Just two months after opening its Queensland store, wholesaler Sato Technologies has ruffled dealer feathers by advertising aggressively-priced PCs and components direct to the public.
Sato Computer's advertisement in Brisbane's Courier Mail newspaper on Saturday, November 29, offered brands including IBM, Toshiba, Compaq and Shuttle XPC.
The move to direct sales came after the wholesaler parted ways with its "long-time" Queensland distribution partner, Idea Technology. The mutual split, after six years, was followed by Sato's decision to establish its own presence in Mansfield.
Sato Technology head, Albert Lok, said the direct sales tactic was only being used at its Brisbane location.
The company, which also has branches in Vic, NSW, WA and Tas, had been selling successfully through dealers for six years, he said. Sato employed less than 30 people nationwide and had an annual turnover of about $26 million, Lok claimed.
The company had changed tactics in Brisbane after opening its Mansfield operation, because dealers hadn't initially supported the business, he said.
Lok hoped the pitch to the public would kickstart the business: "I'm a bit impatient," he said.
Idea Technology sales manager, Paul Jones, was confident that Idea had retained the majority of dealers who had been buying Sato product from his company, and didn't anticipate competition with its former partner: "Our focus is completely different," he said. "Our focus is value add and the system assembly area. Sato's focus is on the movement of their product at a low price. We're addressing two different markets."
But other dealers in Queensland were concerned that Sato was undercutting dealers by offering wholesale prices to the public. One dealer said Sato's advertised prices to the public were similar to dealer best buy prices.
Owner of Queensland chain The Disc Shop, Allan Green, said Sato's pricing could start a price war if other companies panicked and began matching prices.
"It pretty much puts everyone else out of business," he said.
Dealers wouldn't be able to match Sato's aggressive prices, such as $29 for 8 port switches, and internal modems for $14.
"We're very cheap, and I'd have trouble matching those prices," he said. "Nobody can, unless you're a wholesaler or direct importer."
While wholesalers could turn over components on 5 per cent profit margin, dealers such as the Disc Shop needed about 20 per cent to survive, Green said.
"If this becomes the norm for wholesalers, the whole industry will be in trouble," he said.
But Sato hoped to go back through the channel in Brisbane, Lok said.
"Our company isn't trained to deal with end users," he said.
Sato was negotiating to re-establish a Queensland channel, which would be put in place after Christmas, Lok said.