Should resellers pay to play?

Some news from the US caught my eye this week. It seems that Ingram Micro and Tech Data, the two largest broad based distributors in the US, have decided to introduce fees for new accounts.

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By  Mark Sutton Published  August 3, 2002

Some news from the US caught my eye this week. It seems that Ingram Micro and Tech Data, the two largest broad based distributors in the US, have decided to introduce fees for new accounts.

The fees, around $100, are intended to cover the initial costs of screening and setting up an account with the distributor. In both cases, the $100 will go back to the reseller once they have started spending with the distie—in Ingram Micro’s case a sales credit, or as a education, marketing or technical services credit from Tech Data.

The move did not go down well with all partners—many asked why should they pay for the privilege of buying from the distributor. Others said that $100 was not really enough to dissuade unscrupulous partners from setting up accounts. Certainly Tech Data registered a 40% drop in new partners after it introduced the scheme in February, with no change in revenue generated by new customers. But should the same scheme be introduced here?

The reason the scheme interested me was because of other news last month, a little bit closer to home. Yet another reseller folded, owing distributors a huge amount of money—allegedly 7 million dirhams ($1.9 million). A quick look around Computer Plaza in Dubai will show more than one or two empty units, units that were filled by resellers who have suddenly gone out of business owing lots of money.

While allegations of foul play may or may not be true, the problem of businesses taking a short-term approach in the Middle East is well known, and an ongoing concern for the channel. Far too many resellers have come into the market, set up large lines of credit with distributors and then disappeared. With no real ties to the region, executives have had no qualms about taking the money and running on far too many occasions.

Many distributors have caught on to the need to control credit a little better, but, especially in a competitive market, there are still some who haven’t scrutinised their business partners properly and have been burned. A scheme such as those in the US might work to control the problem a little better, but I suspect it would not be enough—and should you have to pay to buy from a distributor in the first place? Let me know what you think.

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