As electronics component sales and service organizations, distributors assist customers in a variety of ways. Master Electronics of Santa Monica, CA, prefers to call its role “problem-solving.”
“We will do anything at this company that makes business sense for ourselves and the customer,” says Riad Nizam, vice president of sales for Master Electronics. “If you bring an idea to the table, we will make it happen.”
The electronics industry is never without its problems --globalization, outsourcing, the economy and government regulation are a few of the current challenges—and distributors play a role in addressing each. “We ask our salespeople to talk to customers and ask them what their problems are beyond buying components,” says Nizam. “If a solution is positive for [Master] and the customer, we are the ones that can do it.”
As the electronics distribution industry has evolved, its leader board has begun to resemble its customer base: there are a few companies with revenue head and shoulders above the rest; and an offering of specialty businesses focusing on a model (catalog or small-volume, high-mix; authorized or non-authorized) or product area (semiconductor, interconnect, passive, electromechanical components and/or computer systems). Master’s revenue in 2013 was $180 million, and its product concentration is in IP&E. Its management believes there are plenty of customers that value the kind of one-on-one attention smaller distributors can provide.
“No company is too small,” says Nizam. “We feel that with all the changes and consolidation in the [distribution] marketplace there was a void that Master has filled. We let the customer buy any way they want—online, by phone, in person—however they want to interact with us we are set up that way.” Master also stocks more than 350,000 IP&E items, which it views as an advantage in a market obsessed with lean inventory. “Customers more and more are buying what they need today, versus the ability to forecast,” Nizam says. “It might not be the most popular way of buying—if there is a jolt in the market there would be a lot of scrambling—but so far that hasn’t happened.”
Like some of its larger brethren, Master has expanded through a combination of acquisition and organic growth. During the 1990s, Nizam said, the California-based regional company realized the world was getting smaller. Master expanded first in California and then nationally through a series of acquisitions. Its largest buy was All American Semiconductor, which at the time was a mid-sized broadline distributor. During the 1990s, this type of company had the hardest time competing in the market against broadlines such as Avnet Inc. and Arrow Electronics Inc. that dwarfed their next nearest competitors. “We haven’t been interested in being acquired,” says Nizam. “We keep finding new ways to offer value to customers and suppliers and we continue to reinvest in the business.” Canada-based Electro Sonic was its most recent acquisition.
Master entered the Asia-Pacific market with the addition of an office in Malaysia via the All American acquisition and more recently, Hong Kong. “We haven’t really had pressure from customers or suppliers to expand – it has really been what we need to do to make the company more successful,” Nizam explained. “At the same time, our customers know our message and our strategy and they’d like to work with us in other parts of the world.”
Globalization has created a lot of new opportunities for distributors but has come with its own set of problems. The regulatory environment—both domestic and foreign—has taxed distributors’ resources. “The last couple years there’s been a lot more regulation and customers are relying on us for things we have no control over, such as conflict minerals information,” said Nizam. “We don’t manufacture the parts and most of our suppliers don’t have the answers either and that is a challenge—the ECIA has some up with guidelines—but we don’t have an answer yet. We are taking time out of dealing with our customer s and doing a lot of paperwork, and [conflict minerals] information is hard to get.”
Nizam also notes that new talent doesn’t seem to be entering the distribution industry. “There are not a lot of new people coming into the industry,” he said. “That’s a challenge for distribution.” And, like distributors of all sizes, Master is facing eroding profit margins on its component sales.
Many companies in the high tech industry are paying attention to the hobbyists, builders and “makers” in the market that could be building the next big thing. Master remains committed to reaching those customers. “Some of our customers today were start-ups—they started with no balance sheet or a D&B rating -- but we were small enough to give the customer a chance,” Nazim says. “Being privately held, we don’t have the pressures of Wall Street and we can make strategic investments in inventory. We are very nimble and we can make things happen for our customers whether it is at the purchasing level or the operations level.”