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Distributors nervously watch Aussie dollar's fall

Distributors nervously watch Aussie dollar's fall

As the Australian dollar hit a 12-year low of 61 cents at one stage last week, Australian IT importers were ready to face the reality of a 9 per cent drop in purchasing power in around 10 weeks of trading.

The importer/distributors ARN spoke to this week were not happy about the weakening Australian dollar, but took some solace in the fact their competitors are also paying for all their imports in US currency.

According to Fabio Grassia, managing director of Sydney distributor Natcomp, if the dollar stays low things will eventually plateau out and every importer will have to put their prices up.

"The drop over the last few weeks has been in the order of 4 per cent. With most distributors working on a margin of between 5 and 9 per cent that makes a real indent on the product.

"If it keeps dropping I think you will see prices rising quite shortly," said Grassia, who admitted to placing some big orders recently as a hedge against further falls.

"But that's a gamble anyway," he said.

Mark Kofahl, sales and marketing manager at Sydney-based networking equipment distributor Tecksel, said it will be wearing a two cent drop before passing the burden on to customers in the form of higher prices.

"The big issue for a lot of distributors is that the unstable currency diverts our focus from other business issues like customer service, stock levels and investment plans," Kofahl said.

Barry Amor, managing director of Queensland distributor Q*Soft, claimed that his business had so far not been adversely affected but he was fearful that currency fluctuations might ignite another round of competitiveness amongst distributors that would even further reduce diminishing margins on a lot of products.

"There is always some resistance to accepting price rises, so some traders see it as an opportunity to improve market share at the expense of profit," said Amor.

Rising foreign exchange costs are "not as yet having any undue effect" on the operations of LG Electronics Australia, "but is of concern", according to marketing and planning manager Peter Atton.

"There's not a lot we can do if political unrest in the region continues and one country is driving it. I'm not an economist, so I don't know what is going to happen. If everybody knew that then we'd all be as rich as Bill Gates. We just have to sit back and hope like hell that predictions of going as low as 60 cents are wrong," said Atton.

People in the channel react to currency fluctuations differently in the opinion of Corey Tai, managing director at Brisbane importer IT'nPC who said the level playing field makes it a fair game that affects everybody. He said that importing less is not an option.

"We are not importing any less, because everything inside a computer is manufactured overseas and most is paid for in US dollars. It is our business. If I import less, I go out of business," Tai declared.


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