Vendor price hikes ‘inevitable’
- 26 November, 2008 14:11
Hardware vendors are lifting product prices by as much as 25 per cent due to the impact of the dire economy and volatile Australian dollar.
Acer was the first to announce it could no longer cover costs and officially lifted product prices across all products by 25 per cent. Product marketing division director, Bert Noah, said it could not absorb the cost of selling stock at old prices and claimed the vendor’s bills had gone up by 54 per cent in the last six months.
BenQ managing director, Phil Newton, predicted its pricing for select products could rise by as much as 20 per cent between mid-December and January. Stock status, product, material, transit and currency exchange rate fluctuation completely control sell prices, he said.
“On some items prices won’t go up at all because of inventory, but some will be as high as 20 per cent,” he said. “Overall it [the economic situation] has had an impact, but it’s unavoidable; the whole market will lift by upwards of 25 per cent. We’re making it as little as we can to maximise our sales and customer profitability.
“If the Australian dollar depreciates by 30 per cent, because there’s so little margin in these products there’s no way anybody could absorb 30 per cent depreciation on a product.”
Lenovo director of small business and consumer, David Nicol, said it had adjusted some prices in line with the broader market.
“It’s really varied by product – some products we haven’t adjusted,” he said. “There’s a direct correlation between the exchange rate and our cost structure, and the cost of components that make our PC technology. Our prices have changed in line with other movements in the market. We’ll adjust our portfolio more so than look at wholesale price increases.” In the last three months, the Australian dollar has fallen by more than 25 per cent against the US greenback and was trading at $0.68 at time of press.
HP has also raised product prices, which vary by business unit, product line and segment. “HP looks to mitigate any price rises where possible, however we believe this was a necessary step,” spokesperson, Brad Swiney, said.
Dicker Data sales manager, Chris Price, claimed prices had risen at about the same rate across most hardware vendors.
“The difference is that some vendors have been smarter and rolled into higher spec models with new pricing,” he said. “I think the vendors held off as long as they could, but they had to move. Given the amount the Australian dollar has fallen and their costs, 25 per cent is pretty reasonable: Most vendors would be taking a bit of a hit in addition to raising their prices.”
Page BreakAccording to Price, sales have steadily decreased since September, although the distributor witnessed a spike in October as people bought up cheaper stock.
Southern Cross Computer Systems CEO, Mark Kalmus, said price hikes were an inevitable part of the pain customers were feeling. Despite this, he still expected bigger projects to proceed.
“We’re all suffering in one way or another,” he said. “We try and minimise the effect to the customer but, unfortunately, it’s the reality of economic situation. Customers are mature about it in most cases.”
Total Computer Technology (TCT) managing director, Robert Brown, said vendors which hadn’t raised prices over the last six months were justified to do so because of the weaker Australian dollar. The reseller deals with Nortel, HP, VMware and EMC.
“Nortel put its prices up last month, but that was the first change in a long time and that was acceptable,” he said. “We were pre-warned about it and if vendors are honest with their partners about what’s going on, I don’t have a problem with that. Our customers don’t either as long we tell them what’s going on.” But Brown said price rises of about 25 per cent was a lot to swallow.
Acer’s Noah said channel partners had to start educating customers about the price rises. Goods hitting the shores from last week onwards will be based on the new exchange rate.
“We’re giving partners a grace period and all the stock we have now will be based on the old exchange rate,” Noah said. “It could be a stimulus to get customers to buy now, based on the fact that there’s buffer stock in the channel.”
He said the 25 per cent increase was conservative and Acer initially tried to cushion the impact.
“It will impact every product that’s imported, whether it’s software or hardware,” Noah said. “The only thing partners can control is their own services.”
Noah warned that if the Australian dollar continued to slide, Acer would have to raise prices again.
“It’s a reality – this is not an opportunity for us to get more profit, it’s not that issue at all,” he said. “Our concern is that the whole supply chain market, our channel partners, distributors and users are not planning for this.”