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D&H Financial Results Suggest Company’s Differentiated Strategy Is Working

The Pennsylvania distributor is becoming the Aldi of tech distribution.

T.C. Doyle

May 28, 2019

5 Min Read
Increasing Graph, growth
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D&H Distributing recently posted strong financial results for fiscal year 2019. Revenue for the year grew 17% over fiscal 2018. Sales in key categories did even better. Cloud solutions sales jumped 107% year over year, while network security sales climbed 77%.

That’s impressive for a growth for a company that caters to “tenure-tested” channel partners that emphasize hardware reselling along with managed services and more.

So, what is D&H Distributing doing to grow so quickly? The answer is embracing a business model that is transforming several industries today. Take food retailing. While traditional grocers have been buffeted by retail and tech giants Amazon, Walmart and Costco, one food retailer in particular is upending the grocery business like no other. It’s German upstart Aldi, which invites consumers to shop differently, just like Apple co-founder Steve Jobs did two decades ago.

Aldi has built a cult-like following, according to CNN. It does so by shaking up “the shopping experience” that many of us know today. Instead of massive food emporiums the size of Costco or Walmart, which typically run as large as 100,000 sq. ft. or more, Aldi stores are just 12,000 sq. ft. in size. What is more, Aldi stocks just a fraction of the number of SKUs that typical grocery stores or big box retailers do — 1,400 items compared to 40,000, typically.)

These differences translate into business value. How? Think customer experience and efficiency. Consider toothpaste. At a traditional grocery store, you will often find two-dozen different varieties of toothpaste for sale. At an Aldi store, you will only find a relative handful.

This provides Aldi an opportunity to not only reduce customer decision fatigue and operate more efficiently, it also allows the company to get closer with its suppliers. This is the same way that D&H Distributing stocks its shelves.

While most broadline distributors try to be the supermarkets of tech products and services, D&H has “the luxury of being line-limited,” says Dan Schwab, co-president at D&H Distributing. “Typically, we have just three or so vendors in a category.”

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D&H’s Dan Schwab

As a result, D&H can promise its vendor partners greater penetration within the D&H base of VARs and managed services providers. This, in turn, can translate into better deals with vendors. The strategy also reduces support complexity. (D&H salespeople simply have fewer brands and products to learn, Schwab suggests.)

Like Aldi, Schwab believes D&H can offer greater customer intimacy than its larger, more broadline counterparts. To back his claim, Schwab notes that his company hosts more regional events annually than most. (Next week, for example, D&H expects as many as 1,000 local partners to attend the D&H 2019 mid-Atlantic conference in Hershey, Pennsylvania.)

Another reason D&H is prevailing is timing, Schwab says. His company is strategically positioned to help the men and women who sell tech solutions to small and medium-size business, which have significantly ramped up the amount of money they spend on tech goods and services.

The increase has helped D&H and other distributors defy expectations.

“Five years ago, people would have thought cloud would disintermediate distribution from the landscape because customers could go direct,” says Schwab.

Theories and expectations aside, D&H found that end customers had little appetite for …

… buying point solutions; instead, they wanted complete solutions delivered by trusted, third-party advisers.

Consider a local doctor’s office that needs full HIPAA compliance to keep its doors open. This customer may need to upgrade its security and document imaging capabilities to remain compliant. It may also need to increase its wireless and data backup capacities. Helping a vertical market customer weigh through these options invariably requires the expertise of a third-party tech professional, Schwab insists.

For the foreseeable future, he doesn’t believe that this dynamic will change, which is why his company invested heavily in new capabilities in fiscal 2019. During the period, it brought on 40 additional SMB salespeople. It also hired eight new cloud experts.

Looking ahead, D&H expects to offer greater capabilities around PSA and RMM platforms, and, of course, cloud. In fiscal 2020, D&H expects its cloud portfolio of products and services to grow by as much as 145%, year over year.

Whether its cloud, Pro AV or network security, D&H is getting big by narrowing its focus. And it’s doing so with what Schwab refers to “tenure-tested” channel partners that have prevailed despite the dot-com bust of the early 2000s, the economic recession of 2008-2009, and the disruptive business challenges that have resulted from the rise of cloud computing.

Despite worrisome trade wars, rising public debt and disruptive technology that threatens to upend many industries, Schwab expects good things from 2020.

“Every year we budget our business to be in the mid-, single-digits growth. We do that regardless of the macroeconomic events going on… We can only control what’s in within our four walls. So, whether the market grows or shrinks by 5%, we can still grow by offering a differentiated level of value,” he says.

It’s not a bad place to be.

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About the Author(s)

T.C. Doyle

Senior Director of Content, Informa

T.C. Doyle, is the Senior Content Director of Channel brands at Channel Futures, and is responsible for the editorial direction of channelfutures.com. A veteran technology writer, editor and video storyteller who has covered the IT industry for more than two decades, he was previously the Executive Editor at Channel Partners, and the Editor@Large with Cisco, where he traveled the world in search of stories that captured the social and technological transformations occurring in the economies of Africa, Latin America, the Middle East and Eastern Europe. A frequent speaker at IT industry events and trade shows, he resides in Park City, Utah.

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