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Distribution in the circular economy

Leon Timmermans, CEO of circular and eco-sustainable hardware distributor Flex IT, says that lockdown measures have woken many firms up to the value of repurposed hardware. The company has experienced significantly increased demand for its products since March, as the supply of new products cannot keep up with demand

Headquartered in the Netherlands, Flex IT has offices in France, Germany, Spain, Italy, Belgium, Poland, Finland, Sweden, Bulgaria and the UK. Having worked at Flex since 2018, Leon Timmermans was appointed to the CEO role in 2019 and has overseen a strategy refresh. “We wanted to create an identity and energise our people and that involved making choices and renewing some of the processes around our strategy,” he explained. “For every euro we spend in the company, if the choice is between circular or new product, I wanted everyone to always spend the euro on circular. Everybody is fully on board with this strategy.”

The company works closely with vendors to buy excess stock and refurbish slightly older laptops, servers and mobile devices to the highest possible standard. Key vendor partners include HP (Flex is a certified refurbishment and rental partner for the brand), Dell, Apple, Cisco and Lenovo from a laptop, mobile device, storage and server perspective, and it is also planning to significantly grow its partnership with Samsung.

“For us, new, is most of the time, end-of-life,” Timmermans explained. Flex IT buys up unused still new in the box products from vendors prior to them launching the next generation. “When a new model is about to be launched, manufacturers are no longer interested in the older generation, so what we do is bring those products into the circular economy and the vendor doesn’t have to scrap them.” Another part of the business involves the recycling and refurbishing of IT hardware that has been in use in companies for sometimes up to ten years.

“We manage the complete lifecycle of a product. So, if we recycle a product, and let’s say the product cannot be recycled anymore and brought back into the economy, then we will harvest the spare parts to build other equipment, nothing is wasted, we continuously reuse products,” Timmermans said.

Flex IT’s strategy means it is not overproducing products or using valuable resources, instead it is doing its bit for the planet, while focusing on quality. Products come with a warranty which can range from one year to up to three years for the Approved Selection Line. Products are awarded different classifications to make it easier for partners to make a product selection. These classifications range from minus 10 and minus 1 generations, the latter being just one iteration below the most recent models launched to market and the minus 10 being older models.

Demand ramps up
Timmermans says that the circular market is one of the few industries that is doing extremely well at the moment. “Demand really ramped up in March as home working was widely adopted, and with manufacturing plants in China shut down, there was a shortage of new products. What we did see though in many cases, that whilst new was an option, more and more companies made the decision to embrace circular,” he explained.

Flex IT’s first goal was to get 50 per cent of revenue through circular IT sales. “But the way things are going it could be up to 65 per cent,” Timmermans said. “Our early focus last year was on the bottom line because we wanted to make a change and stop selling a lot of non-value-add product groups and focus on circular IT, but the bottom line and the top line are both growing now. We are already overachieving on our strategy.”

Reseller first company
Flex IT prides itself on being a ‘reseller first’ company. “We are very loyal to our resellers,” said Timmermans. “We don’t work with end-user businesses, we will always refer them to one of our partners.”

One of the biggest changes in the past few months has been an influx of resellers approaching the firm and asking to become part of its circular partner programme (see box out).

“There’s been a huge change in mind-set,” Timmermans explained. “Instead of us going out to the channel and convincing resellers that circular is a very good alternative for new and that price shouldn’t be the main focus, large resellers across our key geographies are now coming to us, asking us to provide circular laptops in the thousands.

“Many companies had employees that worked off desktops in the office and had no way of working remotely, our partners’ end-user customers were saying: ‘I need xx laptops in two days and this is the spec’. They were no longer asking for the latest and greatest, shiny and new, they just wanted a laptop that met their needs in terms of functionality, so their staff could work from home – and they needed it delivered quickly,” he added.

Timmermans believes that one of the positives to come out of this global pandemic is that people have recognised the quality of products available in the circular market. “They have accepted that products can be re-used and that the quality and function of a product is more important than being the latest, shiniest version. A laptop might be five years old, but you can still use it to do whatever you need to do.” he said.

Circular products are more cost-effective than new, which with a recession ahead, could well make this option even more attractive to companies going forward.

“In some instances a circular product could be 20, 30 or even up to 40 per cent cheaper, but that depends on a lot of things, for example on the grading that you want as an end-user. Say there is a small scratch on a desktop PC, nobody cares because the desktop often is below the desk, nobody sees it, as long as the screen is fine, then it’s fine. If you take a notebook, and there’s a scratch, that might matter more to an end-user, so we operate a grading system – basically the lowest pricing is on products that might not be perfect on the outside, but from a technical point of view have the same functionality,” Timmermans explained.

Flex IT recognises it’s a big step to go from brand new to a refurbished product, which is why the company offers a service whereby it will wrap a product in exactly the same colourway as the manufacturer, so on the outside it looks as new. “For a reasonably small cost, you can visualise the product as being completely new. We are very transparent, we lay out all of the options to our resellers, and if the end-user wants it to look new from a visual point of view, we can do that. But, what’s interesting is that in the past couple of months, no one has been asking what the hardware looks like, they just want it to work.”

Circular partner program

Flex IT Products
Flex IT Products

Flex IT is keen to hear from more resellers that are interested in joining its specialist circular partner programme. “But resellers must want to invest in the circular programme,” Timmermans said. “It is a new concept for many, so they will need to train their sales people and convince their vendor partners that it is not a trap and it will not eat into sales of new products, but instead will work alongside the traditional sales model.”

To this end, Flex IT has made it even easier for partners to sell circular products alongside new. “We have created a web shop, where partners can directly look at and compare the hardware they are looking to provide to a customer alongside a circular equivalent with exactly the same specifications. They can then offer customers a choice of both solutions, with the same warranty and the same specs, it’s an opportunity to have a different discussion.

“There seems to be an upswing in new sales from our partners as soon as they introduce the circular product line. This is because our partners are able to offer solutions on every price level without neglecting the quality,” Timmermans concluded.

Flex IT has a number of different initiatives that resellers can take advantage of to get involved in the circular economy including:

The Flex IT Circular Partner Programme: Split into three different levels: Bronze, Silver and Gold, each level has specified revenue targets and additional benefits such as sales and marketing support, technical services and training, with Gold being achieved by invitation only.

ITAD (IT Asset Disposal): This scheme allows firms to dispose of any old or unwanted hardware and use the residual value of the hardware to purchase new equipment at a discount. Flex IT carries out this service on behalf of its reseller partners and brings otherwise discarded devices back into the market and bringing them ‘full circle’.

Rental: Aimed at firms looking for a ready supply of temporary IT equipment. Originally popular with trade fairs, exhibitions, workshops, seminars or large and small scale events, COVID-19 has pushed this particular strategy in a different direction – fulfilling the demands of firms whose staff have previously worked on premises using desktops, but who now need to hire large quantities of mobile devices to cater for remote working during the lockdown. The option to buy the kit is also included.

Demo: Flex IT has demo facilities in its core countries, which is used to demonstrate the latest vendor solutions to customers and facilitate sales for those vendors’ reseller partners. All the equipment bought and sold through this facility is also integrated back into the circular model once it is no longer required by those customers.