Round Table: The future of the PC reseller

Michael Blumentals, DPI Systems (MB): I would agree staffing is the biggest issue. We run a very small team in comparison to some of the other resellers that are here but still face the same issues. If we have one or two leave, it could wipe out 50 per cent of our sales staff. Our business is built completely around product fulfillment - we don't install, integrate or provide any of the traditional value-add services - and more than ever we find we have to listen carefully to some of the key vendors about attach rate business. It used to be a case of giving a customer what they ask for - no more, no less - but now the margins are so ridiculous that we hang all manner of things off every deal. Even with low staffing and infrastructure costs, you have got to make sure you are selling additional items to make the whole thing worthwhile.

MH: As a listed company, it is a problem trying to persuade the board that it is worth hanging in this business when the returns available in other industries like furniture or promo products are two, three and four times higher. Some of the vendors are chewing into what is a traditional marketplace for us. It's easy for them to say there's a whole heap of business worth $11.8 billion in the SME market but you can't change a business overnight.

MB: As the vendors, and big listed resellers, come down into medium business, we in turn are trying to reinvent ourselves in an attempt to look after the great unwashed. We are finding they are becoming more tech savvy now and it isn't that hard to deal with small business owners. They often know what they want so the cost of sale isn't that high.

MH: Another issue would be smoothing out inconsistencies in our supply chain. I fail to understand how Dell can get a PC to a client in four days when most of my manufacturers can take 10 days to deliver it to me. The vendors are making our job harder than it needs to be. Distribution is quicker but if you are talking about a special build - those don't come through the disties. Less than 50 per cent of my business is PCs but it is a very important lead product and if you can't provide a good service on that then you might as well pack up your bags and walk out.

MB: We are out there selling commodity products from 115 vendors that can be bought from any one of Ingram's thousands of active resellers. Finding people that can articulate the value of your business comes at a fairly serious price.

Guys on $70,000 or $80,000 retainers plus commission have got to be moving a lot of kit to recover that. We are opening up sites that service that commodity business in the retail sector, for example, because the cost of employing somebody is getting too high.

BC: Drive-by shootings are a perennial problem but I have spoken to a couple of vendors that have systems in place to reward resellers for finding business even if they are later undercut by another partner. Does that work?

SE: There are instances where resellers will go in at zero margin, or even negative margin, to get a toehold into a business and then recoup that margin later. Drive-by shootings are a big problem with commodity items and we try to combat them by building relationships with customers.

MH: Staff retention is a big issue because the industry is heavily prostituted. [Sales] reps feel like they own the customers. We need a dose of reality because there are a bunch of prima donnas running around commanding what they want. We are getting to the point where we need to find an alternative route to market.

We have got to work hard to change the industry a little because people are constantly moving from one organisation to another for an extra $5000 or $10,000 and, all of a sudden, you have a cost model that can't be sustained unless you grow another 25 per cent in the following year.