Raj2000 --
Retailers in the U.S. get their software from one of three major
distributors -- Ingram/Micro D, Tech Data and Merisel. The
distributors perform the functions of stocking, shipping, financing
and breaking bulk to tens of thousands of resellers across the
country. Some resellers will be consultants, some computer dealers,
some value-added systems integrators (think of networking companies),
some are vertical market specialists. Even the largest of software
companies, like Microsoft, use these major distributors because of
their ability to service a wide range of customers efficiently:
Ingram Micro
http://www.ingrammicro.com/
Tech Data
http://www.techdata.com/content/visitor/abouttd/td_corpov.aspx
Merisel
http://www.merisel.com/
Also, be aware that certain channels -- the most-notable being
government and education sales -- have specialty distributors. One
good example is Douglas Stewart Co., which specializes in selling to
college stores:
Douglas Stewart Co.
http://www.dstewart.com/
The major computer retailers -- who are also their customers -- are
the computer superstores, including CompUSA, Fry's Electronics,
BestBuy, Micro Center, Office Max and even major direct vendors such
as CDW or MicroWarehouse.
Your contact in selling the distributors will be the software brand
manager, who handles hundreds (if not thousands) of stock-keeping
units or SKUs. The distributors run shows and have marketing
structures of their own that you can use to reach their resellers;
they'll also administer any co-operative advertising programs that you
have for resellers. For this service, they'll expect a gross margin
of 10-20% depending on volume.
One brief note at this stage, if the distributor is talking about the
need to make 15 points, it will translate into a markup of 17.7% -- as
that's how they'll get to making $0.15 on every $1 of sales.
Note too, that the distributor will expect your marketing programs to
be effective enough to provide a minimum volume. They'll also expect
you inventory to turn 10-12 times per year; and they'll want price
protection (against any lowering of prices by you), as well as some
sort of restocking privileges. On your part, you should have access
to information on which customers are buying what.
At the retail level, the stores will want FULL return privileges and
expect a margin of 20-30% (markups of 25-43%). Again, volume is
everything. When Microsoft introduces an upgrade of the operating
system, demand is so high that both distributor and retailer margins
are much lower those mentioned typical here.
Of course at retail, there's a lot that can be done to promote a
product, so your sales manager should be visiting not just the
distributor but also the reseller. This is where you'll arrange any
special direct mail or in-store or other promotions, such as end-cap
or end-aisle promotions, in which you'll pay a fixed amount for a two-
to four-week period to get your products on display. The retail
promotions are many and varied, so can include contests, special
commissions to sales people, kiosks or just about anything you can use
to attract attention to your product. Note too, that each of these
stores will have special programs for business-to-business and GSA
(General Services Administration or government) sales.
At each of the following retailers you'll also want to be in contact
with the software brand manager:
BestBuy (also owns Future Shop)
7601 Penn Ave. South
Richfield, MN 55423
www.bestbuy.com
CDW
200 N. Milwaukee Ave.
Vernon Hills, IL 60061
www.cdw.com
CompUSA
14951 N. Dallas Pkwy.
Dallas, TX 75240
www.compusa.com
Fry's Electronics
600 E. Brokaw Rd.
San Jose, CA 95112
www.frys.com
Micro Center
4119 Leap Rd.
Hilliard, OH 43026
www.microelectronics.com
MicroWarehouse
535 Connecticut Ave.
Norwalk, CT 06854
www.warehouse.com
Office Max
3605 Warrensville Center Rd.
Shaker Heights, OH 44122
www.officemax.com
You will undoubtedly find some service companies helpful, including
those that track your sales and competitors' sales at retail:
NPD Intelect
http://www.npd.com/intelect.html
And the publication that's typically tracked this sector is Computer
Reseller News:
CMP/Computer Reseller News
http://www.crn.com/
Google search strategy:
"software distribution" + Ingram
"computer superstores"
However, much of this comes from direct experience selling computer
hardware and software products through U.S. distributors and
retailers.
Best regards,
Omnivorous-GA |
Clarification of Answer by
omnivorous-ga
on
14 Aug 2003 12:35 PDT
Raj2000 --
I'm not certain about state-specific products, though I'm sure that
with state standardized testing becoming more important, there will be
some of it appearing in distribution. Something for the state of
California will have many potential stocking stores -- but there
aren't many superstores servicing North Dakota, South Dakota, Montana,
Wyoming, etc. It might be better to consider education-specific
distributors in cases like this -- or consider a direct-to-consumer
strategy.
Your assumptions on the markup are correct, though sales & marketing
dollars get spent in a variety of ways. It's very important to make
sure that whatever you do, including a mix of direct sales, is kept
consistent in order to prevent conflict between sales channels.
Resellers will often sacrifice gross margins to keep volume up or to
win a contract, so you want to make sure that you're alert to those
issues.
There's some good information on overall marketing expenses for
software companies from the Software & Information Industry
Association (SIIA) in this Google Answer:
"US Business Average Spending on Marketing as a percentage of
revenues"
http://answers.google.com/answers/main?cmd=threadview&id=62345
Here's the telephone contact information requested for the retailers:
BestBuy (also owns Future Shop)
612-291-1000
CDW
847-465-6000
CompUSA
972-982-4000
Fry's Electronics
408-487-4500
Micro Center
614-850-3000
MicroWarehouse
203-899-4000
Office Max
216-471-6900
Finally, Google Answers researchers are independent of the Google
Answers service, so do not have access to your contact information for
further consulting.
Best regards,
Omnivorous-GA
|
