Techaisle The 411 On Distribution Channels

A TECHAISLE POINT-OF-VIEW DOCUMENT
THE 411 ON DISTRIBUTION CHANNELS –

MAKING THE RIGHT CHOICE
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Contents
Content 2 ABSTRACT
Abstract 2
The document encloses a set of valued insight
The Importance of Distribution 3 and guidelines on how ICT distribution channels
Functions of Distribution Channels 3 operate.
Techaisle Tiering and Channel Definitions 6
Distribution Channel Definitions Table 8 Its aim is to:
Global Reseller Database 10
i) Assert why manufacturers must devote
sufficient amount of time & resources in
About Techaisle 12
selecting the best routes to their customers.
ii) Offer insight on how each element of an
integrated, well functioning distribution
chain operates.
iii) Provide a framework of Techaisle channel
research activities.
iv) Establish a common channel terminology for
our industry.
We have gone to great length to simplify,

standardize, and make relevant each value and
category element to provide a concise globally-
applicable definition set. We have included a
global analysis to enable easy referencing and
choice awareness.
Most importantly, we believe this represents a

firm basis from which to evaluate
developments, measure performances and
support our clients in managing through the
different stages of routes-to-markets’ global
evolution.
www.techaisle.com Page 2 | 12
THE IMPORTANCE OF DISTRIBUTION
Most producers, as part of their marketing place / go-to-market sales activites, make use of
intermediaries to bring their products to market. In doing so, they develop strategies, affiliations
programs and tactical campaigns to create what we call distribution channels. A distribution channel is
a set of interdependent organizations (channel intermediaries) that help make a product available for
use or consumption by the consumer or business user. Channel intermediaries are firms or individuals
such as distributors (wholesalers), dealers or retailers who help move a product from the producer to
the final user.
A company’s channel decisions directly affect every other marketing decision. Place decisions, for
example, affect pricing and product configuration. Marketers that distribute products through mass
merchandisers such as Wal-Mart will have different pricing objectives and product strategies than will
those that sell to specialty resellers.
Distribution decisions can sometimes give a product a distinct position in the market. The choice of
channel types and other intermediaries is strongly tied to the product itself. For instance, in the
consumer market, manufacturers will select mass merchandisers to sell low-to-mid price range products
and distribute top-of-the-line products through high-end electronic stores. The firm’s sales force and
communications decisions depend on how much persuasion, training, motivation, and support its
channel partners need. Whether a company develops or acquires certain new products ought to also
depend on how well those products fit the capabilities of its channel members.
Some companies pay too little attention to their distribution channels. Other comapniess, such as HP,
Cisco and Apple have developed imaginative distribution systems to gain a competitive advantage.
FUNCTIONS OF DISTRIBUTION CHANNELS

