Companies that make computing, telecom, and networking equipment have in recent years improved their ability to sell directly to customers or to resellers, either online or through their own sales forces. Accordingly, they have worked to become less dependent on their old distribution partners. The new approach works well for selling to big customers in developed economies. But as OEMs look for growth in new markets, they should take a closer look at the value offered by some distributors--particularly those known as two-tier distributors--so named because they buy from manufacturers and sell to resellers.
Two-tier distributors are well positioned to boost sales in emerging markets, where these distributors' revenues have grown by 33 percent annually for the past five years. What's more, in both the developed and the developing world, such distributors can help manufacturers sell to small and mid-sized enterprises--for they control 42 percent of all distribution to that market--which is growing by 7 to 10 percent annually, according to recent reports by the industry analysts Raymond James and IDC.
Source: McKinsey Quarterly