What changes have you seen in the distribution business over the past few years?
There have indeed been changes – not so much in the kind of business we have, more in the wars we have to fight to achieve it.
We are very focused on distribution, so we are not into system integration or rental or any other sidelines that would spoil relationships with customers and partners in small markets like Austria. If you start to do rental business as a distributor, for instance, with a projector that rental companies are buying from you, there will sooner or later be conflicting interests and annoyed rental partners.
German business models are different, though, and more business cases are possible. There, for instance, pure dry hire business exists, so you can say as a distributor, ‘buy it or rent it’. In smaller markets, you are immediately ruining your rental partners with this strategy. The same counts for the system integration business and our partners there as well.
But what’s happening if the economy of a neighbouring country is bad is that companies look over the border and, of course, they don’t care about the inherent gameplay of the targeted countries’ business models and relations. In fact, they don’t even care about their own initial business model. If, for instance, a large rental company hasn’t had enough projects for some time, they start dealing or installing – and not caring about service, quality levels and margins. Something is better than nothing. I honestly do not think that this is good for the economy. And for sure, that has been a change regarding the last few years in the distribution business.
We are always very loyal to our partners in the rental and system integration branch and try to keep the house clean concerning direct business to end customers. But the house nowadays is Europe – and in some cases, the world – and so someone will almost always ignore the conventions. This has nothing to do with old-fashioned protectionism. We are happy about the fact that business runs easily across Europe. But we have contracts with our manufacturers concerning which countries we serve and how, and we strictly cling to it. That’s it.
What are the big challenges that you think the distribution business faces in the next year or two?The first is to make distribution channels straight and clean, together with the manufacturers, and establish self-stabilising conditions across Europe. Then, distributors need to offer additional benefits such as real competence in products and systems and outstanding service to their partners. Just moving boxes won’t drive the professional AV business into the future. The third challenge is to establish – or preserve – fruitful long-term customer relations and networks and protect them from the quick and dirty business.
What is Grothusen AV's business strategy?Product-wise we will broaden our portfolio to concentrate on system solutions. Regarding the rental market, most of the Austrian companies we work with try to keep the number of suppliers as low as possible, so as well as promoting our core brands in Austria, we will bring on some additional product lines in order to complete the system portfolio.In the pro AV business, we compete against box-moving companies with our deep knowledge of systems and products – so we’re able to offer system solutions which fit perfectly, and not just a product and a price. Sometimes, this approach provokes a “no” response and you might lose some deals – but we truly believe that the customer who values what we can do for him will generate a stable turnover over years. I say again: just moving a box will not move any people or projects. Our direction of development is clearly defined, and service and support is a strong part of that.
How do you choose which products/manufacturers Grothusen AV will represent?That’s quite easy to talk about - but hard to achieve. We represent manufacturers that stand for the highest quality and innovation – manufacturers like Barco, Sennheiser, Kling & Freitag, Neumann and Lightware. I know everyone claims that – but additionally, we are always looking for exclusivity which brings with it a certain margin and price dynamic in the market. Let me clarify that: for instance, if you bring Barco products to your customers, you won’t end up in chaos with numerous dealers fighting it out on price until someone wins a deal with no value.
We are always looking for manufacturers in the audio and video sector who can provide exclusivity product-wise. But what we always avoid is overlap in the portfolio. It makes no sense to have several boxes in the portfolio from different manufacturers, all of which do more or less the same. This would weaken the clear message about the brands we represent.
What do you think a manufacturer wants from a distributor – and what does a reseller want?Usually a manufacturer knows the major key accounts all over the world who can generate reasonable turnover – but they are always afflicted by a pretty high dropout risk. What manufacturers typically don’t know are the second-tier customers which collectively can provide a stable and significant turnover for decades. There, a distributor can help. We have a high service orientation at Grothusen AV. You have to be close to the customer to provide a high service level – and that can be areal challenge for manufacturers, to be as close as we are.
Concerning resellers: what they want are support and consistency, a stable and market-driven product design and, of course, margin. Usually the margin is the initial driving force for resellers to think about their portfolio. I think it is as simple as that.
How are you managing to preserve – perhaps grow – your profit margins during difficult economic times and when there is so much competition?This would be the perfect question to quote all the slogans and recipes from sales seminars and bestsellers but to be honest, in the pro AV business that we’re part of, the business is a people business. What I mean is that you might have a perfect business plan to preserve margins but in the end it is the relationship with your customer and the relationship with your manufacturer which are the business basics for any distributor. The rest is good ideas and lots of work.
Andreas Hammerschmid was talking to Ian McMurray