Distribution channels perform a number of functions that make possible the flow of goods from the
producer to the customer. These functions must be handled by someone in the channel. Though the
type of organization that performs different functions can vary from channel to channel, the functions
themselves cannot be eliminated.
Channels provide time, place, and ownership utility. They make products available when, where, and in
the sizes and quantities that customers want. Distribution channels provide a number of logistics or
physical distribution functions that increase the efficiency of the flow of goods from producer to
customer. Distribution channels create efficiencies by reducing the number of transactions necessary for
goods to flow from many different manufacturers to large numbers of customers. This occurs in two
ways.
The first is called breaking bulk. Wholesalers/Distributors and retailers purchase large quantities of
goods from manufacturers but sell only one or a few at a time to many different customers.
Secondly, channel intermediaries reduce the number of transactions by creating assortments—
providing a variety of products in one location—so that customers can conveniently buy many different
items from one seller at one time.
The transportation and storage of goods is another type of physical distribution function in that
Wholesalers / Distributors and other channel members move the goods from production site to other
locations where they are held until they are wanted by customers.
Distribution Channels also perform a number of facilitating functions, functions that make the purchase
process easier for customers [and manufacturers]. Channel intermediaries often provide customer
services such as offering credit to buyers and accepting customer returns. Some wholesalers and
retailers assist the manufacturer by providing repair and maintenance service for products they handle.
Channel intermediaries also perform a risk-taking function. If a retailer buys a product from a
manufacturer and it doesn’t sell, the retailer “stuck” with the item and will likely lose money. Lastly,
channel members perform a variety of communication and transaction functions.
Distributors buy products to make them available for dealers/retailers and sell products to these
channel members. Dealers / retailers handle transactions with final consumers. Channel members can
provide two-way communication for manufacturers. They may supply the sales force, advertising, and
other marketing communications necessary to inform consumers and persuade them to buy. And the
channel members can be invaluable sources of information on consumer complaints, changing tastes,
and new competitors in the market.
By using the Internet, even small dealers with limited resources can enjoy some of the same competitive
advantages as their largest competitors in making their products available to customers nationally at low
cost. E-commerce can result in radical changes in distribution strategies and the need for intermediaries
and much of what has been assumed about the need and benefits of channels is changing globally,
albeit at different speeds. In Developed regions many resellers will have an outbound salesforce, a store
and a web site with an associated online shopping cart thus developing hybrid sales & marketing
approaches. In Emerging regions however, different technology uptakes are likely to guarantee
developments that will not mirror that of what we have seen so far. A one-for-all approach is rarely
reccomended.
The Internet is also accelerating channel value obsolecence and we already see a number of channel
intermediaries [that physically handle the product] becoming largely obsolete or being eliminated
altogether as companies question the value added by layers. This latter removal of intermediaries is
termed disintermediation. It is prominent in territories with developed infrastructure, concentration
and where high-tech know-how is high.
At Techaisle we classify these functions into distinct categories. These are directly controled by the
manufacturers or handled by independent intermediaries.
Manufacturer-Owned Intermediaries [directly controlled]
Manufacturer-owned intermediaries are set up by manufacturers in order to have separate business
units that perform all of the functions of independent intermediaries, while at the same time
maintaining complete control over the channel. Manufacturer-owned intermediaries include outbound
sales force, manufacturers’ retail/showrooms and website with associated online shopping chart. Sales
force provide selling functions for the manufacturer in a specific geographic area [territory]. As they
allow members of the sales force to be located close to customers, they reduce selling costs and provide
better customer service. Manufacturers’ retail showrooms permanently display products for customers
to visit and purchase. They are often located in prominent locations where pass-by rate is high. Website
with online shopping cart is, for many Global regions, a relatively new phenomenon, particulalry if aimed
at final users, and is a large contributor to channel disintermediation as well as a source of manufacturer
competitive differentiantion.
Independent Intermediaries [indirectly controlled]

Independent intermediaries do business with many different manufacturers and many different
customers. Because they are not owned or controlled by any manufacturer, they make it possible for
many manufacturers to serve customers throughout the world while keeping prices low. At Techaisle we
recognise the following sub groups:
Distributors
Distributors are independent intermediaries that buy goods from manufacturers and sell to resellers
and sometimes to B2B customers. At the same time, because they take title of the goods, they operate
with a degree of freedom in developing strategies for their markets and assume certain risks if, for
instance, products they hold become obsolete. In some global territories, as a result of the
disintermidiation activites, distributors have adapted their traditional value offering to new business
models such as pure logistic services.
Distributors add value to the ICT chain by performing one or more of the following channel functions:
 Selling and Promoting  Reseller Financing

 Buying and Assortment Building  Risk Bearing
 Bulk-Breaking  Sell Out and Market Information
 Warehousing  Management Services and Advice
 Transportation
Merchandise Reseller Agents

Merchandise Reseller Agents are a second major type of independent intermediary. Reseller Agents
provide products or services in exchange for fees and commissions. They may or may not take
possession of the product and may or may not take title. Reseller Agents normally represent buyers or
sellers on an ongoing basis and in Techaisle’s terminology they include Dealers; Corporate & Value
Added Resellers; System Integrators; Independant Software Vendors; eResellers, Retailers;
Telecommunication & Service Providers.
TECHAISLE TIERING AND CHANNEL LENGTH
The first step in selecting a marketing channel is determining which type of channel will best meet both
the seller’s objectives and the sourcing needs of the targeted end customers. In doing so, identifying the
most optimal channel length and tier level for the product in question.
Distribution Channel Length & Tiers

