Distribution dynamics: The one big customer – blessing, addiction, risk
Today, I'd like to make things a little more personal. This isn't about vendors, pricing, or logistics. It's about something I've witnessed time and again over the past thirty years – and something that almost always ends the same way.
It starts off as a success story. A reseller wins a major end customer. First comes a project, then a follow-up order, then a framework agreement. Revenue grows, the relationship deepens, and before long, that single customer accounts for half the company's business. From the outside, it looks like hitting the jackpot. From the inside though, it's an addiction.
Because, almost unnoticed, something begins to happen to the business. It reshapes itself around its biggest customer. The best employees work almost exclusively for them. Internal processes become their processes. The warehouse fills up with their products. New customer acquisition quietly fades into the background – why chase new business when the existing business is booming? Every single one of these decisions is perfectly rational on its own. Taken together, however, they create a company that can no longer exist without that one customer. And the deceptive part is that, the entire time, it feels like growth.
Then comes the big day – and it arrives in many different disguises. The customer is acquired, and the new owner brings in their preferred supplier. The purchasing manager who has known you for fifteen years retires, and their successor wants to make a name for themselves with a competitive tender. The customer runs into financial trouble – and because they're your largest outstanding debtor, they take you down with them. Or, more simply, they become so large that they decide to buy directly from the manufacturer. None of these scenarios involve bad intentions. They're all perfectly normal. And when one customer represents half your revenue, there's nothing you can do to prepare for any one of them – except prepare long before they happen.
Let's run the numbers. A reseller generates €5 million in annual revenue, €2.5 million of which comes from a single customer. Let's assume an average gross margin of twelve percent – that's €600,000, with €300,000 contributed by that one account alone. By now, the reseller has already built its cost structure around the total business volume: staff, warehouse, facilities, vehicles. If that customer disappears, €300,000 in contribution margin vanishes almost overnight, while the costs remain exactly where they are. You might survive a few months – maybe a year if you're fortunate. Building replacement customers of that size, however, typically takes three to five years. That gap is exactly why so many stories that begin with »We've landed a fantastic key account« eventually end with »Unfortunately, we had to close the business.«
And because this series is about honesty, I'll admit something else: we know this challenge from our own experience – just one level higher. Distributors can become too dependent as well, particularly on a single manufacturer whose brand represents a significant share of total revenue. We, too, must actively ensure that our portfolio is broad enough to withstand unexpected shocks. Excessive concentration isn't a reseller problem. It's a business problem. The only difference is whether you address it while business is thriving – or wait until the fever has already set in.
So what should you do? Take excellent care of your major customer, of course – they're a gift. But at the very same time, invest the same discipline in everything else. Win a few new customers every year with real growth potential. Build a second market segment. Develop a second pillar of your business – maintenance contracts, professional services, or another product category that generates recurring revenue instead of depending on individual projects. And keep one simple KPI under regular review, perhaps once every quarter: What percentage of my revenue comes from my largest customer? If that number keeps increasing year after year, your business isn't becoming stronger. Your dependency is. It just happens to be wearing the same suit as growth.
So remember this: »A customer who generates half your revenue is no longer just a customer – they've become your silent shareholder. Only without any liability.«
Distribution mechanics: The pull-forward effect – how a single announcement can distort an entire market
There is one moment in the distribution calendar that creates chaos with remarkable reliability, and it always begins with an innocent-looking email: »Beginning the...
There is one moment in the distribution calendar that creates chaos with remarkable reliability, and it always begins with an innocent-looking email: »Beginning the first of the month after next, we will be adjusting our prices.« A price increase announced well in advance sounds fair. Transparent. Easy to plan for. What follows is anything but. It's rather like somebody standing up in a packed cinema and shouting, »Last showing!«
Because from that moment onwards, everyone makes exactly the same calculation: what I buy today will cost four per cent more in six weeks' time. So everyone starts buying. Not what they need—what they can. Resellers bring forward orders they would otherwise have placed over the next three months. Their competitors do exactly the same. And we, as distributors, do likewise with the manufacturer, because the very same calculation applies one level higher up the supply chain. The result is a record-breaking month that everyone could celebrate – if it actually reflected genuine demand.
