Tech Pac slaps on services charge

Tech Pac slaps on services charge


As part of the company restructuring announced last week, Tech Pac has hit its reseller partners with a service and handling charge for orders with invoice values of less than $1000 at the same time as toughening up its no-fault-returns policy.

In a letter to all its resellers -- a copy of which has been obtained by ARN -- Tech Pac announced that from May 14, resellers submitting orders under $1000 by phone, fax, e-mail or post will be charged $33. Meanwhile, orders received via the TechLink Web site will attract a lower $22 handling charge.

Tech Pac managing director David Cullen defended the move, explaining it is designed to encourage resellers to consolidate their orders and run their businesses more efficiently.

"We have come to the conclusion that orders of under $1000 are inefficient, unproductive and unprofitable," Cullen said. "As a broad-based distributor we have to maintain high levels of efficiency. This is not a revenue push, it aims to drive resellers to be more aware of their own work practices."

While Tech Pac may well have good reasons for implementing such fees, small resellers feel they are getting the thin edge of the wedge. One reseller, who asked not to be named but who claims to have been dealing with Tech Pac for many years, said he is expecting the next letter to say his account has been closed.

"Tech Pac wants us to hold off ordering until we can accumulate an order value of over $1000," the reseller said. "We don't want keep our customers waiting for something just to meet their ordering criteria. We can pay $20 more somewhere else and still get it cheaper than we would be paying a Tech Pac.

"There are systems integrators, such as myself, that will find this totally inappropriate to the way they do business. Tech Pac has definitely got its way with me on this one, I will now be buying less off them. It will also allow other distributors to put their prices up and still beat Tech Pac on small orders."

However, it appears the other distributors have no intention of following Tech Pac down the services fee path. While many distributors admit the move makes financial sense, they are concerned any such step would only serve to alienate smaller resellers.

Renato Catalan, marketing executive for component-focused distributor Achieva, believes it is important for distributors to remain flexible and attuned to the requirements of even their smallest resellers.

"We don't charge a services and handling fee," Catalan said. "Even if people are small we are prepared to take the risk in order to grow their business."

Catalan believes fees or restrictions on less lucrative orders would restrict reseller flexibility and complicate the business models of some of the smaller resellers.

Others in the industry see some sense in the Tech Pac move, admitting they are often forced to fulfil smaller orders at a loss. Fiona Dicker, managing director of Dicker Data, confirms the company has no plans to implement a minimum order system, but does not rule out the move in the future.

"We don't have any plans to do this at the moment," she said. "But I guess we will have to see how the market goes."

Regional players have responded favourably to the move, pointing out they stand to gain from disenfranchised Tech Pac resellers. David Hein, marketing manager of Adelaide-based Hitech Distribution, says that while orders were occasionally taken at a loss, keeping resellers on-side was a central business objective.

"I can understand why it may not be worth their while to deal with some of the smaller orders," Hein said. "From our perspective we are used to dealing with some very small companies, so we adapt to their needs."

While Hein said Hitech Distribution had considered offering incentives associated with placing online orders, he confirmed the plan had been scrapped in favour of focusing on the nature of the companies' online services.

"The best way to promote online ordering is to have a well designed and intuitive Web site," Hein said. "Features like cross-referencing and fax confirmation of orders make an online ordering system easier to use, that's the best way to catch the attention of our resellers."

However, Tech Pac's Cullen is standing by the servicing fee decision.

"We are in this business for the long haul, and that means maintaining a business model based on profitable practices," Cullen said. "Besides, if you are placing orders under $1000 you have to ask yourself if you are a real reseller."

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