The DigiKey / Panasonic Engagement, The Value of a Franchise

It’s an exciting year for DigiKey. We are having our 45^th anniversary as an organization, having started in 1972. Today DigiKey is the 4^th largest distributor of electronic components in North America and the 6^th largest in the world. But it is highly unlikely that this level of success would have ever been achieved if DigiKey hadn’t been named as an Authorized Distributor by Panasonic in its earliest years.

In 1975 almost all of DigiKey’s customers were hobbyists. And almost all of the electronic components that DigiKey sold at that time were either purchased by DigiKey as surplus product or product purchased on the open market without the benefit of the more competitive pricing and other advantages of being an Authorized Distributor.

At that time DigiKey was operating from rented space in a building that also housed Marcraft, Inc., a business owned by Mark Larson (prior to joining DigiKey) that sold, among other things, public address systems to churches, schools and businesses. One day a Manufacturer’s Representative that sold microphones and speakers made a sales call on Marcraft. During this call Mark took the salesman to the back of the building and showed him the very small but clearly thriving DigiKey operation.

As luck would have it, in addition to representing manufacturers of microphones and speakers he had recently been named a representative for Panasonic components. He was almost immediately interested in setting up DigiKey as an Authorized Distributor for the Electronic Component Division of the Panasonic Industrial Company. He and Ron Stordahl met that evening and discussed how to proceed.

It might seem strange that a tiny company in northern Minnesota would be of any interest to Panasonic. But even though Panasonic was a recognized brand of television and music systems by 1975, it had only recently begun selling its electronic components in the United States and was struggling to establish itself in this market.

In retrospect, we believe that Panasonic believed that setting up DigiKey as an authorized distributor was a “no lose” situation. They were confident that DigiKey’s remote location would ensure that their sales activity would not interfere with Panasonic distributors they had established in key metro locations.

But there was no way they could have reasonably anticipated that within just a few years DigiKey would represent more than 85% of Panasonic’s sales through distribution and serve more than 95% of their customers.

DigiKey’s success in growing Panasonic’s customer base and sales in the United States was soon recognized by many other “name brand” manufacturers in the industry and drove them to engage with DigiKey to experience similar success. Panasonic’s engagement with DigiKey legitimized DigiKey within the industry and gave it the ability to ultimately become an Authorized Distributor for almost every World Class Supplier of electronic components. DigiKey’s engagement with Panasonic was critical to DigiKey’s ultimate success.

Usually good things happen as the result of careful planning and a lot of hard work. But sometimes good things happen because of pure, unadulterated good luck. DigiKey’s engagement with Panasonic was unadulterated good luck!