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security
technology market
weaknesses
These changes are not so startling
when taken over a 6 year period,
but their consequences are now
being felt, with the recent exposure
of weaknesses in the distributor
chain and the near demise of major
European distributor Norbain ,
after falling into receivership only
to be acquired at the last moment
by Newbury Investments UK Ltd.
IP network products do not lend
themselves to the traditional box
shifting treatment of analogue
products and require more sophis-
ticated application of skills; but few
distributors have seen the need to
work with the manufacturers to
acquire the necessary skills.
Memoori believe that over the
next five years we shall see fewer
but larger distributors playing an
enhanced role. The market share
of the resellers, system integra-
tors and solution providers will
increase as systems become more
sophisticated and integrate with
the business enterprise.
Good products sell well but
they sell better when distributed
through the right channel. n
few verticals have opted to sell
direct to the end user and install
themselves. So, one size does not
suit all. However for those manu-
facturers that want to obtain huge
global scale (hundreds of millions
in revenue) they need to operate
through all the distributor chan-
nels but not confuse the market by
selling direct.
Value has fallen
Since 2006 there have been major
changes across the developed mar-
kets of the world in how products
reach the end user. Our research
shows that the value of product
passing through the distributor
channel has fallen off drastically
from over 50% in 2006 to around
30 % in 2011. Their market share
has been taken by direct sales to
resellers, system integrators and
solution providers which have
increased share to approximately
50% in 2011. It would appear that
the distributors have lost most of
their share to these companies that
have partnered with the manufac-
turers of IP network products to
offer packaged solutions.
Whilst these trends appear to
be most marked in the developed
markets of Europe and North
America similar trends are now
being realised in Asia and at the
same time are now taking place in
the access control market; but as
yet it's not as pronounced. Getting
IP network products to market
is going to be a challenge for
distributors and one they will have
to meet because it will eventually
take 100% of the business.
factors, particularly in the video
surveillance sector, where IP net-
work products have taken a major
leap forward in the last 3 years
requiring new skills for designing
and installing systems. In the vast
majority of cases the manufactur-
ers don't want to be directly in-
volved in providing these services
to the end user and they therefore
require the distribution chain to
take on these responsibilities.
This has required new and ex-
isting suppliers to set up under the
broad classification of distributors
but broken down into resellers,
system integrators and solution
providers. Normally they buy
directly from the manufacturer
and some have a strong partner
relationship to one or a few
brands. The term distributor is
still used by larger companies from
the traditional supply chain and
new ones from the information
communication technology (ICT)
business, but these companies now
offer to supply all the components
necessary to deliver a solution to
installers.
In addition many of these
companies will also operate
straight online sales. Finally a few
manufacturers normally having
specialist products selling to a
There are five main reasons why
the change in the structure of
the physical security industry is
causing the distribution model to
change.
1. Manufacturers have over time
extended the range of their
products, which now have
a rich layer of features and
capabilities. The supply chain
must be able to understand and
identify where their clients can
benefit from them.
2. A strong brand and channel
infrastructure giving reach and
efficiencies. Marketing across
the globe can now be achieved
by small companies through the
Internet at lower cost and this
has increased the number of
suppliers and solutions.
3. The pace of innovation is speed-
ing up. Edge based storage and
advances in analytics are creat-
ing more & more applications
for IP video.
4. Open standards are starting to
take a hold. This will open up
competition even further and
will reduce the barrier to smaller
companies. Real competi-
tion will then kill off weaker
companies and consolidation
will come about through open
market forces.
5. Increasing demand for full
integration across all aspects of
physical security solutions and
now the business enterprise.
Cameras in particular
The channels of distribution in
the physical security industry are
changing to take account of these
Aglanceattomorrow's
distributionmodel
The traditional distribution model for physical security
products right across the globe, was often referred to as
"box shifting", it offered products off the shelf but with
few value add services. This is according to Memoori's
report "The Physical Security Business in 2012" now
rapidly morphing into a sophisticated system delivering
value add services that its clients are now demanding.
The traditional distribution model for physical security products is often referred to as
"box shifting" products offered off the shelf but with few value add services.
Memoori believe that
over the next five years
we shall see fewer but
larger distributors
playing an enhanced
role. The market share
of the resellers, system
integrators and solution
providers will increase
as systems become
more sophisticated and
integrate with the busi-
ness enterprise.
For more information on the
security market including market
sizing, structure, technology
and investment, see the report
"The Physical Security Business in
2012". For more information
about the report and ordering
details: www.armedia.se, info@
armedia.se, +46 (0)8 556 306 80.