If there was any serious money to be made in distribution, there is no doubt manufacturers would always sell direct and keep the profit. All middle men need to provide service to win business, otherwise they are just fighting each other based on price.
Firstsight Vision has learned all the lessons of distribution over its history. But having fought on alone for so many years serving the UK vision market, it has discovered that there is strength in numbers. Nearly two years ago it joined the Stemmer Group, founded in Germany by industry veteran Willi Stemmer – and, as part of the Stemmer Group, it has found new vigour.
It has retained much of its independence, but discovered that it is no longer alone. The Stemmer Group holds stock in common, commanding better prices and offering more ex-stock deliveries to customers. More importantly it does not have to constantly re-invent the wheel. Knowledge gained in one member company is shared across the whole group, allowing it to punch well above its UK weight.
It has discovered that, if you share costs and knowledge, you can make money in distribution and also provide customers with better service.
Firstsight Vision was founded by Mark Williamson, a graduate in electronic engineering from Hertfordshire University with a background in imaging with Cossor, now part of Raytheon. After a few years in engineering he wanted to become more commercial and took a job selling test equipment. After two years, he joined a start-up called DataCell in 1989, which had just taken on the distribution of various imaging product lines. DataCell went public and set up a new division called Active Imaging, which was to design and sell top-of-the-range webcams. DataCell started to move into selling complete systems and drifted away from distribution.
Mark Williamson
Active Imaging was bought out and Williamson became UK general manager. It soon became clear that the biggest market for webcams was going to be eastern European brothels and the networks did not really have the capacity. Williamson decided to bail out. It has since re-emerged under a new name in the scientific computing field.
He believed DataCell was onto something and that, if it got its business model right, then there was an opportunity for a distributor to do well out of the growing vision market. He knew about the success of Willi Stemmer in Germany and thought it might be worth trying to do something similar in the UK.
Williamson says: ‘I thought DataCell had the potential to be the Stemmer of the UK and they screwed it up. There was a big space in the market for a strong distributor, so I founded a company called Pinnacle Vision in October 1997. The first product line we took on was Coreco. I wanted to build a totally OEM business. My model was to provide a very high level of not just support, but also development services. A lot of OEMs wanted to use vision, but did not know how to. My business partner did software engineering, but not end user software; it was software that helped sell the board to OEMs. It was a development service to do the programming necessary to get the boards designed into the OEM’s product. No-one else was doing that in the UK and we won a lot of business from the incumbent distributors.
‘At the same time David Hearn started a company called Vortex Vision, with a similar business model. A lot of the distributors were ‘lifestyle’ businesses that did not hold a lot of stock. His angle was that he was going to be ‘the’ UK stocking distributor. I had known Willi Stemmer from my days at DataCell, because we were both selling Imaging Technology frame grabbers. Hearn won the Imaging Technology product line from DataCell and Stemmer put money into Vortex Vision. He also got the JAI product line.
‘He quickly became my biggest competitor and we quickly became the biggest players in the UK market. Then a bomb hit and Coreco bought Imaging Technology. At first I thought this was great, because I thought that I would get Imaging Technology and Hearn would lose it. But Coreco encouraged us to talk. We discovered we had a 15 to 20 per cent overlap in customers, which indicated that we should merge, so we created Firstsight Vision together on January 1, 2001. We combined the stocking distributor with the service approach and Willi Stemmer had a small share in the company.’
Everything looked great, but then the big technology slump hit and the dreams started vanishing in smoke. Having started doing development work to sell boards, Firstsight had to look for development work for its own sake to pay the rent. It lost money in the first year after the slump, but slowly started to recover. Williamson and Hearn were still friends with Willi Stemmer, and they started to talk about how to go forward.
Williamson says: ‘Willi has always believed that it is very difficult to make money in this business. Every time there is a new product out, every distributor tests it and if there is a bug, every distributor has a customer who discovered it and reports it back to the manufacturer. Also they are all stocking kit. There is a huge duplication of resource.’
Stemmer made them an interesting offer. He wanted to expand Stemmer Imaging into other European countries from its base in Germany, but his main interest was France and the UK. So he offered to buy 51 per cent of Firstsight and the deal was made. Firstsight began trading as part of the Stemmer Group in July 2004.
