'It's going to be a very big month' - How Brexit divided Europe's distributors

The melee of political pontification continues; Brexit may end up being an extended divorce.

For distributors of hardware, for whom getting product from A to B is their bread and butter, the prospect of the alternative - a no-deal Brexit - looms large, from road delays to custom checks, tariffs and lower revenues.

This is not doom and gloom projecting; they are real impending possibilities. And as any distributor will tell you, margins are already thin.

However, on the public front, many leading voices are preferring not to be forthcoming about their contingency plans.

"I don't think there are any businesses that are not trying to imagine what a no-deal scenario actually does for their business," said Adam Simon, analyst at IT sales tracker Context

"Some of the distributors have come out publicly to say they are stocking up, but many haven't… Most other people are thinking ‘You know what, let's just see what actually happens'."

The outliers

CPI spoke to Nuvias CMO Hanspeter Eiselt to ask him why he's publicly stating that Nuvias are stockpiling vendor kit.

"We've realised over the last 18 months that we would need to cover logistical disruption, so we've invested in a dual system," Eiselt said.

"We didn't want our stock stuck in Calais or Dover in traffic jams... This is about planning ahead."

What that means is, the pan-European distributor has stockpiled three months-worth of hardware and set up two separate supply chains: in the UK and continental Europe.

"Juniper for example is one of our key suppliers, and we've been working hand in hand with their supply chain team to find out what their replenishment ability is," he added.

"We have the biggest stockpile of Juniper hardware in Europe with over £15m in inventory."

Westcoast MD Alex Tatham has also been vocal in laying out his businesses' Brexit plans.

"We're in a period where populist movements are becoming stronger and stronger, so we're counselling a bit of caution to say that these kinds of protests will impact business. In France you see that roads are being blocked for days and days - Context analyst

Last week he revealed that the firm has been upping inventory levels throughout this month.

"We have been warned by Her Majesty's Customs and Excise to make sure that there is preparation for a no-deal Brexit,  so that is what we are preparing for and that is what all of our contingency plans have been preparing for," he said.

"What we have been particularly focused on firstly is to make sure that our vendors have given us particular stocking deals allowing us to stock up…to cover a substantial amount of time."

Betting the wrong way?

With UK politics being so speculative, trying to judge whether the UK will actually exit the EU on 29 March is almost impossible, and there are always dangers in betting the wrong way.

The response of many other distributors has been that it is still too early to judge whether stockpiling is necessary.

"You have to always balance out the gain you'll get from the inventory against the losses you'll have on 1 April, because you've overstocked yourself," Context's Simon said.

"Having said that, we had a distributor VIP summit that took place three weeks ago, and we had some quite senior distributors there, and the mood was ‘watch out in March, it's going to a very big month.'"

The Global Technology Distribution Council (GTDC) has a different view.

"We're not seeing a lot of change at the moment," GTDC's EMEA managing director Peter van den Berg said.

"I'm sure the big guys have their internal plans, but they're not sharing them. Even I don't have visibility on those plans."

"Although the truth is, nobody really knows what is going to happen at the end of the month. But for now, life goes on and we are trying to live with this uncertainty.

Have purchasing habits changed?

So, what about the reseller view?

Simon said that the distributor "wait-and-see" approach has filtered down to resellers.

A monthly break down in Context's UK distributor market figures indicates that there is already a slight contraction.

In January there was a 7.6 per cent year on year sales increase.

Meanwhile, February logged a -2.5 per cent decline year on year.

"March is going to be absolutely critical to this year's figures," Simon said.

GTDC EMEA MD van den Berg added that the figures for the next couple of months will be greatly impacted by a no-deal Brexit.

"If there are issues with tariffs, at the end of the day, the end customer will have to pay for them because with the margins that distributors have there is simply no way to absorb that."

Meanwhile, US-based VAD giant ScanSource recently announced that it has bolstered its UK presence with a new distribution centre in Southampton, due to become fully operational today.

However, ScanSource denied that the decision was an example of Brexit manoeuvring for its British partners and customers.

The firm told CRN that the development was in the works anyway, but conceded that, with the Brexit deadline being a mere eleven days after its new centre opens, the investment is "serendipitous".

Extra potential costs

As an organisation, Context has also urged distributors to budget for potential social upheaval if a no-deal scenario does happen, similar to the ongoing Gillet jaune protests in France.

"We're in a period where populist movements are becoming stronger and stronger, so we're counselling a bit of caution to say that these kinds of protests will impact business. In France you see that roads are being blocked for days and days."

Like Y2K, we've got better things to be getting on with

Nuvias' CMO Eiselt, said he's hoping that the speculation around Breixt will end up being a damp squib.

"In a way I sort of wish that it would be a recurrence of Y2K, which was talked about upfront a lot, but then wasn't as pessimistic in reality."

He added the prospect of an extension of Brexit will suck up resources and distract the channel from more pressing business.

 

"If you do have legal obstacles, paperwork, and delays in freight getting through from border to border, then that will be a much more negative impact to IT implementation.

"I do think that the entire industry is revisiting their IT infrastructure and investments, whether that's additional datacentre capacity on the continent or having a more solid footprint on the continent…

"It would be great if the entire IT industry could instead focus on the end of the fiscal year in the UK instead and make sure that IT projects get funded and implemented."

• Tweet  
• Facebook  
• LinkedIn  
• Send to  

• Topics
• Distribution
• distribution
• Brexit
• Westcoast
• ScanSource Communications
• Nuvias
• GTDC
• Context
• distributor