Channel Consolidation Ramps Up, Reseller Churn increases Presenting Opportunities and Challenges to those that Remain
CONTEXT ChannelWatch 2017 Survey reveals IT channel adapting to rapidly evolving environment
London, 4rd October 2017 - IT channel consolidation has stepped up a gear over the past year as the industry continues to mature, forcing distributors to focus on optimisation and leading resellers to worry about pricing and procurement costs, according to the latest CONTEXT ChannelWatch Survey.
The study profiles the views, activities and intentions of a representative sample of 7,500 resellers operating across Europe and beyond, in Russia, Turkey, Australia, New Zealand, and Brazil.
It reveals that over 30 major distributor M&A deals have taken place in Western Europe in the past 18 months, as players increasingly seek out the sustainability, plus scale and margin improvement offered by IoT, refurbishment, attractive services margins and cloud adoption.
There’s likely to be much more to come, with speculation mounting over the possible takeover of ALSO by HNA via Ingram Micro.
In fact, the average number of distributors resellers are buying from has dropped from 5-10 in the last report period to just 2-3 this year – partly driven by the rise in purchases from etailers, especially in Turkey, Brazil and Europe, 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.
The report also points to a consolidation in the reseller market.
Across 20 EMEA countries there has been a 3% year-on-year reduction of active resellers in the 90-day period in March – May 2017, according to CONTEXT’s Reseller Count Metrics tracking. If this trend continues, the reseller landscape could alter significantly in the next few years, the report warns.
“Although most consolidation has occurred in the long tail of smaller players and those in consumer channels, larger resellers and retailers are merging too: ie, Dixons–Carphone Warehouse, Dominion–Phone House (Spain), and MediaMarkt buying a slice of Fnac”, said Adam Simon, Global MD at CONTEXT.
“This activity can also be viewed in the context of increasing reseller churn, especially associated with transitioning business models linked to cloud adoption.”
Between 2016 and 2017, CONTEXT Reseller Metrics revealed the notional churn rate of resellers moved from almost three years to just over two years – a 20% acceleration rate
The CONTEXT ChannelWatch 2017 Survey also shows that reseller perceptions of vendor and distributor consolidation on their own business are divided, but overall positive.
Around half of respondents worldwide thought consolidation was a positive thing whilst a third remained neutral on the subject and 15% considered it a negative trend.
This chimes with CONTEXT Reseller Count Metrics tracking which finds that overall reseller revenue in the March-May 2017 period went up. It’s clear that those players which remain after consolidation are able to pick up the revenue lost by those that have been consumed.
“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.
About CONTEXT ChannelWatch
CONTEXT ChannelWatch is an online reseller survey providing detailed insight into reseller behaviour, opinions and attitudes. It has explored channel dynamics and developments across international markets for several years. This survey provides a ‘bottom-up’ view of evolving market trends and the business issues experienced at the sharp end of the IT market.
This latest report, based on the results of the 2017 survey, profiles the views, activities and intentions of a representative sample of 750,000 resellers operating in the following countries: United Kingdom, France, Germany, Spain, Italy, Portugal, Netherlands, Denmark, Sweden, Poland, Czech Republic, Slovakia, Estonia, Latvia, Lithuania, Russia, Turkey, Australia, New Zealand, and Brazil. Results from each country have been weighted where necessary to enable valid conclusions about overall geographical trends to be drawn.
CONTEXT’s market intelligence, performance benchmarks and opportunity analysis empower clients to optimise operations and accelerate tomorrow’s revenues. With over 30 years of industry partnership and of experience reporting on large datasets, CONTEXT delivers analytics at all points in the value chain, providing clients with actionable insights rooted in concrete data and a profound understanding of customer needs. CONTEXT is headquartered in London, with over 250 staff across the world and in 2017 was 2017 recognised as one of the UK’s Best Workplaces™ by Great Place to Work®.
T: +44 7876 616 246