C2000 cracks down on channel pricing
Distributor Computer 2000 (C2000), the UK division of Tech Data, is testing a new pricing model that will change the way it does business with the channel.
Distributor Computer 2000 (C2000), the UK division of Tech Data, is testing a new pricing model that will change the way it does business with the channel.
The company said it will walk away from even the largest accounts if the system shows them to be unprofitable.
Dubbed Activity Based Costing (ABC), the programme has been running in the US for nearly a year. It is designed to judge how much activity - telephone calls, distribution costs, installations - each customer imposes on C2000 when placing an order.
Customers that are resource-hungry will see prices rise.
The programme, which is in beta testing in the UK and Germany, will go live to all major customers in August.
Alistair Brett, general manager of sales at C2000, said ABC's introduction in the US had had a marked effect on Tech Data's business, and saw the company drop some of its largest customers after they were found to be unprofitable under the new scheme.
"ABC will allow us to root out unprofitable business and understand our costs better. Its introduction in the US saw Tech Data cancel some of its biggest accounts, and C2000 will not be afraid to follow in its footsteps," he said.
"We will drill ABC into those customers who are primarily component-based and resource-hungry, and I have no doubt we will walk away from a number of partnerships," Brett added.
"Those meetings will be a game of chicken. Previously we have had to negotiate reseller prices with less certainty. With ABC, we can play with a lot more confidence."
C2000 will introduce details of ABC to its top 100 customers at their quarterly business meetings. It has no plans to contact smaller resellers individually.
Trevor Pugsley, hardware manager at Computacenter, said: "I would support an initiative that drives cost out of the indirect model, but C2000 could lose market share if it turns away unprofitable business, and market share will be vital once profitability returns to the industry."
Trudy Lloyd, purchasing manager at C2000 reseller Bytes Technology Group, said she understood the logic behind the scheme, but insisted it was a double-edged sword.
"Resellers will be discouraged from calling about important matters in case it makes their prices go up," she said. "If something goes wrong on C2000's site, we could end up getting billed more for calling the company about it."
"It sounds like C2000 is trying to get away from giving service to the channel, and at the end of the day, it is not the only distributor out there," she added.