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Pan-European Vendor Finance – A LeasingWorld Special Report

The shape of the global vendor programme market continues to evolve as  leading providers forge ahead into the Asia-Pacific region with service-led  strategies, while niche providers develop their own specialised relationships,  supporting players mop up the low-rate panel-driven business, and broker  conduits start to get the web-based treatment. Jan Szmigin reports

To get an idea of what forces shape the international vendor programme market, it helps to see vendors as split into two categories. In the first category are vendors that see sales finance as a strategic weapon, one that will help to tie the customer into the vendor’s products, conferring what is referred to by some as “socket-control“, meaning that the vendor’s machine is the one plugged into the wall. This in turn helps to establish the ongoing interdependence for a relationship to develop between the vendor and its customer; it is the ongoing nature of the customer relationship that yields greater profits for the vendor, because over time it can make a wider range of services more easily accessible to the customer. “The same global vendor may employ a strategic approach in some countries and not in others.”   Many vendors are experiencing downward pressures on equipment margins, and selling the equipment makes them just a one-off profit. At the same time finding a new customer is time consuming and pitching for RFPs with no certainty of success is many times more expensive than making a repeat sale to an existing customer. Vendors that think strategically see finance as a very useful tool in this situation, as it can act as the “glue” for a number of bundled services that create the ongoing relationship. The idea of commission on finance as a direct source of vendor’s profit, which is the situation that exists in the car dealer showroom environment, is not the primary objective; rather finance acts as the magic element that turns equipment sales into solution sales, and solution sales are multiple sales that ensure ongoing customer contact.   These “strategic” vendors believe that they can generate better returns from their programmes if they offer finance in a way that is carefully controlled by them, which is a different mind-set to that of the second type of vendor. The second type is one that does not see the strategic value of sales finance particularly, and allows its dealers and outlets to arrange the best deal as they see fit. If it does become involved in seeking vendor finance at head office level for one-off transactions, then it will focus on the lowest rate finance provider.   The idea of vendors being one type or the other may be too simplistic to be useful. John Rees, head of vendor programmes

– High Tech at SG Equipment Finance sees the situation as more complex. “The same global vendor may employ a strategic approach in some countries but not in others,” he says. “There can be nuances, in some countries a direct, broker or web-based channel may be preferred.”   As the major global vendor programme providers expand with their vendor client base, so they have to cover an ever-expanding geographical spread. Rees reflects: Ten years ago we needed to offer pan-European capabilities. Then we needed to offer Central and Eastern Europe capabilities as well. Now we have to offer Russia, the Ukraine, Asia-Pacific and China on top.   Only a few lessors can offer full global reach; the costs of opening across all the countries is significant, and getting established in a country like China is a major investment; those lessors with their doors open today for business in China have been building their “shop fronts” there for several years. Philip Schneck, Global Chief Commercial Officer for De Lage Landen International B.V. confirms this when he says, “China is not a place to dabble, you can’t just open an office there, it requires a significant investment of resources.”   The message that is coming through is that those lessors with capability in China and Asia-Pacific are enjoying a “ramping up” effect on their business. Terry Kelleher, President, Global Vendor Finance at CIT, reports: “In the last five years our expansion into Asia has been very successful; our business growth there has been very significant, and we have not had a single year that we have been in the red, despite all the investment”. Over the period Kelleher estimates that while total staff has grown significantly (CIT’s Dublin office alone has 450 people), the assets have grown by a much larger percentage, with more growth still expected in the future. “The Asia-Pacific capability is being seen as a factor that polarises the competition.”   In addition to the increase in volumes, Rees of SG Equipment Finance sees a further benefit in moving eastwards: reverse marketing into the West. “We have opened in the US recently, and our capabilities in Asia are a useful selling tool for persuading US vendors to partner with us for our global reach. That combined with the present liquidity problems

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