I recently asked a number of executives from a variety of relevant companies if the current supply chain model is still valid, or if it’s overly complicated. The way things work now, products flow from a manufacturer to a specialty distributor. Then, they move from that specialty distributor to a reseller (VAR), and finally to the end user. This series of transactions seems complicated and time-consuming, and I wonder: is it still valid?  

     My thought is that the existing model is going to be increasingly irrelevant as the technology gets simpler and the specialty distributors and VARs contribute less "value add" to the product.

 a)  Almost all products are now USB equipped, which means they are plug and play – no magic spell needed.  Today’s products are especially user friendly,  compared to 20 years ago when we were fussing with 9pin serial, 25 pin serial, parallel ports and software to convert data input from an external device to replicate keyboard entry and a few other things. Those technical challenges were too much for end-users, but now those issues are gone.

 b) Consumers are far more advanced today.  Go back 20 or 30 years, and the average business was just beginning to adopt computers.  In 1982 the PC with a hard drive wasn't even available.  The IBM PC with DOS 2.0 and a 10 meg hard drive came out in 1983 - I paid $7,500 for mine, with 64kb (yes , kilobytes) of RAM and a monochrome monitor.  There were no “apps” to speak of.  People were searching keyboards for the “any” key.   Today even my parents, who fought against fax machines, cell phones, and email - own multiple laptops and iPads and Kindles.   The average smartphone has 1,000 times the memory capacity of that old IBM PC.  And consumers are sucking up the electronic devices like free hors d’oeuvres at a happy hour buffet.

 c) Credit card / merchant authorization simplicity -   When I added the capability to accept credit cards to my retail counter in 1982,  I had to sign reams of paperwork, and the company checked me out, checked my business out and actually came to inspect my business.  The process took over a month.    Today, it takes about 3 minutes to sign up with Square and the device is a snap to use.

 d) Massively complex devices like the iPad and smartphone are purchased daily by consumers - yes it's easy to use, but there's a substantial investment in development of the technology underneath the glass.  These devices read and decode bar codes without any problem.

 Here is what a few folks in the industry had to say:

 Q. Is the distribution model for the barcode industry still valid?  Should products go from manufacturers to specialty distributors to specialty resellers to businesses and end-users?

 Mike Baur – CEO, ScanSource, Inc

Yes. The channel continues to play a very important role in the barcode industry.  In fact, we believe distributors are becoming even more of a strategic partner to manufacturers and resellers than ever before – through support, services, and training.  For ScanSource, we are also very focused on helping our reseller customers grow their business through tools that can help them partner with other resellers, ISVs and vendors.  We are continually looking for ways to make it easier for our resellers to do business.  And if that means delivering technical support without escalating it to the vendor, helping them become certified and trained on new technologies from the convenience of their office, or offering marketing support so that they can more strategically market themselves to their end-user customers, we have the means in place to meet those needs.”

Colleen Wilson, director of NA distribution and carrier marketing, Motorola Solutions

The specialty distributor maintains strong mindshare in this space and many manufacturers continue to capitalize on fulfillment versus value-add services for mature technologies.  The specialty distributor model is also expanding, with a focus on adding services to support new markets and more complex technologies and even bundling solutions.  Although some consumer device manufacturers are making inroads in retail for barcode scanning and even mobile point-of-sale, there are a lot of technologies in the nascent stages of adoption (Voice-over-IP, Video, Networks and RFID)  that continue to require the role of the specialty distributor as a key provider of services in this space, while offering the “one-stop-shop” for technology. “

Greg Buzek, founder and president, IHL Group

Selling direct or only through distributors simply will not work, as the support structure is one that VARs and resellers really need to provide.  However, resellers need to up their game in terms of the value-added services they can offer to enable retailers to be successful, as the margins on the hardware and software are reduced for everyone.  The distributors could really help by creating a cross-retailer loyalty plan that could be used and established by the resellers.  This essentially could provide data insight for retailers, so they could get a better picture of their customers beyond just their own store.  I’ve always been amazed that retailers – particularly smaller retailers – don’t have a travel-like network rewards plan to help them better compete with the big box retailers.”

 

Perhaps the larger retailers are destined to rely on the channel – while small retailers and even micro-businesses  - taxicabs and coffee shops for example - may end up being largely self-served as their needs are simpler.

As the specialty distributors add product lines, VARs will have more new ways to maintain profitability - but they won't necessarily be in traditional POS.   Will the market size for POS shrink? Or is it still growing - are small retailers going to trickle up to bigger systems because of the limitations of their iPads and Square card readers?    If the traditional POS (point of sale) system is easier to install, and easier to maintain, won't that change the VAR model?  Is it too early to tell?

Another factor is that POS and bar code products are easily available to anyone.  20 years ago, before the Internet ruled everything, you could not easily get your hands on bar code readers, or POS peripherals. Today, everything is for sale on Amazon.   This is the normal course of evolution and is as it should be. But it is one less point of control for the VAR and specialty distributor.  The odds are high that fulfillment of equipment sales on Amazon or other Internet sites are being handled by the specialty distributors - at least for the major brands.  I think that will change as low priced Asian imports continue to move into this space, as they already are.  The good news may be that the smart phone is spreading bar code technology so quickly, that distribution will benefit in the near term.     

In a recent podcast ("The AutoID Market is Hitting the Reset Button")  – VDC Research Group spoke of two issues that are relevant to this discussion – one;  that there is consolidation in the bar code industry, and that it is causing a “commoditization effect”, and two;  that there is a “BYOD” – Bring Your Own Device issue.  The latter is absolutely indicative of a growing loss of control for the channel.    A good discussion of the BYOD situation can be found in an article in STORES magazine ("BYOD is forcing retail employers to rethink IT"), published by the National Retail Federation.  

In a nutshell -  I believe that the POS and barcode industries are in for a tricky ride.  The distribution model is changing.  

Value add” in this decade is different than ever before -and while the specialty distribution model is unarguably growing, I question whether it will expand on the back of barcoding and point of sale or have to continually add new niches.

 

Be assured we are not done with this discussion!

 

Your comments?

Comments  

Pos software
0 #1 Pos software 2012-11-08 02:16
Yeah you are thinking right. USB equipped very good option now and we can easily convert data to external devices.