It doesn't. The pull-forward effect doesn't create a single additional order from an end customer. No warehouse scans more parcels. No checkout processes more sales simply because a list price has changed. Demand hasn't increased – it has merely been brought forward. And whatever is pulled forward is inevitably missing later. The record month is followed by a slump as predictably as a hangover follows a party. The stock hasn't disappeared – it has simply moved. Instead of sitting in our warehouse, it is now sitting on a reseller's shelves, paid for with the reseller's cash. And for the next few weeks, that reseller orders... nothing.
The real cost appears when the rest of the supply chain misreads what has happened. The manufacturer sees the sudden boom in the sales figures and may interpret it as genuine market growth. Production plans are increased. Additional components are ordered. Manufacturing ramps up. Two months later, all that newly produced stock arrives just as the market has fallen into the post-boom lull.
Warehouses are suddenly full. Inventory turns red on the balance sheet. And somewhere, somebody starts discussing special promotions and discount campaigns to clear stock that only exists because everyone bought early. One simple announcement is enough to set the entire supply chain swinging like a rope that has been struck – first upwards, then downwards, with every stage amplifying the movement.
Does that mean bringing purchases forward is a bad idea? Not at all. It depends entirely on what you bring forward. Buying genuine demand for the coming months at today's price, backed by sound planning and sufficient warehouse capacity, is perfectly sensible. We do exactly the same ourselves. The danger begins when speculation enters the equation – buying stock that has no foreseeable customer simply because it is expected to be »worth more later«. That assumption only holds up if the market behaves as expected. When the inevitable slowdown arrives, so does the pressure to clear stock. Suddenly, everyone is competing against each other with warehouses full of exactly the same products. The four per cent saving achieved before the price increase disappears remarkably quickly when you have to offer an eight per cent discount just to move the inventory.
That is why whenever a price increase is announced, we examine the numbers more carefully than almost at any other time. How much represents genuine demand? How much has merely been brought forward? And how much is pure speculation? Not because we distrust our partners, but because the month after the record month always tells the truth. Those who understand the pull-forward effect aren't surprised when the slowdown arrives. Those who don't mistake the slump for a crisis – and the boom for real growth. Both conclusions are wrong. And both lead to poor decisions.
So remember: »A price increase doesn't create demand – it merely borrows it from the future. And sooner or later, the future always wants it back.«
Distribution mechanics: The grey market – why the bargain from a broker could become the most expensive device you’ll ever buy
The offer usually arrives by email, sometimes even over the phone: 200 units of exactly the device you need, available immediately and priced eight per cent below your...
The offer usually arrives by email, sometimes even over the phone: 200 units of exactly the device you need, available immediately and priced eight per cent below your distributor’s quote. The sender? A company you’ve never heard of, often based somewhere you’ve never even visited. Welcome to the grey market. And before you click Reply, let’s take a moment to look at what you’re actually buying.
The first question – surprisingly few people ask it – is: Where did this stock come from? Brand-new products are not sold eight per cent below market price because somebody is feeling generous. There is almost always a story behind it. Perhaps it was a registered project that fell through, leaving special-priced inventory that now has to be cleared. Perhaps a partner secured a project price for 2,000 units but only deployed 800, leaving the remainder looking for a new home. Maybe the products originated in another region where the manufacturer operates a different pricing strategy. Or perhaps someone abused a Deal Registration simply to buy cheaply and resell at a profit. I’ve already written about project pricing in this series: it exists to protect the partner who invested the effort in winning the business. Grey market stock is very often nothing more than that protection being broken – and turned into cash.
The second question is: What is missing?
Nothing obvious. That’s the deceptive part. The box looks exactly as it should. What is missing is invisible. Take the warranty, for example. Many manufacturers tie warranty entitlement to the authorised distribution channel, and the serial number tells the full story of where a device has travelled. If the manufacturer’s system shows that the unit was supplied for Project X in Country Y, and you suddenly submit it for repair from Germany, the conversation quickly becomes uncomfortable.
And it doesn’t stop there. No RMA support through your distributor. No eligibility for deal registration on future opportunities. No price protection. No reliable firmware or configuration history. You own the hardware – but none of the infrastructure that surrounds it. And that infrastructure is exactly what this entire series is about.
