The IT channel is currently facing some strong post-pandemic headwinds. The geopolitical situation, record inflation, lingering supply chain concerns, and the continuing skills gap among other worries have left channel partners considering how they can weather the storm.

When it comes to device sales, both resellers and retailers face additional challenges. We know the channel partners that sold technology devices had an absolutely remarkable pandemic in terms of sales. Equipping the new remote workforce was a priority for organisations, so the partners that could get devices like laptops, notebooks, smartphones, screens and peripherals into the hands of employees enjoyed great success.

But after those boom years, we are now experiencing the inevitable drop in demand, particularly for smartphones, laptops, PCs and other devices.

The global smartphone market has now experienced a fifth consecutive quarter of decline, falling by 12% year-on-year in Q1 2023. Channel analyst Canalys noted that despite price cuts and heavy promotions from vendors, consumer demand remains sluggish. This especially is the case in the low-end segment, as high inflation affects consumer confidence and spending.

Customers – whether B2B or consumer – are holding onto devices for longer and delaying outlays on major purchases and upgrades.

Another important factor for partners are the changes to how people purchase devices, which began during the pandemic when the world went online. Even procurement managers are now comparing and purchasing products directly from their partner’s website, or their retail chain equivalent, which adds to the price pressures throughout the channel and the need to differentiate with some other kind of added value. This has continued post-pandemic, with macroeconomic and cost-of-living pressures sending many consumers online in search of transparent information and the best deals.

Adopting a ‘through-cycle’ view of sales

These ongoing shifts in buying behaviour prompt obvious concerns among resellers and retailers: How much excess stock do they have sitting in their warehouses or in distribution? How similar are the products in price? Are they holding on to stock for too long? Are they offering products at the right price to attract customers but still deliver margins?

In this scenario, vendors and partners may rush to offer sales and discounted products to clear their inventory. However, this only reduces margins – at exactly the same time that inflation might be pushing their costs and the device manufacturing costs higher. It is also almost impossible to later increase prices when customers have seen them sold for less, which also undermines their perceived value of the products. They end up in a race to the bottom on pricing, which is something partners need to avoid at all costs.

Instead the channel must adopt a long term ‘through-cycle’ view of sales to avert short-term panic about the current slowdown. The term describes an approach based on value creation that enables companies to outgrow their peers, both during downturns and in the subsequent recovery. That could be growing their core business, but they may look at geographic expansion, value chain integration, or moving to adjacent markets.

This is already evident in the channel, where both device manufacturers and channel partners have been forced to consider new value propositions based on long term thinking.

“It’s not just about getting a phone or a laptop for the next two years or three years as it might normally be,” said Runar Bjørhovde, research analyst at Canalys. “It’s thinking about the residual value of the device at the end of those three years. Can we trade the device in? Can we sell the device off to another partner? Can we bundle laptops and smartphones together? That’s Apple’s strong value proposition to why their business is still going very well on the B2B side.”

Creating value and building trust

Many retail partners are also embracing online channels by setting up better digital and physical infrastructure suited to large-scale online business. New developments focus on adapting the customer experience and offerings. As part of this, consumer electronics channels are no longer trying to solely be a product reseller. They are increasingly bundling in insurance, tech support, data services, extended warranties and, in many cases, selling mobile subscriptions for MNOs.

The channel is focused on offering customers service choices through bundled solutions to create channel user stickiness and to attract new customers.

Elsewhere, they are increasingly looking to drive the market for devices through refurbish programmes. There is a huge push from the EU around giving devices a second or third life though refurbishment or recycling. This should be an opportunity for vendors or channel partners to develop programmes that sit within that model – and they should take advantage now.

In both these examples, channel organisations must consider what motivates customers to take immediate action and how they can offer the right value and incentives to make that happen. This could take the shape of a promotion that enables organisations to trade-in old devices for discounts or rebates, or to collect and refurbish old equipment, bundling relevant peripherals, even ‘buy and try’ promotions on new products. If the objective is centred around increasing market share, then trading in a competitor’s brand for a new model of your preferred brand might also be an option. Sales promotions are often most effective when multi-layered, and adapted to a commercial need: sales volumes are all very well, but not at the expense of margins that do not make commercial sense.

Channel organisations may consider the market such that they need to think of promotions as a regular part of their business. Partnering with an experienced third party who can advise, source the right promotions at the right price, ensure fulfilment, manage the customer relationship, help with metrics analysis and act as a true partner could be the ideal strategy.  Make the right partner decision and your promotional activity will bring profit and nurture customer loyalty.

“The market contracting is a good way for channel partners to look around and see where the next opportunities are coming from. Where should we invest right now? Are we prepared when the demand growth picks up again?” said Bjørhovde.

Above all, the current market challenges are a chance for partners to create long-term value and solidify their position as a trusted advisor. It’s also an opportunity to build trust through adopting a complete ‘through-cycle’ view of sales.