Norbain in trouble, spells the end of Distribution as we know it?

Recent news of Norbain’s administration  has sent a shock wave through the security industry.

We have seen many figures banded around the internet this week, some have reported some astounding loses, it would appear only a matter of time before the set up of Norbain had to change.

Norbain’s 4 of the last 5 years trading has reportedly been recorded as losses and with the influx of very low cost products flooding our shores from the Far East, it once again raises the question as to the value of the distributor in our industry?

With the news of the Norbain ‘pre-pack’ agreement (a method of having a pre-arranged buyer before the company enters into administration, thus reducing the image impact and also ensuring hopeful continued business flow) a number of suppliers, presumably left very exposed by the Norbain situation, have stated very different messages. Paxton and Tyco have expressed support, whilst DM have taken the opposite route.

Norbain have reported ‘business as usual’ but even they must be slightly disbelieving of that with concerned customers and even more concerned suppliers asking searching questions.

As for the customers? Several have expressed deep concern regarding regular and consistent supply – stock is in the warehouse but presumably, negotiations between suppliers and the ‘newco’ are still taking place so stock will certainly be precious – no mad discounting or ‘fire sale’ presumably.

So, what is the potential future for Distribution?

What do they offer?

Sure, Norbain were (potentially will be again) best of breed – long credit terms, high credit limits, big discounts, 7pm ordering with next day delivery………

But this may well have contributed to their undoing.

Cash is king, cash flow valued far higher than anything – the old saying, ‘turnover is vanity, profit is sanity’….. Something has to crack and with a global economic hardship, orders reducing then sustenance of such services were obviously going to cause massive strain to any revenue based business.

The problem with Distribution is that it relies solely on turnover – very rarely are there service or maintenance agreements in place for product sold (unlike the installation level of the industry) and as such, recurring revenue, often seen as a lifeline in times of lean new installations, is not something Distributors can fall back on.

Indeed, it would appear that Norbain had considered this with recent moves to introduce charged services – but that really was a bold and brave move in an industry that has enjoyed technical support, project design assistance and after sales support as part and parcel of the product sale – at no extra cost.

So what way forward for the likes of Norbain? Their purchasers have a number of outlets within the group…. Electrical outlets with local branch representation….. Perhaps the model of regionalising the operation, with local deliveries and a local ‘hub’ for sales and operations to base themselves from?

Maybe an online presence? Take the very best parts of Norbain and put it online – reducing overhead, road staff etc – the brand is strong and certainly an online presence would be well used.

The concern though, probably more importantly, is the domino effect this has within the industry. Could we see suppliers financially struggle due to lack of new orders from Norbain and its customer base and also lack of payment for orders already supplied?

Could we see installers decide to not take the risk, particularly on large roll out projects that require ongoing consistent product supply?

It is going to be a very interesting time for our industry…… It might actually change the way the industry works…. We will see….and monitor!

Let us know what you think…..

 

Why did they fail? Was it their tunnel vision approach to IP? We asked this question back in November.

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