Leaders in Security Distribution

Oct. 27, 2008
An Exclusive Security Dealer Roundtable

Susan Brady: What is your Best Performing Product category for the first half of 2006 (i.e. intrusion, fire, video surveillance, access control, etc.)? Why do you think this category is performing so well?

Randy Teague, Vice President of Marketing, ADI: Intrusion is our Best Performing Product Category because all segments of our dealer base continue to grow. Dealer programs have returned with considerable strength, and the smaller independent dealers are growing as well. We are always trying to increase the opportunities to help customers grow, regardless of size. For example, we expanded our product lines to include wireless portable security systems and PERS. IP products are growing at a rapid rate, yet the penetration into the market is still relatively small.

Michael Schwab, Vice President of Purchasing, D&H Distributing: The IP video surveillance category has become a growth leader. Since the majority of our customers understand the ins-and-outs of networking and IP addresses, they also recognize the value of security, not just for data, but also in a physical capacity.

John Gaillard, President, ScanSource Security Distribution: Our best performing product category for the first half of 2006 has been a combination of CCTV and Identification products. Many projects quoted over the last year are finally seeing budget dollars allocated to fund them. Also, the breadth of applications for CCTV is increasing due to IP and businesses seeing additional uses for the technology, such as video surveillance used in a retail environment tied to the POS system. Now the system becomes not only a security solution, but a business management tool. Identification has done well because of the continued awareness of tracking and knowing who is on a businesses premise at all times. We especially see an increase in public sector spending here, with an emphasis on the education market.

Bryan McLane, Systems Design, The Systems Depot: CCTV has seen the largest amount of growth in 2006. Rapidly decreasing equipment prices have been overcome by increased volume. Access control is a close second. People are more security conscious than they were even just a few years ago. The general public is realizing that catching someone on video is one thing, but keeping them out of their facility or secure areas to begin with is even better. CCTV and access control have performed so well because traditional “alarm” dealers are seeing the light. Home and business owners want to deal with a single low voltage contractor.

James Rothstein, Senior Vice President, Tri-Ed Distribution: Our best performing category is Systems Integration as a whole, video surveillance/access control, in particular. This is because technology has made it easier for smaller dealers to work as micro-integrators, whereas, in the past, only the larger companies were doing these installations.

Brady: Within this category, what is the Best Performing Product Group? Why do you think this Product Group is performing so well?

Teague: Wireless is our Best Performing Product Group because not only has the fundamental wireless technology gained complete acceptance but the expansion of wireless peripherals allows it to satisfy broader applications with a more complete solution. From the dealer perspective, the faster and easier wireless installations make economical sense, particularly with the rising cost of copper for wire and cable.

Schwab: Sales of video servers are growing at an amazing rate. This tells us that legacy CCTV systems are being readily converted to IP-based network solutions. This upgrade cycle has created a new business opportunity.

Gaillard: I would say that cameras and DVRs are the best performers. We are beginning to see more and more IP projects quoted, but the majority of what is being fulfilled at present is still traditional product.

McLane: DVRs are definitely the best performing product type in CCTV. The growth of end user acceptance of the DVR has significantly increased with sales volume, and by doing that, pushed prices down. Considering all the advantages of DVRs over VCRs, I think we will see many manufacturers getting out of the VCR business completely in the next few years.

Rothstein: DVRs remain our best performing product group; sales are growing consistently. The security dealer continues to leverage the rapid advancements in the computer space. Increased storage capacity has, and will, continue to benefit our industry by improving the capability of DVRs.

Brady: What criteria do you use to take on a new product or complete line? Is it to: Offer new technology? How is that decision made?

Teague: Yes, but we don’t offer technology just for technology’s sake; it needs to solve a problem or provide a more complete solution. Generally, we look at the complexity of the technology, the training and support capabilities of the manufacturer, along with other factors before making the decision.

Schwab: If we believe a certain technology is proven, we’ll be early adopters. We’ve always supported emerging technologies, often sooner than some larger competitors are able to. However, again, the choice has to make sense for our customers, so we pay particular attention to the learning requirements and pricing considerations of new technologies.

Gaillard: We don’t just choose a product to offer new technology, but we stay apprised of trends. A new technology has a learning and development curve that we must help the dealers navigate. We can’t afford to offer a new product that is still “immature” in this cycle. We must see proof or validation of the technology and then we will evaluate the best of breed before we carry that product.

McLane: New technologies must be carefully reviewed and considered. Are they completely new, or just new to our industry (crossed over from another industry)? What is the track record of the technology and the company offering it? Are low voltage installers ready to accept this technology? Nobody likes to be an unwitting guinea pig for untested technology.

Rothstein: What we call the “Early Adaptors,” the people who pioneer and try new technologies, they lead the way. We act as the conduit in providing new technologies, but customers have to be able to embrace it for it to make sense. The technology doesn’t jump off the shelf - manufacturers have to give it legs. We ask questions such as “Can a customer take it and be profitable with it? Is there an extensive learning curve and is after-sale service required?”

Brady: Do you want to broaden choices in a product category? What do you look for when you already have similar products?

Teague: ADI looks to provide a broad spectrum of price/performance solutions. Once that spectrum is filled, we do not usually look to broaden it with additional brands. We value our relationships with our manufacturing partners and don’t want to dilute their ability to grow. The impact on our existing vendor partners is the most serious consideration in our decision to add a new vendor.

Schwab: Our goal is to offer a robust selection from manufacturers we trust whose products can be integrated into business solutions. The emphasis is on quality as opposed to mass quantity.

Gaillard: We do look at times to broaden choices in a product category, but there must be a valid and sustaining reason to do so. The product must fill a niche that we don’t already cover with a different vendor.