Distribution channels can be best described as being either short or long. A short channel involves none
or few intermediaries from the original point of manufacturing/assembling to the end user. A long
channel, on the other hand, involves many intermediaries working in succession and passing the product
title to one another in order to move goods from producers to end customers.
In general, higher value ICT products tend to move through shorter channels than commodity business
products due to a combination of end customer geographical concentration, comparatively few[er]
business purchases and typical bespoken implementation.
Techaisle research delivers insight on channel length by applying a tier model with the following
methodology:
Type Definition Typically found

Dedicated Business Models,
The title of goods ownership is passed from manufacturer
Tier 0 Value Hardware; Software;
directly to the end user.
Established Regions
The title of goods ownership is passed from the manufacturer to Controlled Channels;
Tier 1 an intermediary [usually an accredited reseller or retailer], thus Customizable Hardware
indirectly, to the end user. Emerging/Established
The title of goods ownership is passed from manufacturer to 2 Open Channels; Volume
Tier 2/+ or more intermediaries [e.g. a distributor to a reseller or Hardware; Shrink Wrapped
retailer], thus indirectly, to end user. Software; Emerging Regions
Software & Service Support firms market primarily through short channels because they sell intangible
products and need to maintain personal relationships within their channels.
Tier 0 – Direct Channels
The simplest and shortest distribution channel is a direct channel. A direct channel carries goods directly
from a producer to the business purchaser or consumer and one of the newest means of selling in a
direct channel is the Internet.
In a direct channel, manufacturers may be better positioned to serve their customers than is possible
using intermediaires and another reason to use a direct channel is control. Direct channels are also
more common to business-to-business markets because B2B marketing often means selling value items
to a market made up of relatively few customers. In such markets, it pays for a company to develop its
own sales force and sell directly to customers at a lower cost than if it used intermediaries.
Tier 1 – Indirect Channels
Many producers, choose to use indirect channels to reach end customers. Customers are familiar with
certain retailers or other intermediaries and habitually turn to them when looking for what they need.
Intermediaries also help producers fulfill the channel functions previously cited. By creating utility and
transaction efficiencies, channel members make manufactuers’ operations easier and enhance their
ability to reach customers.
Manufacturers would select this channel length when addressing the market where a large degree of
control is still required; where reseller/manufacturer [technology] interaction is highly important; when
a selective or exclusive [closed] distribution system is applied; due to geographical concentration or
simply due to [limited] market clout.
The vertical manufacturer-retailer-consumer is an example of tier-1 and the shortest indirect channel.
Tier2/+ – Indirect Channels
The vertical manufacturer-distributor-reseller-customer is the most common distribution channel in

volume oriented marketing and the best example for reppresenting a tier-2 system channel length.
Manufacturers would select this channel length when addressing the market where a little or no control
is required; products are sold in small orders; products are commoditized; limited technology know-how
is required by the intermediaries or consumer; due to geographical dispersion or cost control strategies.
Due to limited infrastructure in emerging regions, it is a practice to also source horizontally [cross-
selling], that is from “equal value offering type” and this is where multiple tiers [the “+”] get created.
Sample of tiering flow adopted by Techaisle Channel research
Tier 0 Tier 1 Tier 2

Vendor Vendor Vendor
Distributor
Intermediaries Reseller Intermediaries Reseller

Agents Agents
End Customers
Government /
Large Business Medium Business Small Business Consumer
Education
DISTRIBUTION CHANNEL CATEGORIES DEFINITIONS TABLE
Different manufacturers will label, segment and classify distribution channel elements in accordance to
proprietary definitions and terminology. In recognition of this, and to provide a common terminology
that can be globally applied and transferred to proprietary segmentations, Techaisle research operates
in accordance to the following main channel categories and sub-categories:
Main Category -Subcategory

