The traditional distribution model for physical security products across the globe was often referred to as "box shifting," it offered products off the shelf but with few value-add services. This is model is now rapidly morphing into a sophisticated system delivering value add services that clients now demand.
There are 5 main reasons why the change in the structure of the physical security industry is causing the distribution model to change, according to a recent report on the security market
1. Manufacturers, have over time, extended the range of their products, which now have a rich layer of features and capabilities. The supply chain must be able to understand and identify where their clients can benefit from them.
2. A strong brand and channel infrastructure is now providing reach and efficiencies. Marketing across the globe can now be achieved by small companies through the Internet at lower cost and this has increased the number of suppliers and solutions.
3. The pace of innovation is speeding up. Edge based storage and advances in analytics are creating more and more applications for IP video.
4. Open standards are starting to take a hold. This will open up competition even further and will reduce the barrier to smaller companies. Real competition will then kill off weaker companies and consolidation will come about through open market forces.
5. Increasing demand for full integration across all aspects of physical security solutions and now the business enterprise.
The channels of distribution in the physical security industry are changing to take into account these factors, particularly in the video surveillance sector, where IP network products have taken a major leap forward in the last three years requiring new skills for designing and installing systems. In the vast majority of cases the manufacturers don’t want to be directly involved in providing these services to the end user, therefore, they require the distribution chain to take on these responsibilities.
This scenario has required new and existing suppliers to brand themselves under the broad classification of distributors, but broken down into resellers, system integrators and solution providers. Normally they buy directly from the manufacturer, while some have a strong partner relationship to one or a few brands.
The term distributor is still used by larger companies from the traditional supply chain and new players from the information communication technology (ICT) sector business. But these companies now offer to supply all the components necessary to deliver a solution to installers. Many of these companies will also operate straight online sales. Finally, a few manufactures normally having specialist products selling to a few verticals have opted to sell direct to the end user and install themselves.
Although one size obviously doesn’t fit all, for those manufacturers that want to realize large-scale global penetration, they need to operate through all the distributor channels and not confuse the market by selling direct.
Within the last five years there have been major changes across the developed markets of the world regarding how products reach the end user. Findings from recent Memoori research shows that the value of product passing through the distributor channel has fallen off drastically from over 50 percent in 2006 to around 30 percent in 2011.
The reality is that distributors have lost market share as direct sales to resellers, system Integrators and solution providers have increased approximately 50 percent since 2011. Installing system integrators have also been joined by specialists from the IT sector, partnering with the manufacturers of IP Network products to offer packaged solutions.
Reference: SecurityInfoWatch, an article by Jim McHale