Electronica 2016 is bustling and distribution is at the heart of things. The booths are packed; meeting rooms are chock-full, and everyone is decidedly optimistic about the future. Overall, the mood is positive and intense competition is, again, in vogue. I won’t mention corporate names in this blog; I’ve ruffled enough feathers this year (please see disclaimer below). However, there’ll be pointers to indicate which companies might fit the storyline.
Distributors are hardy fellows – I mean that literally – but they can be suave too; the men, especially, love their crisp, ubiquitous white shirts (I’m wearing mine today). Many of my favorite distribution executives look like professional arm wrestlers, perhaps because notching design wins and grabbing fulfillment orders can involve a bit of grappling and pressing advantages.
The top contest in distribution today is over design engineers. With billions of dollars and bragging rights at stake, distributors are jostling to claim the highest number of design engineering subscribers, readers, users, etc., all of which can directly translate into design wins, production volume shipments and deeper relationship with OEMs and EMS providers. Those relationships can help cement long-term supply deals for non-commodity parts, the Holy Grail of engineering ROI.
If anyone had any doubts about how important this war is, look no further than the recent acquisition of an engineering service-focused distributor in the U.K. by one of North America’s biggest distributors. The deal should put to rest any doubts that medium-size distributors could continue to dominate the segment, but it also served notice to everyone that a slumbering giant is awake and ready to rumble.
The smaller distributors aren’t cowed, though. They are responding and nowhere are their volleys more resounding than at Electronica.
Engineering is on the Menu
Distributors are all emphasizing their numerous supply chain management offerings but visits to their booths confirm clearly that this is a one-course meal and engineers are the sole item on the menu.
I've roamed the exhibition floors. The distribution market is healthy and people are optimistic. That's good. But they are also hungry and baying for blood. The enthusiasm comes from a growing sense of optimism about the future while the fear stems from concerns about missing or misinterpreting the market's upturn, under- or over-preparing for it or miscalculating the capabilities and intentions of the opponent.
For now, though, distributors are flexing their bronzed muscles at Electronica. Even companies that have less than $1 billion in annual sales are ensconced in booths big enough to park several tractor trailers. A top distributor paid a small fortune for its nearly half a football field long location, and a U.K. rival has a snazzy pavilion with a second floor - a hint of London’s famed double-decker buses. You could have 200 couples in the ballroom size “booth” of a mid-size North American distributor, complemented with a massive coffee and snack station. This same distributor has two booths, one in the regular distribution area and another large one located near the embedded software section. That’s a poke at a bigger distributor’s pointed message about targeting the embedded market and offering complete solutions.
The smaller North American distributor wants a piece of all the pies and it isn't being coy about this goal. Its logo, promo and other advertising materials are festooned on the conference brochure, along with a giant billboard with its name shimmering on as it greets visitors as they enter, right beside a similarly big billboard of a European distributor reputed for its small lot services to design engineers!
Everywhere at Electronica, you run into these companies’ logos, fliers, billboards, flashing messages, soccer balls, casino slot games (you get a free token to play), etc. They want eyeballs and mindshare in the world's biggest electronics event and, by golly, they're getting them.
Why are the distributors making such a giddy splash at Electronica this year? It’s because engineers increasingly huddle online nowadays but once every two years they pop up like daisies at Electronica. The impression your company makes on them at Electronica will last for years. It’s not just the biggest distributors that are avidly courting them, though. The medium-size ones are hungry, too, and probably a lot more afraid.
I would be too if one of the world's biggest distributors has all its guns trained on my back. Since this isn't a fight mid-size distributors can afford to lose – a buyout won’t happen for these – they are fighting back with everything they've got. The war is being waged with internal forces, those of sympathizers and battalions from enemies' enemies.
Small and medium-size distributors are not fighting to merely survive. No. They are defending turfs and niches cornered while some of the giants were occupied with other things. Distribution’s giants are not yielding engineers to anyone anymore, though; too much is at stake. And you know what happens when a giant is roused? An executive at a leading North American distributor bluntly spelled it out like this:
“My company is not competing with other distributors. We are competing for the engineer and we’ll put out all the things we’ve got that can enable engineers to do their work,” he said. “This isn’t about the competition. It’s about what we need to do to service the market.”
I don’t know that I agree but I see his point.
Bolaji Ojo is editor-in-chief and publisher of EPSNews. The views expressed in this blog are those of the author alone who promises to base his sometimes biased, possibly ignorant, occasionally irrelevant but absolutely stimulating thoughts on the subjective interpretation of verifiable facts alone. Any comments should be sent to the author at email@example.com.