Distribution mechanics: why non-stocking distributors exist – and why they aren’t really distributors
In my article about selling directly to end users, I briefly mentioned the term non-stocking distributor. Today, it deserves an article of its own, because it is a fascinating creature: a distributor that leaves out the warehouse. In other words, it leaves out precisely the part that makes distribution… distribution.
So what does a non-stocking distributor actually do? It receives an order, passes it on to the vendor, has the goods shipped directly or cross-docked, and earns the difference. No warehouse, no capital tied up in inventory, no safety stock, no inventory management at three o’clock in the morning. On paper, it sounds wonderfully lean.
And in some industries – software, licences, cloud subscriptions – it genuinely is. There is simply nothing to store. A perfectly respectable business model.
The problem is that our world is different. We deal with scanners, printers, mobile computers, POS terminals and cables. In this business, the warehouse is not an optional extra – it is the very heart of the service. Think back to everything I have written throughout this series: financing inventory, extending credit terms, providing the last mile, breaking down pallet loads into three printers and a single cable for delivery by tomorrow morning, price protection on physical stock, project inventory reserved on the shelf for months at a time. Every one of those services depends on having inventory.
Remove the warehouse, and you are not removing the inconvenient part of the business – you are removing the business itself.
That is why I will make a deliberately provocative statement: In the hardware industry, a non-stocking distributor is not really a distributor at all. It is an intermediary. A broker. A forwarding office with letterhead. There is nothing dishonourable about that – but it is a different business. It does not carry inventory risk. It does not finance stock. It cannot deliver tomorrow morning because it has nothing today. The difference becomes obvious the moment the vendor cannot supply, quarter-end demand overwhelms the supply chain, or a customer suddenly needs 200 units immediately. That is precisely the moment when you discover the difference between someone who actually has the goods – and someone who merely promises them.
There is another honest point to consider. The warehouse is also the reason distribution earns its margin. If you tie up no capital and carry no inventory risk, there is no justification for earning a genuine distribution margin. A non-stocking distributor survives on an extremely thin brokerage spread and is usually the first casualty of a price war or a supply shortage. Warehousing is expensive. But it is also the moat that protects the business.
Please do not misunderstand me. There are market segments where a non-stocking model is exactly the right solution. But if you put the word distributor on the door while leaving out the warehouse, you are selling the label rather than the service.
And that is precisely why vendors should stop relying on this form of distribution. These so-called distributors weaken the channel rather than strengthen it.
And remember:»A distributor without a warehouse is like a bank without a vault – the sign may be correct, but the substance is lacking.«
Why We’re Investing Millions to Become the Efficiency Champion of Distribution
Distribution is a business with tight margins – and our customers have every right to expect both: outstanding service and competitive pricing....
Distribution is a business with tight margins – and our customers have every right to expect both: outstanding service and competitive pricing. The only way to deliver both consistently is through uncompromising efficiency.
That’s why, over the past 18 months, Jarltech has launched the largest investment program in the company’s history.
Fully automated logistics: Our AutoStore warehouse in Usingen picks and processes orders around the clock – faster, more accurately, and more scalably than any manual warehouse. Orders placed until late in the evening are still shipped the same day and handed over to parcel carriers via our own truck deliveries.
AI in every process: From technical support requests that are answered within seconds using manufacturer expertise and knowledge from countless previous support cases, to intelligent inventory and pricing management, and the automatic identification of the right accessories for every project – we use artificial intelligence wherever it helps our customers move faster and makes our processes leaner.
End-to-end digital processes: From our webshop and the new Boost rewards program to order processing and returns management, every step is seamlessly connected – without media breaks, unnecessary delays, or manual handovers.
Our goal is ambitious: we want to become the most efficient distributor in Europe. Not for the sake of efficiency itself, but because every euro we save through smarter processes is reinvested into better service and more competitive pricing for our reseller partners. At the same time, it makes our distribution services more cost-effective for our vendor partners.
