Thursday, July 9, 2009

Some Saelig Secrets ...

  1. Find Unique, Useful and Quality Products. An electronic components distributor’s ultimate goal is to serve the needs of the electronics engineer. Finding that “killer” new product takes constant global market research. Making sure a product is suitable for the domestic marketplace (power supplies, correct broadcast frequencies, etc.) is essential. To effectively do this, a distributor must be willing to continuously evaluate new supplier opportunities, with the goal of finding products that are useful, easy to ship, and which require minimal technical support. Products also need to be high quality, competitively priced, and have features which may be presently unavailable in the local marketplace. A careful, upfront and “hands-on” evaluation is recommended for products. This “due diligence” also helps distributors filter out hard-to-use products, or ones with inadequate documentation, while adequately training technical staff to answer support questions. An analysis of competing product features and pricing are also essential. Monitoring product performance and customer satisfaction is also critical. Returns and field failures should trigger reassessment of the business case for relevant products.
  2. Procure Quality Supplier Partners. Finding trustworthy, reliable suppliers can be a challenge, especially since a typical electronics component distributor cannot usually visit each supplier before business decisions are made. A consistent, comprehensive evaluation process can help determine whether a supplier is a good fit for the distributor. Supplier partnerships need to be both mutually beneficial and trustworthy. For example, upon signing exclusive North American agreements, suppliers would be expected to forward relevant inquiries and sales opportunities within agreed upon sales territories to the distributor, instead of attempting to sell direct. Standing behind products when quality and reliability issues arise is another important aspect of partnership.
  3. Recruit and Maintain Good People/Facilities. Choosing the right distributor supporting team is also essential to presenting efficient, honest, knowledgeable service for customers and suppliers, as is having a well-maintained office infrastructure and properly networked equipment. Providing employees with a secure opportunity to earn a livelihood, with flexibility to pursue personal growth needs, must be balanced with consideration and accommodation to employees for individual family or other personal needs as they arise. Successful distributors treat both customers and employees with the same level of care and consideration.
  4. Effectively Position Products to Customers. Having already identified the ideal target end customer, finding correct venues for product placement and publicity are critical. Advertising and press release distribution are essential, and require constant awareness of an evolving print and online media world. Securing commitments from overseas suppliers to invest in such activities can be challenging, as suppliers frequently perceive a distributor’s responsibility to include shouldering such Marketing costs. That is tough to do on small margins, further eroded by credit card fees, shipping and duty payments and stock costs. Because of the North American market size, domestic distributors may be unable to visit most customers personally. Instead, they must be able to sell products via strong technical support, ease of ordering and shipment, good marketing, and good web support. It’s also important for distributors to have and exercise effective customer-retention strategies, and to keep suppliers, customers and other partners informed about the latest product developments.
  5. Enter into Mutually Beneficial and Protective Distribution Agreements. It is essential for distributors to have in place signed supplier agreements, not just to protect business and legal interests, but also to clearly set forth responsibilities and expectations of both parties. It is also vital to include a clearly communicated termination clause within each agreement. Having the ability at the time of termination to return remaining stock for reimbursement can be a life-saver!
  6. Manage Cash Flow and Finances. International currency fluctuations present a host of issues. Many goods are purchased with advanced payment in a given foreign currency, and the time between issuing a formal price quote and subsequent receipt of customer funds to pay for the goods can be up to three months, during which time, there may be a variation between paid price and received funds. Credit card fraud is another factor - sound judgment is especially needed when deciding whether to fill an overseas order. In addition, credit card “discount” fees can be 2 to 6.5% of total sale value, depending on card type, so a revenue reduction of up to 6.5% must be considered when pricing products. Another challenge is keeping pace with price changes from hundreds of suppliers, and to keep online webshop and internal accounting software prices current. Cash flow can also be a problem. Customers often pay Net 30 invoices late, requiring companies to chase payment. Yet the distributor is expected to buy on Net 30 terms and pay promptly, setting up a real cashflow deficiency scenario. Increasing business revenue therefore needs increasing cash to sustain, possibly requiring a bank loan.

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