Dealer touts whitebox group

Dealer touts whitebox group

A whitebox dealer is calling on his peers to take a proactive stance against margin pressure from the big PC guns by forming a professional organisation.

Computer and Things (C&T) Systems director, Craig Webster, said one of the biggest challenges faced by the small independent dealers was the lack of influence they had with vendors and distributors. The Taree, NSW-based reseller has been selling whitebox systems since 1988.

"We need to get a simple voice for small, independent dealers," he said. "We are the ones who are getting the squeeze from Dell and Co."

Similar to the national Leading Edge Group, Webster suggested whitebox dealers should form their own assembly in an attempt to obtain better buying discounts, finance rates and corporate advertising campaigns.

The group could initially start as a professional organisation under the banner of the Australian Retail Trader's Association or the Australian Computer Society, Webster said. Participants would be asked to pay a nominal annual fee of about $100 to put together their own charter and code of conduct.

Once numbers had reached 500, the organisation could pursue more aggressive strategies, such as bulk buying components like RAM or screens to attract bigger discounts.

It could also up membership fees to cover regional conferences where distributors and vendors met with members, he said.

Dealers would also have the chance to discuss industry issues such as dodgy distributors, Webster said.

"I know it would be difficult but it is one way we could pool our expertise and experience to survive," he said. "You have to build trust - no one has trust in people who start with fees like $1000 per month. You have to get a track record first."

While eager to see a broad range of dealers participate in the group, Webster said it would ultimately need support from a distributor.

"Ideally, one of the fringe wholesalers would be best placed to get things under way: Dicker Data, Impact Systems, Multimedia Technology or Multie Technology Distribution," he said.

However, other dealers and suppliers, said bulk buying would not work because there was not enough margin available at wholesale level.

Westan managing director, Victor Aghtan, suggested channel margins had collapsed.

"Part of this is that vendors are over-distributing in the market," he said. "So the maximum margins are about four per cent. We are getting two to three points out of a product. It doesn't matter who you sell to, you have very little to give away. The maximum benefits [for resellers] are about one or 1.5 per cent. You have to question whether it is worth doing all that."

Director of South Australian-based reseller ITPros, Gary Oliver, agreed margins were tight at wholesale level. He said he was surprised distributors hadn't already upped minimum order volumes.

Instead of focusing on buying goods at a lower bulk cost, Aghtan urged resellers to concentrate on how they could differentiate themselves through services.

"Trying to be a box-mover against the Harvey Normans or Dick Smiths, who squeeze vendors because they buy direct and can always get lower prices than the channel guys, is so difficult," he said. "But if resellers focus on the selling side they will find more positive things."

ITPros had opted to take this path and introduce more service to compensate, Oliver said. "If Dell would do a deal with me, I would do it to take the headache away from hardware," he said. "I'd have somebody else fulfill it."

Impact Systems senior channel manager, Peter Agamalis, said distributors offering bulk buy prices would have to rely on vendors to follow suit.

Nevertheless, he expressed his general support for an organisation of dealers and hinted it was already investigating the issue of creating better margins and value-added services for its dealers.

"Wholesalers have to fall back on vendors that deliver price strategies or plans that can accommodate the business model," he said. "You need vendor participation. In turn, they need to justify their return on investment. The pressure that a vendor has to accommodate to make price points doesn't leave room for many to discount products for a group wanting extra margin."

The whitebox channel was already experiencing strain from the introduction of bargain-priced products from vendors, such as the sub-$1000 notebook, Agamalis said.

"How far can we go?" he said. "There's almost no room for the middle man. We are at a point where the players are selling direct to end-users via online retail sites at prices that are ridiculous to distributors."

Away from a bulk pricing debate, all channel players contacted by ARN indicated support for the formation of a whitebox group. Oliver said an association would be beneficial for sharing information. For example, members could help one another by identifying new buying sources for increasingly diverse products.

It could also be an opportunity to discuss market concerns, he said.

Multie Technology Distribution general manager of business development, Michael Muscat, said the distributor would also put its support behind such a group.

"An association would be worthwhile as there are a lot of rorts in the industry," he said. "If someone tried to regulate this it wouldn't hurt."

A group could also help dealers with some commercial discounts on insurance or better merchant fees, Muscat said.

"There are other advantages besides just pricing in a group," he said. "Leading Edge does well in getting catalogues together. The services it provides are invaluable, particularly to smaller dealers in regional areas. But it's a lot of work though getting it off the ground. You have to build a level of trust."

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