The woes of being a reseller
I read your editorial about the expansion of the big stores and the demise of the small reseller. I have been a rural reseller since 1988 and have dealt with all the suppliers currently in the industry and a lot who have disappeared.
I would like to make you aware of a few truths about being a computer reseller.
First, it is too easy to become a reseller. Most suppliers have no criteria for becoming a reseller other than paying for the products. I have a shopfront, technician, experience, stock, yet I have to compete on price with high school students who sell to their friends and family. I have to compete with people who have full-time employment in government departments and sell computer equipment after work.
I have to compete with retirees who are on a full pension and then buy a few parts and sell them for cash. Surely, it would be in the suppliers' best interest to limit the dealers to reputable business that can properly support their products. It would also limit the number of dealers who set up, take orders and deposits, and then close down, take the money and run. The suppliers have to take a lot of responsibility for the number of dealers that fold up.
Second, the suppliers give us nothing.
It is impossible to get colour brochures.
Training courses are held in the middle of the week in Sydney, Brisbane, Melbourne etc - utterly useless for country dealers.
Supplier representatives that travel out of the city are few and far between. I have never seen a Microsoft rep despite selling over $100,000 worth of products a year. Never. I am a top 50 Dataflow reseller. Never had a visit. Epson, Canon, Compaq . . . the list is endless. None of them send dealer reps to country stores.
Co-op advertising? You are kidding. Harvey Norman et al take all the available budgets.
Price protection, another joke, reserved for the big dealers. So carrying stock is a minus for the small reseller.
Warranty service is a disgrace. I have a Compaq product which has been faulty for five months, despite it being returned three times. All the name brand suppliers use at least one non-standard component, from RAM, motherboards, keyboards to software that's installed but needs to be backed up by the customer. Try getting away with that on a clone.
Third, price. All suppliers have volume discounts. A good idea in theory. It means that the stores that sell more get better prices and then, can sell more. However, we have seen that a number of resellers can get around this by buying ex-tax and selling inc-tax. No supplier gives a 22 per cent volume discount. So this supposed advantage is dissolved. Sure the ATO is taking action to fix this problem. But surely the supplier should take some responsibility. Surely the supplier can tell at a glance that the reseller is ordering an unusual amount of products ex-tax.
Fourth, the Australian Computer Society should be involved in the reseller area. This organisation should be challenging resellers to join. They could support a code of conduct. Perhaps a grading system could be implemented for resellers. Gold resellers should have five years in business, shop front, staff, stock etc. Silver three years, bronze - consultants. Surely the ACS should be significantly more active in this area. I can only conclude they consider resellers to be inferior to their computer professionals. Bull. I have a degree, I am a CITP graduate, programmer, and have over 15 years experience. What more do they want? The ACS could become as valuable as a CPA.
Fifth. Are you aware that consumers can take action against resellers through the Department of Fair Trading / Consumer Affairs, but no such action is available to resellers? If we get ripped off by a supplier, bad luck.
Sixth, billing. There are numerous suppliers out there that can't even get their billing right. ISPs who charge for hours not used. Double bill for customers that don't exist or whose time was upgraded verbally. Incorrect invoicing of products which don't match the published price lists. Credits that take two to three months to process which leaves your account on hold while you wait and can't get any more stock. Some suppliers don't have statements at all and insist that payment should be made from invoice.
Finally, yes, resellers are disappearing. However some of us aren't. Some of us are growing despite the big chains' growth, despite the tough times, despite the rural recession, despite the unfair competition, despite the lack of support from suppliers, despite the suppliers' incompetence. We hang in there and offer a level of service to our customers that I can only dream about from our suppliers. So don't be too critical of the reseller. The real villains are the suppliers and their unfair and incompetent practices.
Please publish this response - maybe if enough resellers realise they are not alone and they start to pressure for a better deal, things may change in the future.
Craig Webster BA, owner/manager C&T Systems - TareeEasy come, easy goDear PhilipHaving been in the industry 20 years, actively selling hardware for 15 of those, I can say that the days of profitable reseller margins are long gone.
When, in the mid '80s, I started selling to corporate users, we worked on a 35 to 45 per cent margin, plus we charged professional fees for delivery, installation, configuring, training. Those halcyon days lasted until the late '80s. It was because of such margins that we could employ qualified "systems engineers" and good-quality staff to provide a service beyond compare, and to plan for the future.
In 1990 I established a retail showroom called Techmart, Brisbane's first computer super store. We marketed rebadged Total Peripherals computers (which were not cheap in the first place) and still commanded the good old 35 per cent mark-up. In fact, I remember having a turnover of $1m in 1990 and making a gross profit of over $300,000.
Then, in 1991Ð92, a plethora of new importer/distributors opened shop and we, like all other resellers, were reeled in by their cheap prices. These new importers were all vying for a share of the "dealer/retailer" market and did almost anything to win it.
From 1992 to around 1995 retail margins continued to decline to the point that 10 per cent was considered somewhat excessive. And with this came a host of bankruptcies.
Techmart quickly repositioned as Brisbane's quality computer store and elevated itself out of the cesspit by innovative corporate style advertising and by refusing to compete on price. However, it was lucky to maintain a 10 to 15 per cent mark-up with overall profitability enhanced by a mix of professional services.
But the story doesn't stop there. When the plethora of new wholesalers came into existence (most of whom are long gone) we decided that we too needed to break our reliance on retail box flogging so we set up Intermedia Computers Distribution to service the small specialist dealer market, on quality products from the new component division of Acer called AOpen. We were the first Australian distributor for these products. We managed to get a 15 per cent mark-up and seldom had to discount because AOpen components were outstanding quality in a sea of cheap rubbish.
So to today. Let me tell you that in 1998 the pressure on our mark-up means now that most reseller sales are made at from 5 to 10 per cent and most retail sales at from 10 to 15 per cent. So on a turnover of $5m we clear the same profit that we did on a turnover of $1m eight years prior. We work much harder for less money. Is there any sense in this? - Ray Shaw, managing director, Intermedia Group of Companies