9 TRENDS IN PRODUCT DISTRIBUTION
July 1, 2006
Like the security industry in general, the access control market has seen some significant changes in recent years. On the technology side, weâ€™ve seen the rise of networked systems based on the Internet protocol (IP) and higher levels of integration with other systems, including human resources, video surveillance and others. At the same time, there has been a high level of consolidation among security equipment manufacturers. Through a string of acquisitions, several large corporations now are able to offer a wide range of security equipmentâ€”including fire, intrusion protection, and video, as well as access control. These new market dynamics are driving changes in how access control products are brought to market. In this article, we look at nine key trends in the distribution of access control equipment.
1. More security dealers handling access control.Although access control isnâ€™t experiencing the same boom as the video surveillance market, it is experiencing stronger growth than the traditional burglar alarm market â€” and that reality is driving alarm dealers to handle access control who may not have done so in the past. As Bryan McLane, system design manager for Hildebran, N.C.-based security products distributor Systems Depot puts it, itâ€™s â€œgrow or die.â€ Adds McLane, â€œYou canâ€™t be just the burglar alarm guy. You have to be the low-voltage guy.â€
2. The rise of a recurring revenue model for access control.Perhaps because of the increased involvement of traditional alarm dealers, who are accustomed to receiving recurring monthly monitoring revenues, a new recurring revenue model for access control also is beginning to emerge. Several manufacturers, including HID Corp., now offer access control systems that can be remotely managed by central station personnel for a monthly fee. Also fueling the need for this type of offering is a trend towards smaller organizations purchasing access control systems. As Stacy Deveraux, access control product manager for Melville, N.Y.-based security distributor ADI explains, such offerings eliminate the need for small business end users to train someone on staff to manage an access control system. â€œIt opens the opportunity for small business owners to consider access for an affordable rate. Theyâ€™re used to having a monthly fee for their burglar alarm systems. Now they have a similar service for access control. They just pick up the phone and request reports or the addition or deletion of cards.â€
3. A greater need for training.The involvement of more types of dealers in access control, coupled with the increased complexity of access control products, also has created a need for more product training. Deveraux notes that in the last year or so, ADI has increased the presence of access control at the Expo seminars that it conducts nationwide. The distributor also has hosted many more counter days, where manufacturers send a representative to demonstrate products to security dealers â€” and many of these counter days have involved IP-based access control offerings.
Several sources interviewed for this article, including McLane and Deveraux, note that more and more manufacturers are providing interactive online training for access control â€” although at least one systems integrator is less than enthusiastic about such offerings. â€œWe used that with one of our technicians but it was not that successful,â€ notes Clifford Franklin, president of New York City-based systems integrator Sabre Integrated Security Systems. â€œItâ€™s better to do hands-on training in front of the box.â€
4. Manufacturers drive for greater loyalty.As equipment manufacturers have consolidated, the consolidated companies are taking an increased interest in gaining greater dealer loyalty and in persuading dealers to buy the manufacturerâ€™s entire product line. Honeywell Security, for example, previously had separate dealer programs for different business units, but recently combined them into a single program. Over the last two years, the company also conducted 70 â€œPartner of Choiceâ€ events nationwide, which were attended by security dealers using Honeywell Security products. â€œThe goal was to expose as many dealers as possible to the whole product family,â€ explains John Smith, marketing manager for Honeywell Access Systems of Louisville, Ky. â€œSome dealers may only be familiar with intrusion protection. Now we can expose them to other components of Honeywell.â€
Along with this desire to drive brand loyalty has come greater manufacturer involvement with large end-user organizations. As Jim Paulson, general manager of commercial and residential solutions for Bradenton, Fla.-based GE Security explains, â€œYou see companies like GE using their size and scale to sell end-users on GE equipment that gets fulfilled through our channel partners. We want to drive the solution to the channel partner and have the end-user say, â€˜Hey, I want GE.â€™â€
5. Increased reliance on security distributors.At the same time that security dealers are facing pressure to align themselves with a particular manufacturer, some are finding that they need more help than ever in selecting access control equipment and learning how to use it â€” and many manufacturers rely heavily on distributors to help fill that need.
One distributor that has seen substantial growth in access control sales recently is Akron Hardware of Akron, Ohio. The company originally focused on providing hardware for locksmiths but in recent years, as more and more of its customers have begun to install access control, the company has begun to carry more access control products. â€œOur core customer base turns to us as a trusted known source,â€ notes Roy Crute, Akron Hardware vice president of sales. â€œWeâ€™re somewhat selective about what we carry. We have each category covered, although not every brand. The manufacturers we deal with are good at getting their name out and driving business to distributors.â€
Manufacturers and dealers also rely on distributors for their knowledge of local markets, Crute notes. â€œOne of the values that a distributor brings is knowing how to point people to where to find local life safety compliance information and who is the responsible party.â€
Deveraux notes that even some manufacturers that traditionally have sold direct to dealers are rethinking that approach. â€œWeâ€™ve seen manufacturers turn more and more of their direct customers to us,â€ she says. â€œFor the systems ranging from 64 doors or less weâ€™re seeing more manufacturers pushing customers to distribution. With ADI stocking the product, manufacturers donâ€™t have to deal with the logistics, receivables or moving small orders. Dealers are benefiting from reduced lead times and are finding savings by having ADI stage their jobs.â€ She adds that dealers also like the fact that ADI doesnâ€™t have annual minimum purchase requirements and can offer a complete solution. Franklin says Sabre has benefited from buying products through distribution. â€œThe main advantage we find is that our local branch is very well stocked so we donâ€™t have to carry a lot of inventory,â€ he says.
