Trying to take the moral high ground
- 17 March, 1999 13:05
As owner of Intermedia Computers Distribution and Techmart, we try (and usually succeed in doing so) to take the moral high ground in the Queensland computer industry. After all, we have been going 20 years under the same ownership and never, never, ever let a client down.
But lately this industry leaves me with nothing but a bad taste in my mouth - not just the retail sector but the wholesale and distribution segments as well.
Retail margins have been forced down to around 10-15 per cent (if you are lucky) because of dirty dealers doing dirt cheap deals, avoiding sales tax (yes it still happens - only the honest dealers pay tax), parts substitution, avoiding their warranty and service responsibilities or simply setting out to deliberately rip off customers.
But retail margins have also been eroded by manufacturers going direct, hell bent on pushing volumes of product at any cost. If they don't go direct you can bet they have a close alliance with a retailer or mail order house that is happy to undercut everyone else.
In the distribution area things are going from bad to worse. Margins are now measured in single percentages and manufacturers and importers are pressuring distributors to sell more at any cost or risk losing their distributorship.
Too many good distributors have simply closed down because they found that selling at 5 per cent profit wasn't enough to stay in business.
Manufacturers/importers set up channels, pay lip service to them and then go behind their backs to find ways of supplying outside the agreement. The name "distributor" used to have some meaning - now it simply means that you have been duped into supporting, stocking and selling a particular manufacturer's goods who then stabs you in the back by selling to others at, or near, your buy price. And believe me manufacturers and importers are driven by volumes only. Loyalty to a distributor or protection of a territory is simply not there these days.
The industry is in decline and the result has been the various scams, dirty deals and lack of ethical behaviour that can be attributed to any immature industry which lacks regulation. It is in such a bad shape simply because Australian and overseas business ethics in this industry were pretty poor to start with. It was always considered an easy industry to make a quick, easy, untaxed buck.
Now let's look at voluntary codes of conduct as one solution. That won't work. A few years ago I, together with a few other honest dealers, tried to set up a computer dealers association. Guess what - only the good guys wanted to join. None of the crooks would support it and there were some pretty doubtful types who wanted to join to gain credibility for their dubious practices. Voluntary codes only make the honest dealer more honest and give the dishonest dealers a target to swipe at. Same as the tax reform - it made honest dealers more honest and drove the tax dodgers further underground.
Now you might think that I am painting a grim picture but the facts speak for themselves. There are hundreds of formal consumer affairs complaints each year and these are only the tip of the iceberg. There are thousands who never get to consumer affairs as well. There are also thousands of unhappy customers who will never know the joy of buying a good machine, who will never know if they have been ripped off. Ignorance is bliss.
The problems are obviously worse at the retail end of the market but let me assure you that even so-called legitimate dealers to government, corporate and education markets are beginning to, or have already, resorted to dirty deals to win business. They too must survive. The most common thing is CPU re-marking, closely followed by use of second-hand parts.
A growing trend is to use second-hand or remanufactured video cards, hard disks, floppy drives etc, as they are virtually undetectable and carry no tax penalty. The second-hand or surplus "bulk" parts market is becoming very "dodgy". I can buy in almost any quantity second-hand video cards, network cards, remanufactured hard disks, Zip drives, printers that were never intended for resale in Australia. There is big business in recycling of these parts. And the warranty is with the dealer and end user - no manufacturer's backing.
Not to mention the second-hand computer industry - that's another can of worms.
Intermedia Computers Distribution & Techmart