Dicker Data CEO, David Dicker, isn’t a man to mince words. He stands by the validity and profitability of a well run volume distributor model.
“I have to say that I’m a little tired of this old, very old, story about distribution having to change,” he said.
“Who is going to move all those boxes? It might not be glamorous, but someone has to do it.
“And the profit we made doing it last year, was a very good result, that I don’t think too many other distributors in Australia would have exceeded.”
“I can't help wondering if people have taken the time to really look at the current distribution landscape.”
Controversial words but the Hall of Fame inductee is usually on the money and his business is testimony to the fact that while many others seem to be moving to the value-added distributor model, Dicker continues to push boxes with great results.
That said, the company’s first-half results don’t look great on a cursory glance: Dicker Data reported a NPAT decrease of 10.9 per cent to $3.3 million and revenues down 3.6 per cent to $213.8 million in its FY13 half-year results. This it put down to lower overall IT spend from the corporate and SMB sectors, and a slowdown in demand for PCs.
But as the company reported to the ASX, the first-half period is not relevant to its internal metrics. “We have said that we will exceed last year’s profit this year, so it’s a little misleading to print the drop,” Dicker said.
And its 2011/12 result was outstanding: It delivered a record revenue of $457 million for the 2012 financial year - up 18.5 per cent on the previous year’s revenue of $385 million. Net profit after tax amounted to $8.276m, an increase of 35 per cent on the previous year’s $6.132m.
Business is competition
So why does Dicker Data do so well in box-pushing when everybody else want to reinvent the distribution model?
“I guess we do it a little better than our competitors do. Business is competition – it simply comes down to doing better than the other guy,” Dicker said, noting the distribution picture has always shown volume distribution versus value-added distribution and that there’s an ideological difference between the two.
His big picture is relatively simple: “Dicker Data has ridden the rise of the computer industry becoming one of the biggest IT industries in the world.
“We set our margin target for our company but we don’t roll around thinking how can we get a higher margin – we’re happy with the margin we’ve got, the volumes we’re doing.”
Dicker’s comments come at a time when the national economy is staring down the face of at least a $12 billion budget deficit – and the possibility of new and increased taxes.
Recent figures also indicate a maximum of three per cent growth in the gross domestic product (GDP). Where does that leave businesses?
“The more niche you make your product, the smaller it is, the better the chance of getting outstanding growth,” Dicker said.
“The national growth rate is usually from 2-5 per cent. If you are in a large industry it is hard to get growth above those figures.
“IT as an industry has above board figures with high single digit growth – and that’s good compared with the GDP of nations.
“Ingram Micro and Dicker Data sell a lot of stuff.”
So forget the talk of negativity, Dicker has “some new stuff coming down the pipe” that he can’t talk about at the moment. In fact, one of the unmentionables is the subject of a meeting he’s about to attend as soon as the interview ends.
“We’re always looking for new stuff, we’re always talking to people, we’re always looking at new opportunities, but a lot of these things don’t make it to the final deal,” he said.
In conclusion, here’s his advice to fellow distributors: “When you are in a high volume arena efficiency is the most important thing and you’ve also got to meet the competition from the other guy.”