- Direct Sales Force
- Direct Sales - Direct Retail Stores
- Direct Fax/Phone/Web
- Dealers - Local Dealer
- Corporate VAR
- VARs
- VAR
- System Integrator
- SI/ISVs
- Independent Software Vendor
- Web Resellers
- eResellers
- Mail Order Catalogue Resellers
- Technology / Electronics Retail Stores
- General Retailer
- Retail Stores
- Office Supply Stores
- Wholesale Clubs
- Telecommunication Providers
- Telco
- xSP Service Providers
- Specialist Distributors
- Distributors - Value Added Distributors
- Broadline Distributors
Each of Techaisle’s main segmentation categories and sub-categories are classified and aligned in
accordance to the following traits:
Dealers VARs SI/ISVs eResellers Retail Stores Telco Direct Sales
Technology /
Value Added System Electronics Retail
Web Store Resellers; Telecommunication
Reseller / Integrators; Stores; General Salesforce; Retail;
Local Dealer Catalogue/Mail Providers; xSP
Corporate Value Independent Retailer; Office Web Store
Order/Fax Service Provider
Added Resellers Software Vendors Supplies Stores;
Wholesale Clubs;
Local & Solution Driven National Online shop Local, Regional,
National;
Regional; Sales Service-led or catalogue sales; National stores; National, Regional;
Type of Inbound and
Inbound and channel, Outbound >50% revenue from 80% revenue from Inbound and
sales outbound sales
outbound sales Outbound sales sales force Fax/Phone/Web walk-in businessoutbound sales force
force; Web Stores;
force; force Store
Hardware & Integrate HW & Hardware, Bandwidth
Develop and
Networking SW into bespoke Peripherals , Hardware, Voice/Data Telecom Hardware,
Primary Configure target
Products, solutions and Networking Packaged Software, Services; Packaged or
Offerings specific solution
Packaged implement into Products, Packaged Peripherals, Bundled Hardware Bespoke Software
packages
Software the organization Software, Consumables, etc. Offerings
Maintenance;
Reselling HW/SW ERP/CRM/BI Service & warranty;
Secondary Support & Service & warranty Service and Bundled Hardware
pkgs/Services solutions; Data Solution
Offerings Value-added packages warranty packages Offerings
together Security/Archive; Integration.
services.
SAMPLE TRADING TYPE OF COUNTRY SEGMENTATION
MAIN CATEGORY SUB CATEGORY DEFINITION TARGET CUSTOMER SALES APPROACH SALES TYPE
NAMES PRODUCT SOLD DISTRIBUTION THRESHOLD
A Dealer [or Local Dealer] is a company [or individual] with an
inbound/outbound sales force with Local or Regional presence. The Dealer Small to Medium
Walk-in and Outbound Low Value High ICT Hardware; >50% Revenue from
purchases goods or services with the intention of reselling them with Businesses; Local MicroTech;
Dealers Local Dealers SalesForce; Volume Individual Software; Post Thousands Outbound Sales
minimal value adding activities [for example shrink wrapped software, Education; Local MediaTech
WebStore; Phone/Fax Purchases Sales Services Force;
stand alone hardware]. The Dealer takes title of the goods before reselling Government Offices
them.
A Value-Add Reseller (VAR) is a company that adds features to an existing
product, then resells it (usually to end-users) as an integrated product or
complete "turn-key" solution. The term is used to describe a company that Small Business; Medium
Outbound ICT Solutions;
purchases ICT elements and builds (for example) a fully Business; Large Business; High Value Long- Corporate ICT; Outbound
Value Added Reseller SalesForce; Post Sales and Thousands
operational system usually customized for a specific task such as a retail Education Establishments; Term Contracts MaxExpert; IT-Com; SalesForce; Phone
Phone/Fax Managed Services
invoicing solution. By doing this, the company has added value above the Local Government Offices
cost of the individual elements. A VAR will take title of the good and sells a
www.techaisle.com
portfolio of specific leading industry solutions.
VARs A Corporate VAR is a company with an outbound sales force usually with
National/International coverage and servicing capabilities that purchases
and takes ownership of a variety of ICT goods to be sold. Corporate VARs Medium to Large
Outbound SCC;
value proposition includes the provision of a "one-stop" solution for Businesses; Large ICT Hardware >50% Revenue from
SalesForce; High Value Long- Computacenter;
Corporate VARs Enterprises that have multiple national or transnational office locations. Education Establishment / Software; Post Few Outbound Sales
Dedicated WebStore; Term Contracts CHG-Meridian;
Corporate VARs differs from traditional VARs in their sources of revenue Research Institutions and Sales Services Force;
Phone/Fax Asystel;
which includes substantial post-sales services [beyond the new Government Departments
techonology solutions offered], for example long-term asset management
support across the client base offices.
A System Integrator [SI] integrates multiple systems for inputting,
processing, interpreting, storing, and categorizing data. For example, a Small & Medium Professional
High Value Accenture; CSC;
systems integrator may build an IT solution integrating an database Businesses; Large Services; Outbound
System Integrators Outbound SalesForce Individual CapGemeni; Hundreds
inventory tracking system, a document management system with a NAS Businesses, Education; Customized ICT SalesForce
Contracts Sapient;
store/retrieve storage system to produce an overall solution for the Government Solutions
customer.
Independent Software vendor (ISV) are companies specializing in making
SI/ISVs or selling software, designed for mass marketing or for niche markets. An
ISV makes and sells software products that run on one or more computer
hardware or operating system platforms. ISVs focus is often on particular Medium Businesses; Large High Value Customized
SAP; Software AG; Outbound
Independent Software Vendors operating systems or in a particular application area, such as engineering, Businesses, Education; Outbound SalesForce Individual Software; ICT Tens
BluStar Infotech; SalesForce
thus developing, for example, software primarily for high-end Unix-based Government Contracts Hardware; Services
workstation platforms. ISVs make and sell software that is added to
platforms with at least 50 percent of revenue coming from the development
of proprietary software solutions or applications.
TigerDirect; Misco;
A Web Store Reseller is a company that sells products or services through Expansys; Dabs;
a website that has an online shopping cart associated with it. The Consumer; Small and Low Value High Acuista; CanalPC; >50% Revenue from
ICT Hardware;
Web Store Resellers customer makes an order in the shopping cart and then receives the Medium Businesses; Large WebStore ; Phone/Fax Volume Individual ePrice; Americana; Tens WebStore Shopping
Software; Services
ordered merchandise at a designated address by way of a package Business Purchases Compra Facil; Cart
delivery service. Bemol; Inmac;
ONNO;
eResellers A Mail Order / Catalogue Reseller is a company that solicits product sales
through designated space advertisement or catalogues usually sent to
customers who place remote orders via mail, telephone or fax and then ICT Hardware;
Consumer; Small and
receives the ordered merchandise at a designated address by way of a Mail; Phone/Fax; Argos; Keys; Software; >50% Revenue from
Mail Order Catalogue Resellers Medium Businesses; Some Single Purchases Few
package delivery service. With the popularity of the Internet and online WebStore PostalMarket Consumables; Mail/Fax/Phone
Large Business
shopping, in many developed markets, Mail Order Catalogue Resellers Services
have opened WebStore counterparts deploying a Multi-Channel sales
stragegy thus rapidily merging into a single category.
Best Buy, White Goods; >80% Revenue from

