The Newark electronics catalog – once known as the “Bible of the industry” -- has made significant progress under parent Avnet Inc. and expects additional investment will boost its e-commerce capabilities and restore historically high profit margins.
Newark was acquired in 1996 by the UK’s Premier Farnell group. The Newark and Farnell catalogs underwent a series of branding initiatives – and diminishing investment -- that failed to resonate with customers. In 2016 Avnet acquired Premier Farnell; restored the Newark and Farnell names; maintained the brand element14 in Asia-Pacific (APAC); and committed to upgrading the group’s inventory and systems.
Catalogs, which specialize in low-volume, high-mix design orders, charge higher prices than volume businesses. Since Avnet’s acquisition, Premier Farnell hasn’t achieved expected performance levels. With trade wars, tariffs and Covid-19, the past year has been especially challenging for electronics distributors.
“We know we’re not where we need to be with [Premier] Farnell right now, but we are tracking and making progress appropriately,” said Avnet interim CEO Phil Gallagher, on Avnet’s fiscal Q4 earnings call. Avnet Electronic Components’ Q4 operating margins were 1.5 percent; Farnell’s were 3.6 percent.
Avnet views its catalogs as a vehicle for growth. In addition to higher margins, catalogs generate sales leads to potential long-term customers.
Newark’s first move was updating component databases, adding 130,000 SKUs, and investing more than $100 million in inventory, said Newark President Uma Pingali. “About seven or eight years ago we realized we had to be more aggressive in on-board components but we didn’t have the money to invest. When I joined Newark from the APAC business a year ago, I spent time with the Avnet team to identify market opportunities and areas of investment.”
Catalog and volume business don’t easily co-exist. Catalog inventory has to be ready-to-ship. Volume stock may be tied up in consignment or subject to supplier lead times. Cross-pollination of inventory simply doesn’t work.
At the same time, volume businesses benefit from insight into up-and-coming designs.
Avnet has supported investment in systems that provide visibility across business units but manage orders from various divisions. “One large EMS volume order for a given product could make us stock out for months and we have to make careful depth investments for products, with clear availability rules in place, to serve our low volume customers consistently,” Pingali explained. “There are customers that overlap [with Avnet] but they have different needs – ours buy a few hundred dollars’ worth of parts; theirs don’t want to manage in-house inventory.”
“The main thing was to make sure the two [businesses] were delineated so we could support each other,” he added. “We manage the new opportunities, which is our role in the Avnet ecosystem; they have relationships with larger customers and they can help us by opening those doors to us.”
Lead-sharing is common among business units and can lead to long-term customer engagements. “We have to make sure we grow the customer base,” said Pingali. “There are two sets of opportunities: one is the customer itself and the second is getting customers into the [Avnet] ecosystem and registering designs. That paves the way for Avnet to capture the design registerable cases and allows Avnet to grow.”
Design-registrations compensate distributors for their engineering efforts. Suppliers give registered partners first dibs on volume orders and may offer higher margins on sales for a period of time. To make this process seamless, Newark’s customer interface – e-commerce—also needed improvement.
“Catalogs’ market opportunity is making it easy for customers to find parts, order online, and invest in customer lifecycle management [such as design to EOL],” Pingali said. “Some customers would come to us and then leave. We had to invest both online and offline to become more viable as an online distributor – be customer-friendly, help them find products, take inventory positions and provide real-time availability and delivery information.”
Newark has been able to leverage Avnet’s global assets to provide consistent customer service. Avnet has warehouses in the Americas, EMEA and Asia-Pacific which allows for lower freight and logistics costs and faster delivery. Farnell, which primarily serves EMEA, and element14 likewise have inventory visibility through the Avnet network.
“If you go to Newark, no matter where the inventory resides, you will receive a consistent level of service. We can ship in a predictable way [days to customer] with cost effective freight to customer,” said Pingali. Delivery times have shrunk significantly.
Newark’s re-branding days are also over. “We made some changes to our brands in North America and Europe last year, returning to those well-known brands that our customers know and trust.”
In North America this meant a return to the Newark brand, which is 90 years old. “We won’t be making any further changes,” Pingali added.