Now let’s honestly calculate the bargain. Two hundred devices. Eight per cent saved. Let’s call that €8,000. Sounds attractive. Then, in the second year, five units fail. Warranty? Rejected because the products came through the wrong channel.
Five replacement devices, plus an uncomfortable conversation with your end customer explaining why their rollout equipment cannot simply be exchanged – and suddenly those €8,000 have disappeared. If the manufacturer is having a particularly bad day, they may even block the serial numbers from technical support or software access. That isn’t a theoretical risk; it happens. Try explaining to your customer that, officially, their devices should never have been in circulation in the first place.
The third cost is the quietest – and arguably the most damaging.
Every grey market purchase helps undermine the very system your business depends on. Every deal weakens deal registration, the mechanism that protects your own projects. It tells manufacturers that channel discipline is breaking down. Their response is predictable: tighter rules, stricter documentation, more administrative work and more bureaucracy for everyone. The honest partners end up paying the price for somebody else’s bargain.
That, too, is a distribution mechanic – just a destructive one.
Don’t get me wrong. I understand the temptation. Margins are tight, pricing pressure is real, and eight per cent is still eight per cent.
But the grey market only sells you half the product. You get the box, but not the safety net beneath it.
As long as nothing goes wrong, you’ll never notice the difference. But you’ll notice it on the day something does. And in our industry, sooner or later, something always does.
So remember: »The grey market sells you the device without the safety net – and the discount is worth exactly as much as the safety net you’ve just given up.«
Distribution mechanics: EOL – Products don’t die overnight, they die with plenty of warning
Sooner or later, every device reaches the same point: End of Life. The manufacturer announces its discontinuation, the product disappears from the price list, and somewhere in a meeting room an end customer utters the sentence every reseller dreads: »What do you mean it’s no longer available? We have 3,000 of them in operation.« Today is about why that sentence should never have to be spoken. Because products in our industry do not disappear overnight. They come to the end of their life with a long, public announcement – you simply have to pay attention.
First of all, why would a manufacturer discontinue a product that is still selling well? Rarely out of choice. More often, it is not the product that has reached the end of its life, but something inside it: a chipset that is no longer manufactured. A display that has gone out of production. A wireless certification that no longer complies with new regulations. An operating system that no longer receives security updates. The manufacturer is not saying, »We don’t want to make it anymore.« They are saying, »We can no longer produce it at a commercially viable cost.« That is simply how the industry works – and, more importantly, it is predictable because it follows a defined sequence of stages.
Those stages all have names, and understanding them is the real trick. First comes the End-of-Life announcement. Then comes the Last Buy or Last Time Buy period, during which the product can still be ordered. Next comes the final shipment. Only years later does service finally come to an end – the point at which repairs are no longer offered and spare parts are no longer stocked. There are often five years or more between the initial EOL announcement and the end of service. That is not a guillotine; it is a long, orderly farewell. If you know all four dates, you do not have an EOL problem. But ignore the first one, and eventually all four arrive at once.
EOL becomes particularly critical wherever large volumes and standardisation meet: during rollouts. An end customer with 3,000 identical devices across 400 stores does not want device number 3,001 to be different. Their software has been validated for that specific model. Their mounting brackets fit that housing. Their employees know those buttons by heart. For them, an EOL announcement is not simply a catalogue update – it is a project. Either they secure enough stock during the Last Buy window to support the remaining lifecycle – replacement units, expansion, contingency stock – or they begin migrating to the successor product in good time. Both are sensible options. Only the third option is a bad one: doing nothing and being caught by surprise.
This is precisely where distribution comes into its own, because this is where we sit closest to the source. We receive EOL notifications first. We know the product roadmaps. We know which successor is genuinely compatible and which merely carries a similar name. A good distributor contacts you before the problem exists: »Your rollout device is being discontinued. The Last Buy window closes on this date, this many units remain available, and here is the recommended migration path.« We consolidate Last Buy quantities across multiple resellers, reserve remaining stock for ongoing projects, and hold inventory for the customer who inevitably realises – after the final sales date – that they still need another 50 units. It is not glamorous work, but it becomes invaluable on the day it saves an end customer’s rollout.
