Satellite Imagery Game of Thrones - Operators vs. Resellers
Satellite Imagery Resellers and Marketplaces face constant existential death.
Their biggest competitors aren’t other resellers, it’s the operators themselves.
When I worked for a marketplace, customers would always ask me: “Why should I order from you instead of [insert operator name]?”
I’d say…
Attentive Sales Support
Better data ordering platform
Focused Customer Service
Large operators focus their direct sales effort on large deals. These come from massive government contracts and large commercial customers.
That leaves the new geospatial analytics companies or niche regions requiring localized support to the resellers.
Traditional resellers own the latter. Large operators don’t have a salesforce that can support every country in the world - they leverage localized resellers to manage sales in those countries.
This relationship is mostly symbiotic, but there’s always a risk that the operator recognizes huge potential in a given country and builds up their own sales presence there.
For new resellers and marketplaces, the key differentiator is ease of access to multiple imagery suppliers and better ordering platforms (usually through a better UI/UX and APIs).
This is great for new geospatial analytics companies building solutions for new commercial use cases. They can leverage a single platform to access many providers and they get much better sales and customer support than going to a provider directly.
Here’s the challenge:
The market for “long-tail” customers isn’t big enough
“Long-tail” customers require a lot of education on satellite imagery ordering
So, when you’re a new reseller or marketplace, you’re placing bets.
You’re betting that a few of these “long-tail” customers today become large geospatial solutions providers ordering at huge volumes tomorrow.
You invest the time and energy to educate them on satellite imagery ordering operations and provide heavy support in the beginning. Through that process, you hope that your relationship keeps them ordering from you at higher volumes in the future.
The problem is…
Reseller discounts and margins.
At a certain point, a few of these customers start growing like crazy. They achieve product market fit, and their image order volume grows exponentially.
They’ve ordered so much imagery that they’ve become image ordering experts as well.
They have teams internally that handle image ordering operations and processing.
Their biggest consideration when ordering data becomes simpler: Price.
That’s a huge problem for Resellers - they can never beat Operators on price.
Resellers usually take a 30% margin on data - that’s the standard I’ve seen. But, it can be anywhere from 10% to 50%, depending on operator, region, and a reseller’s negotiating power.
So, with a standard 30% margin, the maximum discount a reseller could offer is 30%, in which case their profit is 0.
That breaks when customers start ordering $millions in imagery per year and scaling exponentially.
So does the operator just undercut the reseller and take their customer when this happens?
Not exactly…
Operators build out reseller strategies on the premise of mutual cooperation.
If operators steal a reseller’s customer the moment the customer gets big, then their resellers are going to be pissed off and the whole model wouldn’t work.
In these pricing cases, operators and resellers will work on a custom price for this customer where the list price is reduced without eating into the reseller margin.
This is usually handled between the Head of Resellers / Reseller Manager at an Operator and the salesperson at the reseller
There are 2 other players in this equation though…
The customer: Since they now have volume, technology, network, and knowledge - they have a massive amount of leverage. They have a massive amount of choice. This means they can negotiate for the best price. They also have the right to choose their provider.
The direct sales team at an operator: These guys are the ones ignoring your emails when you try to order an image of your backyard. They are typically connected to, but often managed by different stakeholders at the operator organizations.
When it’s time for renewal on a contract, the customer starts shopping around and reaches out to the sales team at an operator directly to see if they can get a better price.
This time, the salesperson sees a $million opportunity show up on their pipeline and you can be sure they’re not gonna ignore it.
They offer a better price than what the reseller can offer with their standard margin.
The mess begins.
The direct sales team at an operator, the reseller team at an operator, and the reseller go to battle.
There are 2 ways this can go:
Operator undercuts reseller and wins the customers business
Operator honors same list price quoted by the salesperson to the reseller, however reseller faces continuous existential threat of key customers moving their business to the operator directly in future years.
This is a long story to illustrate a simple point:
Resellers bet on customers when the customers are small and cash in when the customers get bigger later.
But…
Customers become incentivized to go directly to operators for the best pricing once they order at a high enough volume due to technological and pricing advantages later.
The dance between imagery suppliers and resellers is complex and nuanced. There isn’t a clear solution for either.
