The channels of distribution in the physical security industry are changing, particularly in the Video Surveillance sector, where IP network products has taken a major leap forward in the last 3 years requiring new skills for designing and installing systems.
We have been charting the routes to market for physical security equipment since 2006 and there have been major changes across the developed markets of the world in how products reach the end user. Our research shows that the value of product passing through the distributor channel has fallen off drastically from over 50% in 2006 to around 30 % in 2011. Their market share has been taken by direct sales to Installers / System Integrators which have increased share to approximately 50% in 2011. The installer system integrator route has been joined by specialists from the IT / Communications (ICT) industry and it would appear that the distributors have lost most of their share to these companies that have partnered with the manufacturers of IP Network products.
Whilst these trend appear to be most marked in the developed markets of Europe and North America similar trends are now being realised in Asia and at the same time are now taking place in the Access Control market; but as yet it’s not as pronounced. Getting IP network products to market is going to be a challenge for distributors and one they will have to meet because it will eventually take 100% of the business.
These changes are no so startling when taken over a 6 year period, but their consequences are now being felt, with the recent exposure of weaknesses in the distributor chain and the major European distributor Norbain’s demise and fall into receivership. IP network products do not lend themselves to the traditional box shifting treatment of analogue products and require more sophisticated application of skills; sadly few distributors have seen the need to work with the manufacturers to acquire the necessary skills. Norbain had lost money during the previous 4 years trading but had seen the error of their ways and had instituted an offering called “service plus”. This programme embraced integrator / installer partners, training, service and cloud initiatives but it was too late for the existing shareholders and management to pull the company round. In May it went into receivership, but has now found a new owner.
Distributors that have become more IP savvy such as the AES Group and Digitalcom in Thailand and Tri-Ed / Northern in the USA have been able to maintain their share by taking on more system integrator duties especially with regard to system / network design and commissioning. But sadly not all distributors have taken up the challenge.
There is a place for the distributor but not in the traditional role, at least not for long. Knowledge is paramount, especially in increasingly connected, integrated building and security environments and bringing together packages that meet these needs and the IT services that they require is a service that they can bring to the table.
Hayden Shu Editor in Chief of A&S International notes that “We are also seeing an increasing number of “hybrids” in Asia – specialist companies distributing systems for technology partners and developing or integrating systems (more software-based) for clients.” This is not dissimilar to the way Controlware the UK based distributor operates. The Controlware Group has provided IT communications networking solutions since 1980. During this time Controlware has accumulated extensive experience in the design, delivery and maintenance of cost-effective IP networks. Since 1997 they have also specialised in the integration of applications such as IT Security, Storage and Video Surveillance systems. They can now offer total packages of IT communications networks, CCTV cameras, CCTV encoders, CCTV Video Management Software, recording, and video content analytics systems.. They work closely with Installer and Integrator partners to provide security systems for users from all vertical markets. Their value added services range from consultancy, product advice and supply through to systems design, project management, commissioning, maintenance and installation through their channel partners.
Last month our blog “Alliance and Partnership is Playing a Major Role in Winning Market Share in the Security Business” discussed how the manufacturers were extending the range and depth of their alliances and partnerships with manufacturers of adjacent products and shows how this is broadening out to all stakeholders in the supply chain. Distributors in the wider definition have a very important role to play, but they will have to sharpen their game if they are going to partner with the manufacturers and deliver what their clients need – http://memoori.com/blog/alliance-and-partnership-is-playing-a-major-role-in-winning-market-share-in-the-security-business