The acquisition of German accessories business more puts US distributor Strax among the elite of Europe, according to its UK managing director and group international director Barry Colman.
Two years ago, both Strax and more just missed out when Orange invited distributors to tender for its accessories business.
At the time, Orange had around 150 accessories partners and was looking to reduce the number to just five, with Dextra Solutions in the UK and the Avenir Group in France being the first over the finish line.
Orange is expected to invite distributors to tender for its accessories business again this year, and Colman says the new improved Strax is a shoe-in to win the contract.
I would put my house on the new combined company getting the Orange contract this time, he says.
Strax, founded in Miami in 1994 by Icelandic national Ingvi Tomasson, first entered into discussions with more about an acquisition in May 2005, closing the deal in December of the same year. The integration process, which centred on the two companies overlapping UK business units, completed towards the end of last year.
Strax, which dropped the more brand completely last month, has accessories distribution agreements with Nokia, Motorola, Samsung, Sony Ericsson and LG Mobile, alongside an abundance of deals with second-tier manufacturers. It also has agreements in place with OEM brands such as Parrot, Jabra, Logitech and Plantronics.
On the customer side, it has direct supply agreements with Orange, O2, T-Mobile and Vodafone in certain European markets. In the UK, where it turned over £56 million in 2005, its problem has been that none of its products has found its way to the big networks and retailers direct.
For instance, it supplies O2 in the UK with a range of stock, including an O2-branded cigarette lighter adapter, but all of it is traded via Dextra. The same pattern marks its relationship with Orange. Strax distributes to Orange in 80 per cent of the European territories in which Orange operates, including the UK, via third-party local distributors. It only has direct deals with Orange in Spain, Holland and Poland.
We are supplying a lot of the major players on the high street in the UK, but a lot of it is through other distributors, says Colman.
Were building up our team in the UK so that we can take those relationships direct. Even though theres no contract there, we are doing the numbers indirectly and we have contacts with the buyers for the networks and high street retailers. We are continuously putting product in front of them.
Strax UK sales director Dan Usher, who joined from Hutchison in February, adds: If you look at the UK market, the key chunks of the pie are with the network operators and the multiple retailers, and thats where we want to be. We want to be one of the major forces in accessories distribution. Well do that by working with other distributors and by developing direct relationships with networks and retailers.
But to understand the new Strax proposition, one has to consider its position on the continent. The companys growth strategy for Europe hinges on its broad reach and local market knowledge.
The company has just moved to a new office and warehouse facility in Cologne, Germany, just down the road from the old more headquarters. Birgir Ù’ rn Birgisson, who co-founded the UK business, has moved to Cologne to oversee development across Europe, the Middle East and Asia.
Purchasing for mainland Europe is centralised, with regional offices putting their orders through Cologne. Strax has tightened its own purchasing policy in line with the manufacturers aggressive stance on fake kit. Nokia pulled Dextras accessories contract, the biggest in Europe, last year when it discovered counterfeit stock in its warehouse during an audit. Dextra has since had its contract reinstated, but the rules have changed.
Nokia made a statement, says Colman. None of the manufacturers would think twice about bringing the shutters down. We have changed our purchasing policy. We dont deal with anybody, no matter what the price, unless they have a direct relationship with the manufacturer.
That is a group-wide policy. But were quite far up the chain, so those deals dont come around as often as they used to. A very high percentage of our purchases are direct.
Clearly, centralised purchase orders enable Strax to take advantage of its new economies of scale. Colman admits that, in some cases, suppliers fail to supply local support when orders are submitted for multiple markets. But Strax is pushing the manufacturers to change and, down the supply chain, its multi-market network and retail customers are now looking at global distribution deals.
The likeliest network to hand Strax a broader remit is T-Mobile, which it supplies direct in Germany, T-Mobiles home country, as well as Holland. That direct relationship with T-Mobile will expand into other markets, says Colman.
Its the way distribution is going, reckons Colman, and Strax is well set in Cologne. All these companies operate in many different markets and they are all starting to combine their purchasing power, he explains. We are set up to take advantage of this kind of globalisation. When a global tender comes up, Strax has to be considered a serious contender. But we understand local markets at the same time and that is key, he says.
The Cologne warehouse, which measures 7,500 square metres, is split into four huge, pristine halls, each allocated to a different process in Straxs stock procurement, logistics and fulfilment service. As it stands, the facility holds 4,500 product lines, although it is only running at 60 per cent of capacity. There is, then, plenty of room for expansion.
Strax operates subsidiary businesses in 10 European countries, organised purely for sales and regional market feedback to Cologne. Product management, purchasing, deliveries, faulty stock and invoicing for its regional offices are, by and large, run from its Cologne base. The theory is that, where possible, its administrative overheads are centralised, kept in check and reduced.
It sucks up cash if you just throw non-revenue resources at a business, so we are trying to use our [Cologne] headquarters for as wide a remit as possible, and to utilise our resources there, explains Colman.
Strax operates in this way in Europe wherever it can. There are anomalies, however. The UK remains an autonomous business unit that takes care of all stock and fulfilment operations itself.
The recent integration of Strax and more in the UK has seen it move to a new warehouse facility in St Albans, four times the size of its old base, which replicates the Cologne fulfilment operations for the UK market.
Another example is France. The French government levies a percentage of foreign companies import revenues as a green tax. Strax, therefore, passes down invoicing duties to its French subsidiary to relieve its customers in France of mountains of paperwork.
The same goes for Poland, where its old sales office has taken on bookkeeping duties because the local networks prefer to be invoiced in Polish zloty.
But the centralised warehouse facility in Cologne delivers crucial fulfilment services, such as original accessories packaging (OAP), to customers in mainland Europe. Strax repackages original accessories in its own blister packs áa