Middleman Kenfil Growing in Tough Software Business
Irwin A. Bransky’s first experience with computers was a dismal one. It came, he said, when he flunked a course in FORTRAN, the granddaddy of computer languages, while in college in his native South Africa.
Bransky’s first business venture in the United States also flopped. It was a Pioneer Chicken franchise that he owned in the early 1980s near Beverly Hills, hardly a fried chicken kind of town.
Despite those early setbacks, Bransky, 38, a former leftist student leader at the University of Witwatersrand in Johannesburg, has combined computers and business to build his second venture, Kenfil Distribution, into the nation’s third-largest distributor of software for personal computers. For the year ending June 30, Bransky’s privately owned Van Nuys company expects sales of just under $100 million. Six years ago, Bransky started the business, operating it out of a West Los Angeles garage.
“They’ve grown enormously in a very difficult and competitive market where many others have failed. They hustle,” said Linwood A. (Chip) Lacy, chairman of Ingram Micro D in Santa Ana, the nation’s largest software distributor.
Distributors such as Kenfil are middlemen who buy software from publishers and resell it to stores such as the Egghead Discount Software chain and Software Etc. Kenfil specializes almost exclusively in selling business software, which includes such programs as word processing, database software used for information storage and spreadsheet programs, which are something like electronic ledgers for accounting. Kenfil’s best-selling program is WordPerfect, a popular word-processing software package.
Despite its rapid growth, Kenfil is not an authorized distributor for some of the biggest and best-known software companies, such as Lotus Development, Ashton-Tate and Microsoft. Those companies limit their distributors to a highly select group, and Kenfil isn’t one of them. Bransky said he is trying to woo Microsoft now.
Without the biggest software companies as customers, however, Kenfil has relied largely on distributing software from smaller publishers, especially those who produce “utilities” programs that help users with such chores as recovering data that appears to be lost and software that builds backup systems to prevent losing computer data.
Competition is keen in the software distribution business and profits are thin. One illustration is Math CAD, a program used by engineers that is made by Mathsoft in Cambridge, Mass. Kenfil buys it wholesale for $220 and resells it to retailers for $240, for a thin $20 gross profit.
Kenfil has to pay its overhead, the salaries of about 100 employees and try to squeeze out a narrow profit. Bransky says Kenfil’s profit after taxes is expected to be about 2.5% of its sales, meaning that it should net more than $2 million for its fiscal year.
Alan Gleicher, chief executive of Soft-Kat, a Chatsworth software distributor, said distributors face another problem because large software retailers can bypass them and deal directly with publishers on the most popular software packages. By buying directly from the publisher, a large retailer can get much bigger discounts.
Profits Slim
As a result of the competition, the industry norm for software distributors is about 2 cents in profit for every $1 in sales.
Bransky left South Africa 10 years ago, fed up, he said, with the government’s apartheid policies and the constant strife they caused. A native of Johannesburg, Bransky had been active in one of that country’s major student leftist groups in the 1970s before going to work in market research for A.C. Nielsen in South Africa before he moved to the United States.
Shortly after his Pioneer Chicken experience, Bransky went to a computer show. As he was standing in line for a free Coke, he struck up a conversation with a man who was selling software. Bransky bought about $10,000 of it, figuring that he could resell it to a business contact in South Africa. That didn’t work out, so he sold it to dealers in the United States instead.
Using his father-in-law’s garage as his headquarters, Bransky founded Kenfil in April, 1983, later moving to a 1,000-square-foot building in Reseda and ultimately to a location near Van Nuys Airport. About $50,000 was provided by his father-in-law, a developer, who also supplied him with the Kenfil name, which he had come up with by mixing the names of his son, Philip, and nephew, Kenneth.
Today, Bransky jokes, it means “Ken-fil the order.” Sometimes, he said, it is “Kent-fil the order.”
Tough Competitor
Bransky has earned a reputation as a brash, opinionated competitor, a “street fighter,” as one competitor, who declined to speak for attribution, put it. When two competitors, Ingram and Micro D, merged to form the biggest distributor in the business, Bransky issued a press release calling the merger good for Kenfil because the companies would be too big to be attentive to customers.
“It was a bizarre announcement,” a Kenfil competitor said.
Kenfil is also known as a price slasher. “We’re sometimes referred to as the price whores of the industry,” Bransky said.
Alex Papas, Kenfil’s chief financial officer and senior vice president and a friend of Bransky’s from South Africa, said that despite Kenfil’s aggressiveness in pricing, the company does not sell products at a loss to gain a share of the market.
Quick Delivery
Bransky and other software distribution executives said price is no longer the primary concern of retailers. It is more important, they said, to be able to deliver products quickly.
Kenfil has a reputation in the computer business for running a lean operation. In the early days, Bransky reused Styrofoam packing pellets and cardboard boxes. Until recently, Bransky and Papas helped pack software in the warehouse in the afternoon.
They don’t do that any more, but the operation is still lean. Bransky has no secretary, and the company’s offices in Van Nuys are sparse.
Kenfil also has only one warehouse, which it attributes to its decision to stick to software distribution rather than offering computer parts as many of its competitors do. Because it comes in small, light packages, software can be shipped easily and relatively cheaply across the country overnight.
Competitors contend that while Kenfil often slashes prices, it frequently does not match them in service and support operations for retailers, such as training classes to use the software.
Papas counters by saying that Kenfil provides something many competitors do not--people to talk to when customers call. He said most competitors have electronic “voice mail” systems that make it easier to take orders. But, he said, it often makes it frustrating for someone with a problem to hook up quickly with a person.
“When you call Kenfil, you will speak to a human being,” Papas said. “We will install voice mail in this company over my dead body.”
