Keep it simple

Keep it simple

Distributors are justified in examining their costs but should build any additional charges into their price lists

As the world’s largest distributor of IT products, Ingram Micro is something of a dichotomy. It reported global annual revenues of more than $US35 billion for its last financial year but despite its size – due largely to the low average margins of its broad-based business model – it is often more susceptible to changes in the economy than its smaller rivals.

So it was no real surprise when Ingram was the first distributor in the US to cry foul with regard to petrol prices and flick pass some of the rising costs to its resellers via minimum order fees and handling charges. That major rivals Tech Data and Avnet quickly decided to follow suit was even less of a shock.

In justifying the move, Tech Data CEO, Bob Dutkowsky, told a US publication that IT distribution had been something of an anomaly in evolving a free freight model when most other industries made their customers pay. While that had been fine when fuel was $US0.50 a gallon, it’s a lot harder to justify at $US4; especially when the boxes of laptops on the back of a truck are now worth a fraction of what they were just a few years ago. It isn’t difficult to put the rising cost of fuel and falling technology prices together to see where the problem is.

Whether it’s fair to pass those costs onto your resellers is a sensitive issue to say the least. When I raised it with local Ingram boss, Guy Freeland, about a month ago, he said it wasn’t a very popular topic but was frank enough to admit that it was certainly a discussion his senior management team was having. Avnet’s country manager, Gavin Lawless, had little to say on the subject when contacted by ARN last week except that it wouldn’t be following the lead of its US parent company (which has introduced fuel charges for all orders).

Synnex is taking a watching brief so far, in the US and locally, but I expect to see something of a domino effect across the industry. That’s not to say everybody will follow suit because some will no doubt try to use it as a differentiator – Express Data’s managing director, Ross Cochrane, told ARN it won’t be introducing fuel charges because he believes surcharges and levies over-complicate the ordering process for resellers; Dicker Data incorporated freight costs into its price list some time ago and offers free fright to most places in Australia.

Tech Pacific landed itself in hot water with smaller resellers a few years ago when it introduced minimum order fees and was eventually forced to can the idea after partners voted with their wallets and went elsewhere. In the current economic environment, I think distributors are entitled to revisit their cost models and look to pass some of their pain along the chain, but it would be better for all concerned if they built the additional charges into their pricing list.

Resellers have enough to do in comparing prices from a number of suppliers – another factor in that process is just about the last thing they need.

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