As referred to in a previous article, the electronics component market is undergoing quite the sea-change at the moment. Consistent pressure to consolidate within a rapidly altering market place, initially in the manufacturing space, is now making itself more and more felt within the distribution sector. Whilst one reason for this consolidation is that of pure scale in a tougher industry, another is the changing make up and expectations of the customer base.
The consolidation of the distributors within the 'franchised' vertical is having an impact on the choice of products available to the end user. The emergence of the internet (with the associated risk of an easy route to market for counterfeiters) alongside a much higher expectation for value-added services (particularly from design engineers) is also changing the way the market operates. It is no longer enough to simply provide the products: the market expects much more from its supplier. Alongside this, the growing presence (both open and hidden) of 'broker' distribution models once spoken of in hushed tones is making itself more and more felt as a credible alternative in certain circumstances.
Examples of this include the merger last year of Avnet with Premier Farnell. At the time of the acquisition, Gary Fay of Avnet (President of Marketing) highlighted a number of advantages of the takeover thus:
" Our customers will be able to do more technical research online through the services provided by Premier Farnell . . . In addition to deepening our customer base, this acquisition will enhance our go-to-market strategy as we target the industrial Internet of Things with edge-to-enterprise products and solutions."
Steve Rawlins of Anglia perhaps sums up the market movement best, in his recent interview with 'New Electronics':
"Customers are demanding more value added services. While the industry is responding, companies are not, in general, charging for these additional services. Only strong businesses that are well structured will survive in this environment.”
The market has been steadily evolving since inception and shows no sign of settling down any time soon. What will component distribution look like in 5, 10 or even another 20 years? Whilst impossible to predict, we can guarantee it won't be the same as it is today and we look forward to examining further mergers and acquisitions within this space.
Before, broadliners such as Avnet and ‘high service’ companies, such as Premier Farnell, stood on either side of a divide. On one side, high service companies kept modest stocks of a wide range of products; on the other, broadliners held deeper stocks, but of a narrower portfolio. While that divide was already narrowing Avnet’s acquisition of Farnell has brought the two sectors together and one company now has the ability to address the whole development process – from prototyping to production. Steve Rawlins, CEO of Anglia, noted: “Industry consolidation is reducing choice. As a result, buyers are turning more to brokers and the grey market, despite the risks this brings. And consolidation is happening at the same time that movements in the currency markets mean customers are shopping round – and this is sharpening competition.”