A Technology / Electronic Retailer is a company that sells through a Low Value Mediamarkt, Comet; Consumer Walk-in AND >30%
Consumer; Small and Walk-in; WebStore;
Technology / Electronics Retail Stores dedicated fixed location establishment a wide variety of technology and Individual PC World; Euronics; Electronics; ICT Tens Revenue from ICT
Medium Businesses Phone/Fax
entertainment products and services Purchases Fortess; El Corte Hardware; Technology
Ingles; PC CITY Consumables Products); WebStore
A General Retailer is a company that sells through a dedicated fixed
Auchan; Sears; Aldi;
location establishment a wide variety of commodity goods to the public
Wal-Mart; Tesco; Food; Apparel;
without an overriding specification. The definition of general retailer Low Value
Consumer; Small and Stockmann; Stationary; >80% Revenue from
General Retailer includes department stores, food stores; shopping super-centers; Walk-in; WebStore Individual Hundreds
Medium Businesses Karlstad; Carrefour; Household-ware; Walk-in
mercantile stores, product-ware; outlets; country stores; corner stores. The Purchases
HomeBase; ICT Hardware
main sale approach is with a customer walking into the establishment and
PowerBuy
leaving with the product itself.
Retail Stores
An Office Supply Store is a company that sells through a dedicated fixed
location establishment a broad assortment of general office supplies, Office Depot; Office Stationary;
Low Value
computer supplies, business machines and related supplies Consumer; Small and Buffetti; Staples; Office Furniture; >80% Revenue from
Office Supplies Stores Walk-in; WebStore Individual Hundreds
merchandise, and office furniture from national brands as well as own Medium Businesses PaperStone; ICT Hardware; Walk-in
Purchases
private brands. The main sale approach is with a customer walking into the McPaper Software; Services
establishment and leaving with the product itself.
A Wholesale Club is a company that sells through a dedicated fixed

