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28 Nov 2008
If there are financial difficulties in the channel, how much is a consequence of the fact that some resellers have been struggling to get by on diminishing margins?
A traditional PC and networking business makes two or three per cent on hardware, and there’s little margin left in laptops.
Online retailing can still do well by selling huge ranges of products cheaply, without actually carrying any stock themselves. These players squeeze sale prices for VARs. As things get tougher, VARs get caught in a downwards spiral of depreciating margins and themselves carry less stock.
Unsurprisingly, margins and profitability vary across products. A reseller might earn five to six per cent on audiovisual equipment. And non-commodity products, such as auto-ID and barcode printers and scanners, can earn a reseller around 18 per cent.
Resellers may make more comfortable margins on products and services they provide themselves, hence the importance of value-added services and integration work.
All IT products should be sold on a basis that the customer will be better off afterwards. Either they save time or they save money or they cut their losses.
Other reasons for investing in technology pale into insignificance during a downturn. Auto-ID applications can deliver efficiency quickly.
Tracking systems tell companies where objects are and are much in demand for tracing valuable mobile inventory like laptops and reducing loss.
Similarly, proper inventory control will go along way towards preventing pilfering and theft and making effective use of limited stocks.
Software applications like these often open doors to associated infrastructure sales and implementation work.
In times of slower trading, there’s a tendency to undercut prices and customers will be shopping around more than usual for the best deal.
Widening margins is a sensible strategy to combat a downturn and make a business more secure. There are two ways of doing this: you can look for ways to reduce service costs or you can work with premium products that will contribute greater profitability.
We have just had our best month ever, even though our auto-ID products are geared 100 per cent to the SMB market, which everyone says is struggling.
Hugh Furness is the director of WASP Barcode Technologies UK
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