Channels of distribution in the physical security industry are changing, particularly in the video surveillance sector where IP network products has taken a major leap forward in the last three years and require new skills in terms of system design and installation.
We have been charting the routes to market for physical security equipment since 2006 and, during the intervening period, there have been major changes across the developed markets of the world in terms of how products reach the end user.
Our research shows that the value of product passing through the distributor channel has fallen off drastically from over 50% in 2006 to around 30% come last year. Security distributors’ market share has been taken by direct sales to installers/system integrators, who have now increased their share of the market to approximately 50%.
The installer/system integrator route has been joined by specialists from the IT/Communications (ICT) industry. It would now appear that the traditional distributors have lost much of their share to these companies who have partnered with the manufacturers of IP network products.
Trending across the globe
While these trend appear to be most marked in the developed markets of Europe and North America, similar trends are now being realised in Asia and, at the same time, are taking place across the access control solutions market (but as yet it’s not as pronounced in this space).
Getting IP network products to market is certainly going to be a challenge for distributors and one they will have to meet because it will eventually take 100% of the business.
These changes are not so startling when assessed over a six-year period, but their consequences are now being felt. There has been the recent exposure of weaknesses in the distributor chain, while major European distributor Norbain found itself in administration (albeit very briefly).
In truth, IP network products do not lend themselves to the traditional ‘box shifting treatment’ of analogue products. They require more sophisticated application of skills. Sadly, few distributors have seen the need to work with the manufacturers to acquire the necessary skills.
Norbain had lost money during its previous four years of trading, but has instituted an offering by the name of Service Plus. This programme embraces integrator/installer partners, training, service and Cloud initiatives.
Taking on more systems integrator duties
Distributors that have become more ‘IP savvy’ (such as the AES Group and Digitalcom in Thailand and Tri-Ed/Northern in the USA) have been able to maintain their market share by taking on more system integrator duties, notably with regard to systems/networks design and commissioning.
Not all distributors, however, have taken up the challenge.
There’s a place for the distributor but not in the traditional role, at least not for long. Knowledge is paramount, and particularly so in what are now increasingly connected, integrated buildings and security environments.
Put simply, there’s a need to bring together packages that meet these needs. The IT services that they require is a service that professionals can bring to the table.
Increasing number of ‘hybrids’ in Asia
Hayden Shu, the editor in chief at A&S International, has noted: “We are also seeing an increasing number of ‘hybrids’ in Asia. Specialist companies distributing systems for technology partners and developing or integrating systems that are more software-based on behalf of their clients.”
This is not dissimilar to the way in which UK-based distributor Controlware operates. The Controlware Group has provided IT communications networking solutions since 1980. Since then, the organisation has accumulated extensive experience in the design, delivery and maintenance of cost-effective IP networks.
Indeed, post-1997 they have also specialised in the integration of applications such as IT security, storage and video surveillance systems. They can now offer total packages of IT communications networks, CCTV cameras, CCTV encoders, CCTV Video Management Software, recording and video content analytics systems.
On top of that, they work closely with both installer and integrator partners to provide security systems for end users emanating from all vertical markets. Their value added services range from consultancy, product advice and supply through to systems design, project management, commissioning, maintenance and installation (by way of their various channel partners).
Extended alliances and partnerships
Our previous blog discussed how several manufacturers are extending the range and depth of their alliances and partnerships with manufacturers of adjacent products, and showed how this process is broadening to encompass all stakeholders in the supply chain.
Distributors in the wider definition of the word have a very important role to play, but they will undoubtedly have to sharpen their game if they’re going to partner with key manufacturers and deliver what their clients really want and need.
Allan McHale is director of Memoori
The Memoori Blog focuses on business intelligence, comment and insight in relation to the physical security and smart grid industries (access the dedicated web link below)
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