matters.¬† The distributors hopefully have long standing relationships with customers so how they are classified, “catalog” vs. “virtual” etc does not seem to matter.¬† For the changing times though as some customers fall out and new ones emerge, perhaps they need a name that encompasses all the services they provide.¬† The word “catalog” whether it be physical or digital, implies that you are just purchasing an item from a magazine.¬† It does not include all the other services a distributor provides that will aid the customer in the design process.¬† I'm not sure you can find one word that encompasses what each distributor will want to say depending on the services they provide. How about “Full Service Distributors”?

  11. Kunmi
    April 11, 2011

    If name will be an issue, why can't the company go 'Acronyms' and be called “DCD”. The company has established its name and the product is known. As long as the power has not change hand, they name change does not matter.

  12. Tim Votapka
    April 11, 2011

    I wouldn't get wrapped around the axle on this. Back in the early days of this channel, the “Radio Row” entrepreneurs like Seymour Schweber sold radio tubes out of a suitcase in Manhattan. No catalogs. No warehouses. Yet they were key in providing access to a wide variety of components. What it comes down to is results.

  13. Barbara Jorgensen
    April 12, 2011

    This is a really fun discussion-if for no other reason we get to play with words.

    Maybe there is just a driving need for publications–such as EBN–to 'categorize” things that don't need categorizing (or re-categorizing). For the past 20 years, those of us who cover distribution (Hi Tim!) have used broadline, specialized, catalog, etc., and more recently non-authorized (versus independent or broker). These are all terms that the industry has told us are important to differentiate one from the other.

    However, Digi-Key itself refers to its model as “a fully-integrated online distributor.” So it's worth throwing it out there. Most, if not all of Digi-Key's catalog competitors have made it a point to re-iterate they are still in print.

    Which brings us back to square 1.

    I'm leaning toward “digital catalog” and “hybrid (digital/print) catalog”

    or just leaving well enough alone

    ūüôā

     

     

  14. saranyatil
    April 13, 2011

    Anandvy,

    you have given them the right name. they have established themselves very  well. most of the times when i need components i just place an order and just get it within limited amount of time.

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