Electronics talks to Mark Larson, President of component Distributor, Digi-Key in a Q& A session about some of the factors that are leading to positive results for the company in the face of the economic downturn
Despite the uncertainty of the current global market and the impact of general economic conditions on the electronics industry, component distributors such as Digi-Key have demonstrated markedly positive results over the past several years.
The company claims that, in 2005 it was the 11th largest electronic component distributor in the world and five years on from that by 2010 to have progressed to become the 5th largest component distributor in the world.
To put this in perspective, Digi-Key’s claims its electronic components sales exceeded those of Premier Farnell and RS Components, and more than doubled those of Mouser.
In the interview Larson gave the following reponses:
What are your thoughts on the future outlook for the electronic component industry?
Although I am very optimistic about the performance of the electronic component industry in the future, I believe successful performance for the industry may be challenging in the short term.
There are economic uncertainties in Europe, North America, and Asia that have the potential to really impact the economy in each or all regions.
The electronic industry is already experiencing some headwinds as a result of a general weakening in the world economy, and I expect this downturn to continue for a while.
Although year-to-date growth is positive, Digi-Key is seeing weakening demand in almost all product categories. There might be several isolated classes of components that are escaping this weakening demand, but they are definitely the exception at this point. But I am confident that in relative terms Digi-Key will fare well.
What do you think is the secret to the company’s success?
We stock one of the broadest ranges of electronic components in the industry- with electronic components that are available for immediate, off the shelf, delivery, allowing us to support virtually all technologies and applications.
Our comprehensive product portfolio is available to engineers and purchasing professionals worldwide. Recent independent industry surveys highlight the accessibility of this.
Digi-Key was Rated #1 for ‘Product Portfolio’ in Germany in a recently published independent survey. A recent survey in Japan also rated us #1 for ‘breadth of product.’ In addition to this, in another survey the company was Rated #1 for Product Portfolio in North America.
New products are added daily, as the company strives to stay at the forefront of product advancements.
Because we serve a broad range of customers from nearly every industry segment, the company is able to outperform the industry in an uncertain economic climate.
How do you think the company achieves its international market position?
The company has a significant competitive edge as an integrated, Internet-based global distributor. The fact that we have a single Product Distribution Centre that serves customers worldwide is a major differentiating factor.
This gives us the ability to aggregate worldwide demand and offer far more components than our competitors that have more than one distribution centre, each one serving a region or sub-region of the world market, and, on that basis, each one serving only a subset of total worldwide demand. Multiple distribution centres fragment market demand.
A Product Distribution Centre that serves only a subset of worldwide demand cannot economically justify offering our breadth of product available to ship from stock.
We stock more products than many of our competitors and ship them all from one location, making it possible for us to ship orders the same day.
A second point is that, as a company we have made the decision to ‘go green’ and discontinue producing and mailing a printed catalogue. At one time we printed more than 4,000,000 catalogues a year.
We have made the decision to totally focus our resources and efforts on increasing our product and content offering online. We are confident our full transition to being an Internet-based distributor will provide our customers with everything they need and more to purchase product, access up-to-date information on all electronic component needs.
Is the global move driven by a bigger ethos for the company?
Becoming a significant global source for electronic components has been a challenge well worth the rewards. Engineering and technological design is an art that transcends national boundaries and it is our goal to satisfy customer requirements worldwide.
The United Kingdom is a key market for us. Our success in the U.K. was initially driven by design engineers. While our engineering base continues to grow, we are rapidly developing a base of production customers that have seen our ability to support low volume/high mix projects.
The United Kingdom is our second largest market in Europe, with only Germany having greater sales.
Globally the U.K. ranks sixth in terms of country sales for us. In 2010, our sales in the U.K. more than doubled over 2009. Our U.K. sales for 2011 are up more than 20 percent year-to-date. We are pleased to see a similar increase in Europe.
What is the company’s strategy for reinforcing an online focus?
Global reach is essential for any growing, successful distributor. The company as an online entity reaches millions of customers daily in the US, Europe, and Asia, as well as in emerging markets such as India and China.
Reaching the world’s engineers and procurement professionals in helpful and cutting edge ways allows us to remain a trusted source for quality product and valuable information.
In the current economic climate, it is essential that we construct and continually refine online initiatives that meet the needs of engineers and purchasing professionals. Offering an easy, convenient, and efficient purchasing and resource-based online environment for customers around the globe is one of our top priorities.
For many years Digi-Key has been rated the Top Distributor in the United States for “Overall Performance.” Our challenge is to earn that same status in the United Kingdom.