For our partners, this translates into tangible benefits: dedicated personal contacts, smarter and more responsive service, best-in-class inventory availability, competitive market pricing – and a partnership built for the future.
Distribution dynamics: why »cheap at any price« doesn’t work in B2B distribution
»Cheap at any price« may be a great slogan for consumers buying a television once every few years....
»Cheap at any price« may be a great slogan for consumers buying a television once every few years. In B2B distribution, however, it’s one of the most expensive misconceptions there is. Because the distributor with the lowest price is almost never the one that costs you the least. It sounds contradictory, but it's simply a matter of arithmetic.
Take the reseller who consistently buys from whichever distributor has the list price that’s two per cent lower. Sounds perfectly sensible. Until the day the exact device needed for a customer project is out of stock. Suddenly, the end customer is at a standstill, the roll-out is delayed, engineers are booked but left waiting around, and the competition couldn’t be happier. So what did they save? Two per cent on the purchase price. What does the disruption cost? Several times that amount. Product availability isn’t a nice extra – it’s part of the price. It just doesn’t appear on the invoice.
The same applies to everything I’ve covered in this series. Payment terms that give a reseller breathing space. Credit facilities that keep the business moving. An RMA process that replaces a faulty unit quickly instead of leaving them waiting for three weeks. Configuration services that save valuable time. A knowledgeable person on the end of the phone who actually understands the product. Every one of these things has value – and the cheapest supplier is often the one that’s cut back on exactly these areas so the price on paper looks more attractive. You'll still pay the difference. Just later, somewhere else, and usually at a much higher cost.
I’ll say this quite openly, even if it goes against the stereotype of my own industry: distribution isn’t a price war – it’s a business built on trust, with a price tag attached. If you buy purely based on price, you train your suppliers to behave in exactly the way you least want them to. They cut back on service, inventory, accessibility and support, because suddenly everything revolves around the second decimal place. Then everyone acts surprised when nobody is there when it really matters.
Don’t get me wrong: price matters. We fight every day to remain competitive, and any distributor that’s consistently overpriced deserves to lose business. But price is only one variable among many – not the only one. The real question isn’t »How much does the box cost?« It’s »What will this business actually cost me in the end – including the days when things go wrong?« That’s the principle of total cost of ownership, and when you look at the total cost, the cheapest option is rarely the most economical.
The truly good buyer understands this. They negotiate hard on price – and still buy from the supplier they know will deliver when the pressure is on. Both at the same time. That's not sentimentality; it’s professional procurement.
So remember this: »The cheapest supplier is the one with the smallest invoice – and the biggest hidden costs.«
Distribution mechanics: broadliner vs specialist – why »everything for everyone« doesn’t work for us
There are two archetypes of distributors, and they could hardly be more different from each other....
There are two archetypes of distributors, and they could hardly be more different from each other. One is the broadliner: a gigantic catalogue, from hard drives and toner to network switches, hundreds of thousands of products, »everything for everyone«. The other is the specialist: a clearly defined world – in our case AIDC and POS, meaning scanners, mobile computers, label printers, point-of-sale systems and security – but with expertise at every level. Both call themselves distributors. And both are playing an entirely different game.
The broadliner lives by scale. Its advantage is breadth: a reseller gets everything from a single source, one invoice, one delivery, one login. That is convenient and exactly right for many standard products. The price paid for that is depth. If you stock 200,000 products, it is simply impossible to have someone in-house for each one who knows which scanner will still read at minus 20 degrees in a cold store, which printhead matches which label material, and why that one particular terminal causes problems during a rollout in France. For the broadliner, the product is a line in the catalogue. For the specialist, it is a craft.