6. Increased reliance on independent representatives.Independent representatives, who typically handle equipment from several different manufacturers, are another importance source of support for dealers who install access control systems. â€œManufacturersâ€™ reps are important in the selection of products,â€ notes McLane. â€œManufacturers need a rep force that works with customers and goes out to help with an installation, especially with software on a dealerâ€™s first installation.â€
Gust Askounis Jr., owner of Atlanta-based rep firm Security Solutions Inc., says the role his firm plays in supporting the manufacturers it represents has changed significantly in recent years, with the rep firm called upon to handle an increasing range of responsibilities. â€œIn the past you could be an expert in one given area, but now you have to be a solutions provider,â€ he says. â€œYou have to have expertise in many areas. Also the size of the jobs is larger because of networking capability, and for the dealer thereâ€™s more at stake. You have to have the installation expertise and the IP expertise to help the dealer get the final solution.â€
To help support dealers who increasingly are finding themselves face-to-face with customersâ€™ information technology managers, Security Solutions has two IT specialists on staff. â€œOne of the dynamics that has changed is that we participate more with the dealer on the end-user level because of the complexity of the products. We generally go with the dealer to do the presentation.â€
Industry consolidation also is contributing to changes in the role of manufacturersâ€™ reps. Although the largest equipment manufacturers typically have their own sales force, the smaller specialty manufacturers are more likely than ever to use rep firms, Askounis says. â€œThe biggest thing we bring to the manufacturer is our relationships with the dealers,â€ he notes. â€œFor distributors, the biggest thing we bring is outside sales capability. And the biggest thing we bring to the dealer is our ability to have leverage with the manufacturers and as a source of information.â€
7. Increased interest in buying groups.The desire to have more leverage with manufacturers also is driving another trend in access control product distribution â€” increased interest in industry buying groups. One such group, PSA Security Network, has seen steady gains in membership in recent years. â€œWith PSA, companies have access to a wider range of vendors,â€ notes PSA chairman of the board Gary Venable, who is also the owner of Kansas City, Kan.-based systems integrator Systems Designed Solutions. â€œIf I were on my own, I would have to find one vendor and adapt to its products,â€ Venable notes. Another benefit of PSA membership is the wide range of training that the organization offers, he says. â€œThe training is a significant advantage,â€ Venable says. â€œYou canâ€™t get it on your own without spending many times what you would spend with us.â€
A new PSA initiative was launched in response to another industry trend â€” the increasing desire on the part of large business customers to deal with a single source for their security needs, even if they have offices in several different regions.
8. Increased price pressure.Along with more companies installing access control equipment has come increased price pressure. Equipment prices have stayed about the same, most sources say, but the cost of doing business has increased. Venable notes that the cost of labor continues to rise â€” and Franklin points to increased fuel costs as another concern. Sabre recently tried to raise prices to cover those additional costs, but had to give up on the idea when it found difficulties in winning jobs at the higher price levels.
Sandy Jones, principal of Sandra Jones & Company, a Chardon, Ohio-based consulting firm focused on the security industry, offers her advice for coping with price pressure. â€œMargins are always tight when competition is high,â€ Jones relates. â€œItâ€™s incumbent on the dealer to price right. If theyâ€™re offering great service, they may have to be creative and lease rather than sell. A customer may not have the capital budget for a system, but they may have the ability to pay monthly as an expense.â€ Selling service contracts is another way to fight margin erosion, she adds.
â€œThe key for everyone in the pipeline is to remember that none of the end customers are in the security business,â€ Jones says. The selling process is easier if you can understand how to make a customerâ€™s job easier, she advises.
9. New distribution channels arise to meet new trends in system design.Since the events of September 11, 2001, another trend in access control involves how systems are laid out. As David W. McCoy, quality program manager for Master Halco Security Solutions Group of Orange, Calif., puts it, â€œSince 9/11, the perimeter has been moving outwards; today the typical security director would rather address access at the perimeter of the property, rather than at the building.â€
For Master Halco, which has long been a key distributor of high-security fences and other perimeter protection equipment, this change has meant a deeper involvement with traditional access control products. Recently Master Halco created the Security Solutions Group to focus on traditional security products, including access control. The company offers training and certification programs at no charge for its customers.â€ As McCoy explains, â€œMy responsibility is to develop quality and training programs for dealers to help them grow in the access control industry.â€ Traditionally Master Halcoâ€™s customers have included general contractors and architects, as well as a relatively small percentage of security integrators, but McCoy sees that mix changing. â€œWeâ€™re trying to bring more integrators into the fold,â€ he says. â€œWe want to be the glue to bring perimeter protection and security integration together.â€
Editor's note: SDM acknowledges the staff at ADI's Elk Grove Village, Ill., branch for their courtesy in permitting us to take photographs.