Many small resellers appear to be still reeling in shock after distribution giant Tech Pacific recently announced that orders under $1000 will attract a service fee of between $22 and $33.
If anything, comments ARN received from resellers suggest Tech Pacific's competitors are likely to win with an increase in revenues as a result of the decision, which may outweigh the benefits of the efficiency Tech Pacific hopes to achieve.
The most ferocious criticism of the new Tech Pacific policy has come from smaller resellers that feel alienated by the charges.
"I get a little annoyed at companies that are only interested in dealing with the big fish, and don't want to waste their time giving us little Aussie battlers a fair go at establishing new businesses," said Charmaine Dangerfield, proprietor of regional South Australian reseller Comp-U-Lern.
The fees have also drawn criticism from small systems integrators and VARs that specialise in consulting rather than retail sales. "A real reseller is one who discriminates between good and poor quality products [and suppliers]," said one such VAR, who wished to remain anonymous. "They choose what they believe is best for the client and then order it. They do not simply choose what is laying on the floor behind them because they were forced to order in excess stock from a non-supportive wholesaler."
Tech Pacific managing director David Cullen said all the distributor's customers are a priority. "I would be surprised if a reseller couldn't pull the orders [to meet the $1000 minimum], given the wide product range we represent."
Many resellers contacted ARN after the service charges were announced, and indicated that they were irate enough to start using Tech Pacific's competitors in protest. "What a cheek to say we have to be encouraged to consolidate our orders," said an "insulted" Rob Beaumont, manager of Adelaide's Berlin Wall Software Supermarket. "If I spend a few dollars more with their arch rival I get free freight, albeit not overnight. I guess that is why I spend heaps more with their rival - they reward me."
Dangerfield agrees. "Six years ago when I first set up my business I attempted to join Tech Pac, and even then they insisted on at least $2000 worth of business a month," she said. "How can someone just starting guarantee those figures? I then found BMS Technology and Hi Tech Distribution, and my annual turnover has gone from $42,000 to $313,000 in six years. So I'm glad I have been able to help the little ones like BMS and Hi Tech to grow along with me and left the big fish, who don't want to know us small fries, to themselves."
Some resellers have suggested that orders over $1000 may as well be directed to Tech Pacific's competitors too. "Now all of our orders of under $1000 will be going elsewhere, the over $1000 ones might as well go as well," said one reseller, who wished not to be named.
These resellers suggest Tech Pacific should be looking internally to solve inefficiencies, rather than passing on additional costs to their customers. "All it serves is to alienate resellers," said Beaumont. Never bite the hand that feeds you seems to have been forgotten."
Cullen said the changes came about after months of reviewing Tech Pac's operations. He said the company did focus on getting its own house in order, in a restructure which involved 83 staff being culled, before the distributor looked at streamlining the ordering system.
"It was a tough decision," he said. "We looked at ourselves first, then looked at the drivers of inefficiency back in the market place. If we didn't make the changes, we would have had to raise prices up 10 or 15 per cent later on."
One reseller suggested the idea of encouraging resellers to consolidate their orders is positive, but the charge for orders under $1000 was not the best of strategies.
"Considering Tech Pac's recent rhetoric about lowering the "total cost to resellers", this seems hypocritical," said Sigmacom's Mark Harwood. "Setting a monthly minimum would make more sense."
But not all areas of the channel were angered by the introduction of the charges. James Ellingford, managing director of software distributor Jack of All Games, said he understood the logic behind Tech Pacific's move and, despite hearing criticism of the charges from software dealers, maintains the policy is reasonable.
"I totally support the move and understand why Tech Pacific have done it," he said. "I believe many resellers and retailers don't understand how much it costs to pick, pack and ship an order. It really is costly to run a distribution operation. Gone are the days when distributors were making huge margins. This business is very tough."
Cullen noted that the strongest criticism of Tech Pacific in recent months has come from resellers that have had credit issues with the distributor. He accepts that the company was always going to be under scrutiny for introducing the charges, but believes the majority of his customers will actually benefit from consolidating their orders. "We have to live with that [criticism]," he said. "But I do get upset when people who have owed us a lot of cash over a long period of time complain."
Cullen believes that the entire channel needs to look at ways of becoming more efficient to survive in the current market climate.