So here is my advice, without making it more complicated than it needs to be: do not treat product discontinuations as an inconvenience. Treat them as a sales opportunity. Every EOL announcement creates a natural reason to speak with your customer – about migration, successor products, contingency stock or the next project. The resellers who understand this benefit twice from every discontinuation: once from the final purchase of the outgoing product and again from the first purchase of its successor. Everyone else is left explaining to their customer why the project can no longer continue.
So remember this: »A product dies twice – once in the price list and once in the field. Miss the first death, and you’ll face the second completely unprepared.«
»I’m on holiday« isn’t an excuse. It’s an organisational issue.
Let me be clear from the outset: I’m all in favour of holidays. We all need them – and we need to take them properly. No phone on the bedside table....
Let me be clear from the outset: I’m all in favour of holidays. We all need them – and we need to take them properly. No phone on the bedside table. No nagging feeling that somewhere, something is about to hit the wall. Better still if the business doesn’t even notice you’re away.
What has really frustrated me this summer, though, is how casually people seem to accept that business simply slows down because someone is on leave. Remove just one person from a chain of four and suddenly nothing moves. For two weeks. Sometimes three. The customer waits. The supplier waits. The project waits. That’s not a holiday problem. It’s an organisational failure.
You can tell an astonishing amount about a company from a single automated email. A good out-of-office message consists of two lines: »I’m away from … until …« – because, frankly, nobody cares whether you’re in Mallorca, at a rehabilitation clinic or on a training course; it makes absolutely no difference to the sender – followed by: »My deputy is [Name], available on [email] and [phone], and is authorised to make decisions in my absence.« That’s it. Nothing more is needed.
Then there’s the other version, the one you receive dozens of times a day: »If your matter is urgent, please contact…« That isn’t a handover; it’s handing the responsibility back to the sender. They now have to decide whether their issue is important enough to bother someone who knows nothing about it, has none of the paperwork and, most likely, isn’t authorised to make a decision. In plain English, the message reads: »I’m on holiday, so please don’t bother the company with orders or enquiries while I’m away.« The crucial word is authorised. A stand-in whose only contribution is to explain that they can’t tell you anything isn’t a stand-in at all.
My view on this isn’t particularly comfortable, but I stand by it: if you haven’t handed over your open tasks properly, then you haven’t earned your holiday. Not because I begrudge anyone time off, but because a proper handover is just as much a part of the job as writing a quotation or making a customer call.
And if there genuinely isn’t a suitable deputy, then in my view the deputy should be your manager. So be it, if that’s the only way to ensure that someone is actually able to make decisions. I have absolutely no problem when one of our department heads comes to me and names me as their deputy. Quite the opposite – that’s exactly the right instinct.
What doesn’t work is when several employees take leave at the same time without proper coordination and, all of a sudden, nobody is able to move a project forward. If that doesn’t bother you, perhaps you’d be happier in the civil service. In a company that depends on satisfied customers, it matters a great deal.
In an ideal world, there wouldn’t be an out-of-office message at all. A colleague or manager would simply read your emails and reply to them. That’s how we did things at Jarltech for 30 years. We don’t always manage it in every single case anymore, and I’ll gladly admit that some of our own out-of-office messages still need attention. But I remain convinced that, with us, nothing gets left behind. With some other companies, I’m afraid I’m not so sure.
And now to the real point – one that actually has very little to do with customers.
When you’re packing your suitcase, which feeling would you rather have?
Option one: »Ha! Nothing works without me anyway.« It sounds important, but in reality it’s a badge of failure. It also means checking your inbox three times a day out of guilt, and never really switching off.
Option two: »A colleague is covering for me during what is usually a quieter period. Customers and suppliers are looked after. Nothing is left waiting. And in a few weeks I’ll do exactly the same for them, so they can go away just as relaxed.«
The second option isn’t just more professional. It’s far more restful too.
That’s why I don’t see holiday planning as some tedious administrative task for HR. I see it as one of the most important leadership responsibilities of the year. Anyone who arranges proper cover, clarifies decision-making authority in advance and makes sure that three key people aren’t all away at the same time is practising management in its truest sense: making sure the business continues to function without them.
Operational readiness comes first – in August just as much as it does in November.
So remember this: »If nothing works without you, that isn’t proof of your importance. It’s proof of your company’s poor planning.«