McLane: What does the product do different/better/cheaper than products we currently offer? We want to offer the products our customers want, but we don’t want to dilute our product offering by selling a bunch of “me too” products. It only serves to confuse our customer and make selection of the best product for the application that much harder.

Rothstein: We consider: Is that particular market going to expand? Will that product create more demand? Does it offer any special features and benefits? Does another manufacturer offer a better value proposition to our customers?

Brady: Do you try to fulfill a trend in the market? How do you track trends?

Teague: Yes, ADI keeps up with market trends as a trend is usually an indicator that there is a growing demand, or an anticipation of high growth. Customer feedback and analytics provide us with a better understanding of what a trend really implies.

Schwab: Since we’re multidivisional, we have a broad perspective on trends. For instance, we watched video technologies perform in the computer and consumer electronics markets years before the category found an application in the security industry.

Gaillard: We do track market trends and try to stay ahead of what is happening. We accomplish this through a group within our company who studies this and makes recommendations.

McLane: Three ways: watch, listen, and learn. Our product management team walks the trade shows looking for new opportunities and technologies with our customer base in mind. We ask our customers to tell us what direction their business is taking (or what direction they want to take their business in).
Rothstein: We communicate directly with our customers. We ask what they’re seeing and what they need. We also look to industry publications to keep us on the pulse of changing trends.

Brady: Are you trying to offer a solutions approach? Please explain how a product fits this criterion?

Teague: ADI provides a solutions approach at all times when needed. No single manufacturer can provide every product to meet every situation.

Schwab: Again, our goal is to offer a robust selection from manufacturers we trust whose products can be integrated into business solutions.

Gaillard: Our approach has always been to carry complete solutions that enable the dealer to fulfill a project in one place. We believe it is a key strength of the two-tier distribution model to reduce the number of places dealers must coordinate to buy products.

McLane: The sales process is all about finding a problem and offering a solution. The catch is how real is the problem, and how viable is the solution? Our vendors are there to sell us product, that we are expected in turn, to sell to our customers. So we must be very diligent to make sure that the “solution” is everything it claims to be.
Rothstein: Yes. It goes back to the fact that our customers need to provide their customers with a whole solution. We have to provide a product portfolio that enables them to do that, based on the criteria I’ve outlined.
Brady: Pricing—is it cost only? How do you balance quality and competitive pricing?

Teague: ADI never makes a decision to add a new product or vendor based purely on price. While price is an important factor to a dealer when making a purchasing decision, we believe that most customers really are looking for trusted business partners, where support and performance share priority with a fair price.

Schwab: Although we always look to offer the best pricing we can, we prefer to offer best-in-class products, and that level of product doesn’t always carry the lowest price. Quality is part of what makes a solution competitive.

Gaillard: We believe that there are different price points in various market segments and we should have products that fit these. However, we will not just carry an inexpensive product as a cheap alternative. We believe our dealers look to us to have done some due diligence in selecting a quality yet competitively priced product for each market segment.

McLane: Pricing is a game we play all day long in distribution. We offer competitive pricing on everything we sell, but not every product is best for every application. To achieve balance, we educate our dealers. Cheap price always comes with a catch (less features, little support, lower quality). Often, the cheapest product is not always the best buy for the customer.

Rothstein: They’re part and parcel of each other. We only offer quality products, and always deliver the most competitive pricing possible. The real benefit to the customer, though, always comes down to value-added services they receive when they do business with Tri-Ed.

Brady: Do you accept a specific manufacturer because of its reputation? How much of a role does this play?

Teague: Reputation can influence but is never a key factor. The manufacturer being considered must first have the right product and support. And, we still consider the impact it will have on our other manufacturing partners.

Schwab: It’s very important to align ourselves with top-rated manufacturers. This is how we add value for the customer. It’s a high priority for them.

Gaillard: Vendor reputation plays a significant role in our initial look at a product. How they are perceived: quality reputation, dealer support, channel programs, training, etc. It is our role to augment what the vendor does for the dealer, so it is important to work with reputable vendors. We then take a harder look at all the criteria that would make them a candidate and then determine if it is a mutual fit between companies prior to selection.

McLane: Reputation plays a big role in product selection, both by us and our customers. A company with a healthy history will see wider and faster acceptance of its product by customers. But even the best companies have an occasional “dog.” If the product the vendor is offering does not meet our standards, we will let that vendor know and we will not recommend it to our customers.

Rothstein: We definitely try to separate the company from its product offerings. Based on their reputation and their track record we evaluate if they would be a solid partner and offer real value to our customers.

Brady: Do you try to answer dealer requests for the product? Does dealer demand initiate interest in a product?

Teague: We answer dealer requests at times; however, rather than bring on a specific requested manufacturer we try to understand why the customer is requesting that product or manufacturer. Often, we find that an effective solution already exists that the customer was not aware of.

Schwab: A dealer request might initiate an investigation into a new product but that’s only one component of our evaluation process.

Gaillard: We will evaluate a vendor if a customer requests, but as a general rule we aren’t going to carry a product for one customer or one project. We look for a long-term relationship to be successful over the years, not just short term.

McLane: Dealer requests often drive product interest but a lot of our product line development is homegrown. Our product management team has a wealth of experience in the low voltage industry on both manufacturing and distribution sides. Using this experience, we can often spot a product or trend ahead of the curve.

Rothstein: Without a doubt. We are absolutely committed to meeting our dealers’ demands. It’s often entailed us calling upon a vendor to get the products needed onboard. We are a solutions provider, as well as a partner. We function to offer exactly what our customers need.