And this is exactly where »everything for everyone« fails in our niche. Our products are not self-explanatory. A scanner is not simply a scanner – there are dozens of variants, accessories, cradles, firmware versions, configurations and industry-specific solutions. A specialist reseller equipping a warehouse worth half a million or planning a rollout across 3,000 stores does not want to talk to an ordering portal. They want someone who genuinely knows the products, who configures them, stages them, provides training, has RMA under control, and tells them when a particular device is the wrong choice for their application. That level of depth cannot be spread evenly and thinly across 200,000 products.
I do not want to criticise the broadliner – in high-volume business with products that require little explanation, it is unbeatable in terms of efficiency, and that is exactly where it belongs. But our industry is not a high-volume business with products that require little explanation. It is a solutions business. And a solutions business rewards those who master a few things exceptionally well, not those who are just somewhat proficient at many things.
That is why we deliberately chose depth over breadth. Not because we could not build a larger catalogue, but because in our world, »we do that as well« almost always means »we simply do it less well«. We would rather represent 40 manufacturers we know inside out than 400 where all we can look up is the price and availability. That is not modesty – it is strategy.
Incidentally, the market sorts this out by itself. In the long run, size wins in the standard business, while depth wins in the solutions business. Those who try to be both at the same time usually get squeezed in the middle: too small for the battle of scale, too broad for genuine expertise.
So remember: »Everything for everyone ultimately means nothing done properly for anyone.«
Distribution mechanics: why non-stocking distributors exist – and why they aren’t really distributors
In my article about selling directly to end users, I briefly mentioned the term non-stocking distributor....
In my article about selling directly to end users, I briefly mentioned the term non-stocking distributor. Today, it deserves an article of its own, because it is a fascinating creature: a distributor that leaves out the warehouse. In other words, it leaves out precisely the part that makes distribution… distribution.
So what does a non-stocking distributor actually do? It receives an order, passes it on to the vendor, has the goods shipped directly or cross-docked, and earns the difference. No warehouse, no capital tied up in inventory, no safety stock, no inventory management at three o’clock in the morning. On paper, it sounds wonderfully lean.
And in some industries – software, licences, cloud subscriptions – it genuinely is. There is simply nothing to store. A perfectly respectable business model.
The problem is that our world is different. We deal with scanners, printers, mobile computers, POS terminals and cables. In this business, the warehouse is not an optional extra – it is the very heart of the service. Think back to everything I have written throughout this series: financing inventory, extending credit terms, providing the last mile, breaking down pallet loads into three printers and a single cable for delivery by tomorrow morning, price protection on physical stock, project inventory reserved on the shelf for months at a time. Every one of those services depends on having inventory.
Remove the warehouse, and you are not removing the inconvenient part of the business – you are removing the business itself.
That is why I will make a deliberately provocative statement: In the hardware industry, a non-stocking distributor is not really a distributor at all. It is an intermediary. A broker. A forwarding office with letterhead. There is nothing dishonourable about that – but it is a different business. It does not carry inventory risk. It does not finance stock. It cannot deliver tomorrow morning because it has nothing today. The difference becomes obvious the moment the vendor cannot supply, quarter-end demand overwhelms the supply chain, or a customer suddenly needs 200 units immediately. That is precisely the moment when you discover the difference between someone who actually has the goods – and someone who merely promises them.
There is another honest point to consider. The warehouse is also the reason distribution earns its margin. If you tie up no capital and carry no inventory risk, there is no justification for earning a genuine distribution margin. A non-stocking distributor survives on an extremely thin brokerage spread and is usually the first casualty of a price war or a supply shortage. Warehousing is expensive. But it is also the moat that protects the business.
Please do not misunderstand me. There are market segments where a non-stocking model is exactly the right solution. But if you put the word distributor on the door while leaving out the warehouse, you are selling the label rather than the service.
And that is precisely why vendors should stop relying on this form of distribution. These so-called distributors weaken the channel rather than strengthen it.
And remember:»A distributor without a warehouse is like a bank without a vault – the sign may be correct, but the substance is lacking.«