The corporate gifting industry in South Africa is like a three-tiered wedding cake: the supplier is the bride, the reseller the groom and the brander the best man. To continue this happily-ever-after analogy, there is also a guest of honour at this particular wedding: the end-user who ultimately buys the combined efforts of the other three.
For years now, this network has worked perfectly well for the benefi t of the entire industry, but now a growing number of insiders are concerned that the marriage might be in trouble. In this instance, the spanner in the works seems to be in the hands of point-of-origin sellers, who are now dealing directly with end-users, from giant corporate entities to small business operations, all in the name of cutting costs in a recessionary climate. What they’re really cutting out, however, is the middleman, the reseller who has been the glue of this particular business marriage from the very beginning.
Little, if any, research has been conducted into this trend, in SA or overseas, but a recent article published by the British Promotional Merchandise Association (BPMA) provides information that local resellers would do well to heed. According to the BPMA article, the industry is ‘up in arms’ at the growing number of suppliers selling direct to end-users. ‘The reason behind their dismay is clear: suppliers can obviously charge much lower prices than the distributor.’ ‘Distributor’ being the British term for reseller. When price is a critical factor in determining who the end-user deals with, some resellers feel they’re being ‘squeezed out’.
Resellers are the heart of our industry, the vital organ that keeps the rest functioning properly and profi tably. They provide the end-user with an array of cost- and timesaving services that makes their continued involvement vital to industry growth and progress. In brief, resellers are at the coalface with end-users: they develop merchandising ideas based on solid experience and understanding of industry needs; they source the products to match end-users’ campaigns; they scour suppliers’ catalogues and attend trade shows to source merchandise for their clients; they fetch and deliver samples, branding approvals and presentations. Most importantly, they deliver the end-user’s goods in time for any launch or promotion.
What end-user can afford the time or the expense to perform any of these vital reseller functions? Precious few. BPMA Director Gill Thorpe says, ‘I don’t think this is happening as much as some people claim. There have always been suppliers who sell direct, thinking they can make a quick buck, but they’re known in the marketplace, and those who win and grow are those who work to the reseller channel, building long-term partnerships and working to their strengths.’
Evan Lewis is a trade-exclusive supplier. He says, ‘We are seeing many more businesses claiming to be independent suppliers; however, while a business may be trading as a separate company, it’s operating from the same office and is run by the same people who sell to the end-user.’ Lewis believes the credit crunch has led to an increase of suppliers dealing directly with end-users: ‘The current climate is making it harder than ever to produce profi ts, so organisations are no doubt turning to any means to maintain their bottom line. Still, I don’t think hindering the relationship between supplier and reseller will benefit suppliers in the long term.’
Many industry players affirm that the reseller network is a critical part of the business. Industry expert David Long says, ‘We believe the reseller adds signifi cant value to the end-user in creative expertise, sourcing skills and production management. The reseller saves an end-user valuable time. To source each product individually is time consuming and few end-users are willing or able to do this.’
Supplier Andrew Hill says, ‘We need a strong reseller network to promote our products. Resellers are essentially our sales force. We cannot live in isolation from each other, and diluting our relationship will cause friction and hostility.’
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