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Retailers give SMB VARs time to focus on the big deals

Sending customers to local and online technology retailers for low-margin products helps IT solution providers focus on fixing their clients’ big problems.

While many IT solution providers still view office technology retailers with competitive suspicion, some have focused on finding ways to work with them through services relationships or by using them to source certain products.

“Most small businesses still have many questions, and they want to work with someone that they trust for recommendations,” said Peter Conway, account executive for Net@Work, the New York City-based software solution provider.

Marc Harrison, president of Silicon East Inc., a small and medium-sized business (SMB) solution provider in Manalapan, N.J., said his company has operated with this mind-set since retailers became far more active in the IT channel 10 years ago. Silicon East has actually managed to turn the retailers’ price advantage to its own advantage.

For instance, the organization sometimes sources products from Staples and that are priced lower than the prices offered by Silicon East’s distribution partners. In addition, at times, it suggests that prospects try out demonstration units in local retail locations and then helps customers with the ultimate configuration of the systems to fit their business needs.

“By and large, the best stuff at Best Buy is way more low end than what we typically offer,” Harrison said.

SMBs clinging to specialization
That is a strategy also used by HillSouth Inc., an IT solution provider in Florence, S.C., that has become increasingly specialized over the past five years partly in response to pressure from the retail channel.

Robby Hill, president and CEO of HillSouth, said he encourages customers looking simply for a product -- and not a full-fledged unified communications, storage or virtualization solution -- to use retail for pricing and convenience. “One of my best customers goes through CDW for desktops and laptops,” he said.

HillSouth also maintains a service partnership with CDW, a legacy of the now defunct Solution Edge program. That initiative saw CDW partner with local services experts in order to extend its reach.

HillSouth sees very little competition from local technology retailers because of the nature of the solutions it sells, Hill added. “My customers aren’t buying products, they are buying solutions,” he said.

Ted Hunter, founder and owner of Champion Networks, a solution provider in Brunswick, Me., likewise has pushed most low-margin products off its line card -- sourcing them sometimes as a convenience to small businesses. Champion Networks’ philosophy is to focus on building server-related services offerings. “The bigger threat to the SMB VAR, in my opinion, is the cloud,” Hunter said. “Big-box stores can be my friends.”

Becoming friends with competitors
With that in mind, Hunter is in the process of building a working relationship with his community’s local Best Buy. Champion Networks team will be able to provide proactive services, remote backup and other services that Best Buy simply can’t handle. “…things that people aren’t buying off the shelf,” he said.

Warranty repairs, virus infestations and other simple break-fix services are the sort of thing Best Buy leaves to its Geek Squad technicians, so Hunter said he makes it a point to understand the skill levels of the local personnel so that he can refer his customers to the best ones.

That said, building a relationship with Best Buy at the corporate level probably isn’t in the best interest of most SMB VARs. In early November, the retailer announced it would pay $167 million to acquire mindSHIFT Technologies Inc., a national provider of managed data center and cloud services.

“There’s no question that acquiring the skills, capabilities and clients of mindSHIFT has the potential to help expand Best Buy’s global services capabilities in the vast small and midsize business market,” said George Sherman, senior vice president of Best Buy Services, in a statement. “As important, the mindSHIFT team will bring added experience, talent and resources to the remote support capability we have been building within our multichannel tech service unit, Geek Squad.”

It is therefore reasonable to expect that companies like Amazon, Best Buy, Office Depot and Staples will gobble up the quick fixes and continue to push SMB VARs further and further up the services food chain, leaving the most complex tasks to them.

About the expert
Heather Clancy is an award-winning business journalist in the New York City area with more than 20 years’ experience. Her articles have appeared in Entrepreneur, Fortune Small Business, the International Herald Tribune and The New York Times. Clancy was previously editor at Computer Reseller News, a B2B trade publication covering news and trends about the high-tech channel.

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