Andy King has been president of Arrow Electronics Inc.'s global components business for a little over six months, half a year or two fiscal quarters. Calendar 2015 was a year the electronics distribution industry was happy to put in its rear-view mirror. According to the EPSNews Top 50 Distributors report, the North American franchised distribution industry grew revenue by only 1.3 percent in 2015, after posting a 5 percent increase in 2014.
Calendar Q1 sales for Arrow global components were better than expected. Non-adjusted sales grew 10 percent year over year to $3.68 billion. Regional year-over-year sales grew 3 percent in the Americas; 15 percent in Europe and 15 percent in Asia-Pacific. “We felt our earnings were pretty strong,” King told EPSNews in an interview. “Most interesting: we delivered year-over-year growth in a macro environment that hasn’t changed very much. “
How Arrow achieved this, King said, is two-fold: Arrow has been investing in its global salesforce over the past two years in spite of a flat market; and it has been focusing on small and midsized enterprises on mainland China. “We have added 500 people around the world, both engineering and customer facing, in markets that we think will grow. And in China, we’ve invested in our physical infrastructure to support emerging businesses, and we see that beginning to pay back regardless of high-volume supply chain deals,” King said. Arrow has, in the past, disengaged with high-volume customers in Asia-Pacific when the relationships weren’t profitable. At the same time, King said, small to midsized business have been growing across all vertical market segments. Arrow’s added about 600 new customers in the first quarter alone.
Another area of emphasis for Arrow has been design registration, where a distributor is compensated by a supplier if its component is designed in to an end-product. This can be an expensive proposition for distributors: engineers do not directly generate sales; not all suppliers compensate for design-wins; and not all designs reach volume production. As distributor compensation is usually based on volume sales, design-registration programs typically take a long time to reach fruition.
Arrow’s design wins in the Asia-Pacific region were up 60 percent year-over-year, said King. Although that’s significant growth, King doesn’t see that as evidence that design is shifting from other regions to Asia. “My take is we are still seeing growth in design wins in every other territory,” he said. “Remember, China started with a lower basis point. It’s not a shift in design activity; what we are seeing in China and Asia-Pacific – we think – is evidence of Arrow’s support for that activity.”
“In fact,” he added, “design is strong and healthy around all emerging markets.” IoT is one example, he said, where engineering efforts are focused on designing for connectivity and for security solutions.
Arrow, like many distributors, has been building a cradle-to-grave services model encompassing components, design tools, hardware and software solutions; and reclamation and recycling. Arrow is also undergoing a digital transformation that makes these services more accessible online and links them seamlessly for customers.
“We have a company that spans from traditional component distribution through system integration, and we are seeing that concept connect particularly in the startup realm,” said King. In the Internet of Things (IoT), for example, businesses may have an idea but no supply chain to support concept-through-production. “We can help customers design a board, assemble the board, bundle the board into a connectivity solution and help them integrate software. At end-of-life we can recycle the board and take care of the disposal.”
What Arrow and other distributors are achieving, King said, is connection with customers in multiple ways and at multiple points in a product’s lifecycle. “Not every customer wants [contact] in the same way or at the same point,” he explained “But we have processes in place so we can connect customers with what they need.”
Arrow has also been enhancing its e-commerce efforts through Arrow.com and the Verical.com online marketplace. Verical, in particular, focuses on ease-of-use. “From my standpoint we’ve been leaders in the digital transformation,” said King. “Whatever we provide offline we want to provide online. This is one of the big drivers of our customer base: we want to touch more customers with a digital footprint and provide capability to attract more people to our ‘shop.’ We are certainly seeing the sense of that—our online business has been the largest source of sales leads compared with a year ago."
For Arrow's components business, said King, the digital transformation is focused on a couple of “buckets" of capabilities. "The first is the search-find-sell capabilities: that is the b2b e-commerce side. The second area is content: there is a significant amount of money being invested in the digitizing of valuable content such as data sheets and reference designs. If you match that up with toolkits and design solutions in lighting and power, for example--and make that all available on a website with the engineer in mind – instead of taking a catalog online we provide the engineer with content and data online and then provide the capabilities necessary for procurement.”
Arrow has recently targeted the maker movement through a partnership with crowdfunding site Indiegogo. The strategic alliance – which the companies refer to as a “crowdfund-to-production platform” -- aims to accelerate the pace of innovation for technology and IoT entrepreneurs.
Arrow is integrating its design and production platform into Indiegogo’s crowdfunding engine, creating a program that will provide qualifying Indiegogo entrepreneurs with direct online access to Arrow’s design tools, engineering experts, prototype services, manufacturing support and even supply chain management. In addition to technical and design support, Arrow will also provide qualifying Indiegogo entrepreneurs with discounts on bills of materials and technology-design software, as well as access to dedicated design engineers via Arrow.com’s live video collaboration platform.
Arrow views its investment in digital as part of its growth platform toward the goal of outperforming the marketplace. “What it comes down to,” King concluded, “is connecting with customers in the most effective way.”
King has more than 30 years of experience in the technology industry, and most recently served as president of the Europe, Middle East and Africa (EMEA) region for Arrow’s global components business. Previously, King served as Arrow’s vice president of sales in the EMEA region, and vice president of engineering and marketing with overall responsibility for Arrow’s supplier business relations and engineering services strategies in that region.