The company behind plans to launch an online electronics discounter might well be promoting its services as complimentary to the IT channel but it seems unlikely that many resellers will share this positive outlook.
While the idea of providing dealers with an opportunity to offload end-of-line stock and other surplus inventory is initially interesting, there are several sticking points that mean it is not going to please most of the thousands of business owners trying to make a buck in the channel.
The most obvious reason why the site will be of little or no benefit to the vast majority of resellers is that most of them don’t carry much excess stock in the first place. That will not be too damaging for whoever ends up running the It’s a Bargain electronics franchise because there will still be plenty of stock to be found in the warehouses of distributors and vendors alike. But it does immediately call into question the feasibility of building a supply network within the reseller channel.
And even if there were significant levels of stock gathering dust in reseller storerooms all over Australia, the basic economics of such a business partnership went out of the window at least four years ago. In selling to consumers, It’s a Bargain is promising new stock at discounted rates that are at least 20 per cent below recommended retail prices. Barring a mass outbreak of philanthropy, it is difficult to see how resellers could justify offloading products so cheaply when double-digit margins are about as common as a cool and calculated English penalty-taker. My guess is that most resellers would rather let end-of-line stock rot before they would sell it at a loss so somebody else can make money on it.
On the other side of the coin, master franchisor DRTV has already held discussions with several interested parties which are considering heading up its electronics venture. Some of these are understood to be resellers and it wouldn’t be too surprising to see a face familiar to the channel stepping up to the plate.
After all, a large percentage of the stock to be offered on the website will be the digital home gadgets — MP3 players, camcorders and monitors — that are being heralded as the next big noise in the industry.
Selling brand new products with a significant discount, 14-day money back guarantee and full manufacturer’s warranty would seem like a potentially nice spot in the market to occupy as these product sets move into the mainstream. And the five per cent on offer for sales as a franchisee are no skinnier than many hardware resellers are dealing with day in, day out. In case you are interested, the asking price for the franchise is $550,000.
The rise of the digital home will increasingly see IT and consumer electronics resellers pitched into direct competition. If the It’s a Bargain site gets off the ground and proves to be successful, it will at least provide dealers from both sides of the digital convergence trend with a common enemy. What do you think?
Brian Corrigan is Editor of ARN. Reach him at firstname.lastname@example.org