The announcement of BEL USA’s merger with Branders.com (asi/145021) has generated a wide range of opinions among industry executives, as companies consider what the deal means for the ad specialty market. In the transaction, BEL USA, parent company to supplier BelPromo (asi/39552) and distributor DiscountMugs.com, added Branders.com to its group of companies. While BEL will operate the companies as separate businesses, they will be under one corporate umbrella, leading to questions about future market consolidation and the blurring of the traditional industry sales model.
“I have a huge problem with a supplier and distributor being owned by the same parent company,” said Greg Muzzillo, founder of Top 40 firm Proforma (asi/300094). “In my mind, the essential element that makes the distributor/supplier relationship work is trust. I think most distributors would struggle to maintain trust in a supplier that also was a distributor.”
Marc Simon, CEO of Top 40 distributor Halo Branded Solutions (asi/356000), has similar concerns. “I think it is very difficult for a supplier and a distributor to be owned by the same company,” he told Counselor. “The rest of the distributor community needs to feel comfortable that the sensitive client information shared with the supplier does not become available to the captive distributor. I just don’t know how that comfort can be created.”
Simon also thinks distributors would hold back business from a supplier like BelPromo for another big reason. “The distributor community would not want to be providing volume to the captive supplier, when that volume would certainly be used to create purchasing power for the supplier,” he said. “That purchasing power would inevitably be used by the captive distributor to outbid the rest of the distributor community for client business.”
Others in the industry have a bit of a different take on the deal, like Steve Paradiso, president of ePromos Promotional Products (asi/188515). “The people that were freaked out by Bel before are going to be freaked out now,” he said. “I think this is a pretty exciting opportunity and there are some smart people involved in this. Remember, most big distributors have figured out how to do things direct for a while now, so in some ways this is just an extension of business as usual.”
Another component of the merger between Bel and Branders is the prevalence of the Web as an increasingly popular sales platform. Could this deal spark a faster industry transition to online selling? Not really, execs say. “This Bel and Branders merger is certainly interesting but the shift to Internet-based selling has been going on for years,” said Joe Fleming, president of Hub Pen (asi/61966), a Top 40 supplier that was the winner of Counselor’s Supplier of the Year award in 2012. Brandon Mackay, president of supplier SnugZ USA (asi/88060) agrees. “Internet selling has already established itself,” he said.
BrandAlliance’s (asi/145177) Alan Chippindale believes continued consolidation may be in the industry’s future, especially involving companies that focus on the growing value of the Web. “It is not surprising to see suppliers and e-commerce sales channels combining,” he said. “It is probably happening more underneath the surface than we all realize or are admitting.”