Williamson says: ‘The concept was that we would have a central warehouse that would order in larger quantities and get better prices. We would have more stock so we could give better delivery times to customers. We implemented a support database across the whole group so that if anyone found a bug, the information was shared around the group.
‘Smaller distributors don’t have the resources to really test a product before they start selling it. Now we had the resources to fully evaluate and test every product to a far greater degree than we ever had before. We have 100 people across Europe and 30 of those are engineers, with the same number of products. Customers are getting a better service because now we are proposing kit that we know will do the job. Sometimes we know more than the manufacturers, particularly about interoperability.’
Williamson said that although Firstsight is now majority-owned by Stemmer and part of the Stemmer Group, it is not the UK branch of Stemmer. The different countries in the EU are quite different; a fact that often bewilders US companies setting up in Europe. It is not just the language and culture that differ, but also the economies have different strengths and have acquired certain habits when it comes to technology. The idea is that each operation in each country reflects the market in that country rather than trying to impose a common corporate standard.
He says: ‘Each of the companies in the group is free to choose its product areas and decide its own direction. For example, in Germany 70 to 80 per cent of the business is industrial machine vision. In the UK we are selling into lots of other sectors, such as sports analysis, medical imaging and security. We use the same technology but obviously Germany has a stronger manufacturing base. We have also been swapping ideas and Germany is now moving into security. Each country is very different.
‘In the UK we adopted FireWire technology early on. Stemmer was telling us that there was no market for FireWire in Germany and yet it was our fastest-growing line. Germany is now adopting FireWire. The UK market is much more technology-driven. Price is a big thing and the “being the latest” is a big thing. Germany is much more reserved and they like tried and tested kit. This means the support issues are very different between the two countries. But if we feel that we need to get involved in a new technology we are free to do it.’
He says that there is a strong commercial incentive for the various companies to sell
the same products as much as possible, because then they will benefit from the common purchasing and stock holding. Also, this means that other members of the group benefit from development work and knowledge in another country. Each company in the group is designed to be a one-stop shop for the market in its home country.
The link with Stemmer has had a big impact on Firstsight. It has grown from £3.7m to an expected £5m this year, despite the UK business having just 14 people. The business model has not changed; the emphasis is still on providing development services as a way to leverage product sales.
Williamson says: ‘What we offer our customers is that we can get them to market quicker because we understand all sides of the problem. They can come to us with a requirement and we can deliver a package of the right camera, the right lens, the right lighting and provide help in integrating them into their OEM product. Doing that themselves it would take three months. We are doing it all the time.’
He said that there have been cases of customers sourcing products from other distributors because they are slightly cheaper. But he said they often come back because they find that those distributors cannot offer the support they need and it is well worth the small difference in price.
Firstsight has recently launched a partner programme for OEMs that commit to purchasing from the company, in order to receive much better pricing. The idea is that, rather than give a discount for volume on a single product, it will take a view on the whole range of products being supplied, so that if a customer is buying a lot of different products, but only a small number of each particular item, then they will benefit from a higher volume price on every product. It also offers a sale or return system to committed partners.
Williamson says most of the most popular products are delivered to the central Stemmer warehouse in shipments of more than 100 while, when it was Pinnacle, it was ‘order 10 at a time’, so the price for a broad range of products is probably as good as smaller operations that are only selling fewer products in higher volumes, without the full range of support.
The fastest growing area of business for Firstsight is smart cameras, but that does not mean that PC systems are not also growing. It has a distributor agreement with Cognex’s DVT systems, which are becoming more powerful and so are starting to find applications that would have required a PC system a few years ago. Firstsight also does training for end users of DVT, which teaches them to get more out of the system. Historically most of DVT’s resellers have been sensor companies that have expanded into vision, but Firstsight sees it as the entry level for vision.
Williamson says that often people come to Firstsight looking for a DVT or smart camera solution and are told that if they really want to do what they say they should be considering a PC system instead. He believes that every technology and interface has its place in the market. No one thing will ever kill off any other. Smart cameras are getting better, because their processors are more powerful, but in that time PC systems have been able to do more. Frame grabbers can do much more than they ever could, while FireWire is still the choice for multi-camera applications, and Gigabit Ethernet is the choice for applications requiring long cable lengths.
Long may it continue that way from Firstsight’s point of view because, as long as there are choices, customers will always want someone to help them make the right choice rather than just ordering a box from a website.