location establishment a wide variety of merchandise in which customers Food; Apparel;
Low Value Costco; Metro;
are usually required to buy large, wholesale quantities. The clubs' Small and Medium Stationary; >80% Revenue from
Wholesale Clubs Walk-in; Multiple Makro; PriceSmart; Tens
customers may be required membership [fees-based or be business Businesses Household-ware; Walk-in
Purchases Sams' Club
registered] in order to shop. The main sale approach is with a customer ICT Hardware
walking into the establishment and leaving with the product itself.
A Telecommunications Service Provider is a communications service AT&T; BT; Transmission and

>50% Revenue from
provider that sells traditionally telephone communication and similar Consumer; Small Business; FranceTelecom; routing of
Walk-in and Outbound provision of
services. This category includes ILECs, CLECs, and mobile wireless Medium Business; Large Long-Term Verizon; Vodafone; telephone
Telecommunication Service Provider Saleforce; WebStore; Tens Telephone exchange
communication companies. TSPs may bundle hardware or provide Business, Education; Contracts Airtel; H3G; exchange services
Phone/Fax transmission related
services together with their telephone communication service such as Government Telefonica; NTT and exchange
Services
Telco connectivity harware and IT products. Docomo; access
An xService Provider (XSP/ISP) is a company that offers its customers
>30% of Revenue
access to the Internet using a data transmission technology such as dial- NorthWestISP; Data & VOIP
Small Business; Medium Outbound Saleforce; Long-Term from provision of
xSP Service Provider up, DSL, cable modem, wireless or dedicated high-speed interconnects . Telium Networks; Transmission; Tens-to-Hunderds
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Business; Large Business, Phone/Fax Contracts Data transmission
xSPs may bundle access hardware or provide hosting or managed Netaway; COLT; Managed Services
related services
services solutions separately or together with access provision service.
GLOBAL RESELLER DATABASE – SAMPLE RESEARCH FINDINGS
Techaisle’s extensive channel research provides profiled resellers database lists and analytical findings
relative to trends, migrations and uptakes across the world regions.
Below is a summary of Techaisle’s 2010 research findings for key countries within the Emerging and
Established global ICT regions.
Emerging Markets Characteristics:

Characteristics Dealers SIs/ISVs Telco / xSPs Corporate/VARs Retail VARs/SIs Dlr./Rtl./Rslr.
Total number of partners 74.417 52.477 24.110 138.133 12.805 190.611 87.222
Average number of employees 16,5 19,8 21,0 17,8 5,3 18,4 14,8
Average age of business 9,4 9,1 7,8 10,7 6,3 10,3 8,9
Average annual revenue $0,5 $0,8 $0,3 $0,6 $0,2 $0,6 $0,5
Average growth rate 14% 17% 19% 12% 17% 14% 15%
Average number of locations 1,3 1,5 2,3 1,8 2,1 1,7 1,4
Verticals Served 7,7 8,2 7,9 7,8 1,5 7,9 6,8
Vendor partnerships 7,6 7,1 6,8 6,7 4,3 6,8 7,1
Avg. # of products/services offered 17,2 15,5 11,4 18,5 11,3 17,7 16,3
Revenue from Customers
Revenues from SBs 34% 18% 24% 29% 14% 26% 31%
Revenues from MBs 20% 25% 25% 25% 6% 25% 18%
Revenues from LBs 10% 35% 27% 22% 1% 26% 9%
Revenues from consumers 27% 1% 6% 7% 78% 5% 34%
Revenues from Govt./ Edu. 7% 17% 10% 12% 1% 13% 6%
Other Channel Partners 3% 5% 6% 4% 1% 4% 2%
Revenue from Products
PCs/Peripherals 57% 27% 12% 53% 89% 46% 62%
Software
Developed by other vendors 8% 5% 6% 8% 2% 7% 7%
Developed in-house 2% 3% 3% 3% 0% 3% 2%
Custom made 2% 2% 3% 3% 0% 2% 2%
Networking 12% 23% 11% 14% 4% 16% 10%
Security 3% 4% 5% 3% 1% 3% 3%
Storage 4% 5% 5% 3% 1% 4% 3%
IT Services 8% 25% 19% 9% 3% 13% 7%
Telephony & Communication 2% 1% 2% 2% 0% 2% 2%
Internet Services 1% 5% 34% 3% 0% 4% 1%
Revenue from Local Customers 76% 70% 72% 80% 95% 77% 78%
Revenue from Non-Local Customers 24% 30% 28% 20% 5% 23% 22%
Margins
PCs/Peripherals 15% 14% 8% 15% 13% 14% 15%
Software
Software Apps. 10% 10% 10% 10% 12% 10% 10%
Custom Dev. 9% 9% 11% 13% 0% 12% 8%
Networking 10% 11% 10% 10% 12% 10% 10%
Security 9% 9% 11% 9% 2% 9% 8%
Storage 10% 10% 11% 7% 3% 8% 9%
IT Services 9% 16% 10% 9% 9% 11% 9%
Costs
Inventory & Production Costs 31% 1% 12% 22% 23% 17% 30%
Technical & Support Costs 4% 44% 52% 4% 3% 15% 4%
Inbound & Outbound Logistics 2% 1% 1% 2% 1% 2% 2%
Sales & Marketing Costs 3% 10% 4% 2% 6% 4% 4%
Admin/Operations 4% 7% 9% 5% 4% 5% 4%
Operating Margins 4% 5% 8% 4% 4% 4% 4%
In this sample, Emerging Markets research is formed by: Brazil, Russia, India, China, Turkey, Poland, S. Africa, Malaysia, Thailand
Established Markets Characteristics:
Characteristics Dealers SIs/ISVs Telco / xSPs Corporate / VARs Retail VARs/SIs Dlr./Rtl./Rslr.
Total number of partners 87.163 57.208 62.482 150.584 14.998 207.792 102.161
Average number of employees 11,7 17,3 10,5 12,7 5,6 14,0 10,8
Average age of business 11,1 11,0 9,0 12,5 6,9 12,1 10,5
Average annual revenue $0,9 $4,1 $1,9 $1,3 $0,6 $2,0 $0,9
Average growth rate 7% 10% 14% 7% 6% 8% 7%
Average number of locations 1,2 2,0 2,0 1,2 1,3 1,4 1,3
Verticals Served 8,5 6,7 6,5 8,4 2,6 8,0 7,7
Vendor partnerships 10,8 10,6 5,4 11,2 11,6 11,1 10,9
Avg. # of products/services offered 16,8 18,7 13,6 17,4 14,9 17,7 16,5
Revenue from Customers
Revenues from SBs 31% 18% 23% 30% 15% 27% 29%
Revenues from MBs 21% 37% 26% 22% 6% 27% 18%
Revenues from LBs 15% 21% 26% 30% 1% 27% 13%
Revenues from consumers 24% 0% 3% 2% 77% 2% 32%
Revenues from Govt./ Edu. 7% 19% 18% 14% 0% 15% 6%
Other Channel Partners 2% 5% 5% 2% 0% 3% 2%
Revenue from Products
PCs/Peripherals 48% 16% 7% 33% 73% 29% 52%
Software
Developed by other vendors 9% 8% 9% 9% 8% 9% 9%
Custom made 4% 5% 5% 3% 0% 3% 3%
Networking 14% 16% 6% 17% 13% 16% 13%
Security 5% 9% 5% 7% 2% 7% 5%
Storage 5% 3% 4% 6% 1% 5% 4%
IT Services 7% 29% 15% 14% 0% 18% 6%
Revenue from Local Customers 69% 63% 51% 67% 92% 66% 73%
Revenue from Non-Local Customers 31% 37% 49% 33% 8% 34% 27%
Margins
PCs/Peripherals 8% 10% 9% 7% 11% 8% 8%
Software
Software Apps. 6% 7% 9% 7% 12% 7% 7%
Custom Dev. 7% 9% 11% 6% 0% 7% 6%
Networking 7% 14% 12% 7% 8% 9% 7%
Security 6% 8% 9% 5% 7% 6% 6%
Storage 6% 6% 9% 5% 10% 5% 6%
IT Services 6% 17% 13% 7% 0% 10% 5%
Costs
Inventory & Production Costs 19% 1% 1% 6% 29% 5% 20%
Technical & Support Costs 7% 43% 41% 28% 6% 32% 7%
Inbound & Outbound Logistics 5% 1% 2% 2% 5% 2% 5%
Sales & Marketing Costs 8% 3% 6% 4% 6% 4% 7%
Admin/Operations 6% 10% 13% 8% 8% 8% 6%
Operating Margins 5% 10% 12% 6% 6% 7% 5%
In this sample, Established Markets research is formed by: Australia, Canada, France, Germany, Japan, Korea, Italy, Spain, Taiwan, US, UK
ABOUT TECHAISLE
Techaisle is an IT market research and consulting company covering SMBs and Channels. Go-to-market
strategies require actionable research, flexible data and deeper segmentation. Techaisle's segmentation
is easily understood, rapidly deployable and drives actual sales and market understanding. Techaisle’s
channel research coverage provides in-depth understanding of resellers and distribution channels across
numerous countries. Techaisle provides six major services: Worldwide IT Market Sizing, Channel
Research, Reseller Partner Sizing, Syndicated Research, Custom Consulting and Segmentation.
AMERICAS EMEA APAC

