Distributors and Direct To End User Remain Preferred Distribution Channels For UPS Products Worldwide

In the recently released multi-volume study entitled "The 2002 Power Protection Market Intelligence Program," Venture Development Corporation (VDC) concluded that the sales channels most commonly employed in the worldwide UPS industry are the use of distributors and selling direct to the end user.

Natick, Massachusetts - February 19, 2003 - In the recently released multi-volume study entitled "The 2002 Power Protection Market Intelligence Program" Venture Development Corporation (VDC) concluded that the use of distributors and selling direct to the end user are the sales channels most commonly employed in the worldwide UPS industry. Despite there being numerous methods and combinations for the allocation of these products, these two avenues combined account for over 60% of all shipments in this $4.50 billion market. This is due partially to the processes involved and the changes inherent in them as the kVA level of the products in question increases. Among the major differences:

- UPS products below the 5.0 kVA level typically have 'plug & play' capabilities and do not require extensive customer service. This simplicity lends itself to a multi-tier distribution structure (i.e., retail distribution, specialty distributors, mail order, Internet) and eliminating or delegating many of the customer service duties.

- As suppliers' UPSs protect higher power equipment, the products become more expensive and complex, requiring maintenance, technical support and servicing, and training. Thus, the need for a high level of customer service and hence a direct distribution strategy increases. For this reason, the channel infrastructure for over 5.0 kVA UPS products favors a manufacturer-direct approach, either through a company's internal sales force or via its regional network of manufacturers' representatives. The sales evolution of a high-kVA UPS often involves the UPS supplier, manufacturers' representative, contract engineers and electrical contractors.

Global Battery UPS Consumption Segmented by Distribution Channel (Percent of Dollars)

2001 Total: $4.50 Billion

Distributor: 30.4%
End User: 29.7%
VAR/SI: 10.5%
OEM: 9.8%
Electrical Contractor: 8.9%
Retail: 3.8%
Private Label: 2.7%
Other: 4.2%

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To view the entire press release including charts go to
www.vdc-corp.com/power/press/03/pr03-11.html

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Successful channel strategies in the less than 5.0 kVA market segments are largely a function of territorial coverage. Many suppliers have implemented scaleable sales structures that enable them to deliver to high-volume customers. Like the addition of new product features and enhancements, many vendors have similarly adopted this method on a broad scale. One of the key elements of such a strategy is the responsibility of channel partners, as well as internal sales and other personnel to educate and adequately service the end user. The forecasted purchases of higher powered home systems (due to reductions in cost) mean more and more end users buying direct, making user-friendly hands-on learning and personal attention paramount to the success of the channel strategy. Beyond this, efforts should be made to cast as wide a distribution net as possible and to ensure that channel partners can maintain appropriate margin levels by dispersing efforts to blanket all applications.

The 3.0 to 8.0 kVA segment is a transitional one, in that these UPSs can encompass qualities typical of both low and higher range products. Consequently, they are sold through a wide range of channels, including traditional distributors, value-added resellers/systems integrators, private label resellers, OEM and/or direct to the end user. However, inevitably, as the kVA rating and the mission-critical value of the protected load rises, it becomes increasingly necessary for the supplier to take a more direct approach in building a close relationship with customers.

ABOUT THE STUDY

The report, "The 2002 Power Protection Market Intelligence Program: Volumes I-VI" (North America (under and over 5 kVA), Europe (under and over 5 kVA), Asia-Pacific, and Latin America), is a multi-client study designed to provide subscribers with relevant and up-to-date market intelligence to support strategic marketing and product planning decisions. This report includes:

- Forecasts by product categories, major applications, major industries, country, channels of distribution, product features, etc.;
- Major issues, technology trends, and end-user needs that affect the future of this market;
- Discussion of the industry structure and the influences generated by the various types of participants;
- North American, European, Asia-Pacific, and Latin American vendor shipment levels and market share data by product categories;
- Detailed profiles on the leading Global suppliers of battery powered UPS systems; and
- Recommendations providing insight into current and future market opportunities in this highly competitive marketplace.

Venture Development Corporation, a technology market research and strategy firm, was founded in 1971 by graduates of Harvard Business School and MIT. Over the years, VDC has developed and fine-tuned a unique and highly successful methodology for forecasting and analyzing dynamic technology markets. VDC has extensive experience in providing analysis in electronic components markets. This includes both multi-client and customized consulting engagements in a broad spectrum of related topics including switching power supplies, surge suppressors, fuel cells, static transfer switches, and others.

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Report Availability
www.vdc-corp.com/power/annual/02/br02-40.html

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For further information about "The 2002 Power Protection Market Intelligence Program: Volumes I-VI" (North America (under and over 5kVA), Europe (under and over 5kVA), Asia-Pacific, and Latin America), contact:

Matthew Goodwin, Senior Analyst
mattg@vdc-corp.com

Marc Regberg, Senior Vice President
msr@vdc-corp.com

If you would like to subscribe to more VDC updates go to: www.vdc-corp.com/subscriptions