Resellers riding the recession

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Resellers riding the recession

Microscope contributor

Despite predictions of a bloodbath, company failures in the channel fell in the third quarter amidst the toughest recession in UK history.

From July to September 61 firms went to the wall, down by more than 11% on the same period in 2008, according to data from credit reference agency Graydon.

"The channel is in rude health, a lot of the dead wood has been cut out of the industry over the last few years," Mark Ancell, head of intelligence at Graydon UK told MicroScope.

In the first half of the year, there was just a small rise in the number of businesses going bust but senior figures in the industry felt that after enduring a tough sales environment, many resellers would simply run out of cash over the summer.

So far 198 firms have gone out of business this year and it looks as though the total number for 2009 will be flat with 2008.

It is also worth noting the size of resellers which have gone down have been markedly smaller than those that went pop in both 2006 and 2007 owing distributors millions.

Ancell reckoned this was because companies were operating more conservatively in the downturn with "tighter control on credit management and cash flow".

Hit by the double whammy of bankers withdrawing support for resellers and credit insurers cutting cover for distributors, the industry has had to get more creative in the way it interacts, said Jon Pritchard, executive vice president at Comstor.

"We have been in recession for a year and anyone that would have gone under would have gone under by now," he said, "The channel has matured and looked at ways to solve the finance issues."

Leasing and escrows have been two interesting ways to get over the issue, added Pritchard, and these are likely to be employed with greater frequency next year as the credit insurance sector remains tight.

Directors at many of the smaller resellers are using personal funds to keep their businesses afloat as banks are refusing to lend or agree overdraft facilities, said Nitin Joshi, founder at Channel Money.

 "When smaller firms go bust the directors, not the banks are often the biggest creditors," he said, adding this was keeping the market buoyant.

 


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