Ph: +1 408-314 4690 Ph: +39 3407351725 Ph: +91 9810412226
inquiry@techaisle.com inquiry@techaisle.com inquiry@techaisle.com
Tavishi Agrawal Paolo Puppoli Gitika Bajaj
tavishi@techaisle.com paolo@techaisle.com gitika@techaisle.com

Techaisle The 411 On Distribution Channels

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A TECHAISLE POINT-OF-VIEW DOCUMENT

THE 411 ON DISTRIBUTION CHANNELS –

5053 DOYLE RD, SUITE 105

We have gone to great length to simplify,

Most importantly, we believe this represents a

FUNCTIONS OF DISTRIBUTION CHANNELS

Independent Intermediaries [indirectly controlled]

 Selling and Promoting  Reseller Financing

Merchandise Reseller Agents

Distribution Channel Length & Tiers

Type Definition Typically found

Tier 0 – Direct Channels

Tier2/+ – Indirect Channels

The vertical manufacturer-distributor-reseller-customer is the most common distribution channel in

Sample of tiering flow adopted by Techaisle Channel research

Tier 0 Tier 1 Tier 2

Intermediaries Reseller Intermediaries Reseller

Main Category -Subcategory

Best Buy, White Goods; >80% Revenue from

A Wholesale Club is a company that sells through a dedicated fixed

A Telecommunications Service Provider is a communications service AT&T; BT; Transmission and

Emerging Markets Characteristics:

AMERICAS EMEA APAC

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