How the Marketplace works – The Dealer Channel

In this series of blogs, I hope to inform business owners and Telecoms buyers of the considerable and diverse range of products, services and providers available to them in what is a very vibrant and fast moving market.

We saw in an earlier blog that when it comes to phone lines for business, there are alternative Service Providers (SPs) to BT .

Similarly, these SPs are also at liberty to sell Telecoms equipment such as PBX telephone systems or to offer hosted products such as Centrex or hosted VoIP systems for business (Voice over IP).

In addition to the SPs, there are ‘’Dealers’’ who have agreements in place with the big manufacturers such as Siemens, Mitel, Panasonic etc. This environment is called the Dealer Channel. There are many different Dealer models in place but essentially the arrangement is based along commission principles and/or the Dealer undertakes (contracts) to buy a certain amount of a manufacturer’s products at a given price. Dealers then sell these products either directly to customers or through SPs and other distributors and are supported by the Dealer with Branding and Marketing.

In the latter case, it is usual for the Manufacturer to provide his goods to the Dealer on a sale or return basis or to offer the dealer a large line of credit to allow the Dealer to purchase a large level of stock.

This market generally works well but there are things to watch out for than can cause tensions in the supply chain and can have an impact on the Dealer’s ‘’relationship’’ with the customer. I know from my own experiences that these pressures and tensions can result in Dealers making decisions that are not always in the customer’s best interest.

If the Dealer fails to meet their targeted sales, then the price per unit of the individual product will  go up.  Or, I’ve seen cases where if targets are missed, then no commission at all is payable by the Manufacturer. This results in a pressure filled Sales environment and these pressures can, and do, cause problems that can filter through to the customer.

Our advice is that customers use an independent supplier of telephone system…one that is not tied to a particular Manufacturer’s pbx phone system.  Alternatively, ask how much of your money is going to pay commission to the Salesman. (This disclosure concept is common in other industries such as Financial Services, Banking and even the construction industry).

It is always worth considering using the services of an independent consultant to examine, in detail, your needs and produce a specification that can be tendered. This can be done for a very modest cost (£200) and could save you thousands of pounds.