Broad-based distributor Tech Pacific has thrown down the gauntlet to its competitors with some aggressive price promotions.
Alongside the free-freight-fortnight scheme recently announced by the distributor, its competitors and many of their reseller customers have noticed some products being priced so low they wonder whether Tech Pacific might be selling at below cost.
"The price war is primarily being led by Tech Pacific -- on certain products they have reduced their margins considerably," said Ian Vagg, director of HiTech Distribution in Adelaide. "The unusual thing is Tech Pacific is traditionally a price follower, not a price leader."
George Skaf, general manager of distributor Digiland's commodities division, said that in the five years he has been in IT distribution, he has "never heard so much noise from Tech Pacific". He said it appeared to be offering incentives at a level that is "unsustainable" in the long term for a distributor with such large overheads.
"They are attempting to buy back customers," Skaf said.
In dismissing the "price war" tag for the promotions, Tech Pacific's managing director, Kerry Baillie, said that vendors set a recommended retail price and many of Tech Pacific's competitors sell below that mark, which is effectively the market or "street price".
What Tech Pacific is now doing is meeting the street price, which is "established by competitors", Baillie said. "They are used to us being more expensive than the street price, whereas what we are now doing is allowing our staff to match the market. This is unusual behaviour for Tech Pacific and [our competitors] have been taken aback by it."
For ARN's full analysis of distributor discounting, see this week's issue, out now.