The Deal Economy

Electronics distributors are leaving rebate on the table every year: here’s why

As wholesale electronics gets more competitive, electronic distributors must find ways to grow revenues and protect margin. Maximizing the value of supplier agreements should be a priority.

On paper, this is a great time to be an electronics distributor. The market for components has been growing every year, according to Statista, and doesn’t show any signs of stopping. Market Research Future predicts 10% CAGR until 2022 for active components, while Zion Market Research sees a huge 23% CAGR for Internet of Things devices.

That’s a lot of demand—but on the downside, the fight for market share is getting fiercer. With a growing number of competitors—including big names like Amazon Business—putting pressure on prices, electronic distributors must find new ways to grow revenues and protect margin.

One source of revenue and profit that’s often overlooked is supplier trading agreements. Electronic distributors who maximize the potential of supplier rebates and other types of agreement can unlock millions of dollars that others miss.

In our latest eBook, we take a closer look at this often under-utilized growth driver. But for now, we’ll explore some of the reasons rebate gets left on the table by electronic distributors, together with some advice on how they can maximize the value of supplier trading agreements.

Customers always come first—but suppliers shouldn’t be far behind

Every electronic distributor knows how important its customer relationships are, but comparatively few place the same emphasis on their supplier relationships. Yet supplier rebates and other types of deal—like market development funds and special pricing allowances—can be a critical source of revenue, with a major impact on the bottom line.

In reality, though, there are major obstacles preventing electronic distributors from maximizing the use of these supplier funds—meaning they’re leaving rebate revenue on the table.

In our experience, two of the biggest obstacles for electronic distributors getting the most value from their rebates are deal complexity and technology constraints.

Rebate complexity

Trading agreements are often very complex, with multiple rebate tiers for different SKUs and product types. With hundreds of agreements in place, electronic distributors struggle to identify the best strategies to maximize their returns across the whole supplier agreement landscape. Electronic distributors also often struggle to reconcile products ordered and sold against the terms of the agreements, meaning opportunities to claim often get missed.

Technology constraints

It’s not just the complexity of supplier agreements that make deal management difficult—it’s also the tools used by most finance teams.

Most popular ERP systems—such as Oracle, SAP and Microsoft Dynamics—can handle some types of rebate agreement, but we’ve yet to see one that can handle the massive variety of deal types struck by most large electronic distributors.

That forces finance teams to find alternative methods of managing and claiming against supplier agreements. Some choose to track and manage rebate in spreadsheets, with all the associated risk of error and omissions. Others rely on the data in their suppliers’ vendor portals, on the assumption that it’s always accurate and reliable. (Spoiler: it very often isn’t.)

A new strategy: collaborative deal management

To truly gain full visibility of their supplier agreements, and take an effective approach to deal management, electronic distributors need a new strategy—and new software to make it happen.

As the electronics distribution market gets more crowded, unlocking the full potential of supplier trading agreements is becoming a strategic priority.

That means working more closely with suppliers to develop trading agreements that benefit customers, electronic distributors and suppliers alike—and then ensuring that the full value of each agreement is realized.

It’s a strategy we call Collaborative Deal Management, and we explore it in detail in our guide: A New Growth Driver for Electronics Distributors.

Get your copy now to explore a more strategic approach to supplier trading agreements—and see how distributors like AD and Rexel Canada are using our cloud-based rebate management software to surface unclaimed rebate revenue and boost their supplier relationships.