Hard times for corporate resellers

Mathias Knöfel says the components for success have had quite an effect on the PC market of late, despite a dearth of natural disasters

Consumer demand has always been subject to fluctuations and seasonality but corporate PC demand tends to be more reliable and evenly spread across the year. SMBs may buy small numbers of devices as and when, but larger corporate accounts often have ongoing specific requirements.

BYOD might have had an impact on tablets and smartphones so far but not just yet on PC systems. These purchases are still looked after by the corporate buyers - and the corporate reseller supporting them.

It is in the buyer's interest to get the best pricing for the right products; corporate resellers, on the other hand, need to not only keep their customers happy but meet their own sales targets, in part to earn better discounts from distributors or vendors.

Technological advances over the years usually mean that when a new product is released, the price is high, decreasing over time through economies of scale and commoditisation.

Yet what we have seen over the past few years has not always fitted this picture.

Disasters such as earthquakes, tsunamis and floods have affected component manufacture across the globe, with supply issues and price increases the result. And component prices have not decreased as expected over the past 12 months, either.

It appears that the latest economic challenges may have been anticipated by many component manufacturers. Instead of continuously oversupplying the market, they scaled down their production volumes.

Copyright Context 2013. All rights reserved

This in turn has led not only to challenges for the vendors, who now struggle to obtain the required components in the volumes they need, but to price increases for PC components.

From January 2013 until July 2013, we have seen third-party vendor component costs at distributor price level rise by almost 11 per cent for desktops, and about six per cent for notebooks.

Had a reseller committed to a fixed price in January for a given configuration, in the hope that prices would come down, chances are the VAR would have had to take a hit on margins by seven per cent (for notebooks) and 12 per cent (for desktops) in the past seven months.

Where some vendors might have calculated sales prices sufficiently high to take a bit of a hit on their margins, others initially offered more aggressive pricing but had to raise these on many configurations.

This created a tricky situation for certain resellers.

VARs are keen on maintaining good relationships - especially with their corporate customers - but having to pass on these price increases would have made this much more difficult.

At this point, it becomes even more important for the corporate reseller to make sure that vendors will still provide competitive prices, and do not overly inflate their price points. Furthermore, sharing price information with the corporate customers might be helpful in an attempt to convince them that the price increases are "real".

Contract prices and costs

Copyright Context 2013. All rights reserved

But all this might not be enough to ensure corporate customers do not take their business elsewhere. Salespeople must therefore get creative, as they might have to offer additional services for the bundle, even if only temporarily.

As pretty much all vendors are facing difficult times, and trying not only to maintain market share but to grow it, vendors would do well to support their "extended salesforce" as much as they can.

Any added bonus, from extended services to additional discounts, would be helpful to VARs - and if this could convince customers to buy now rather than later, it might also help vendors grow their businesses.

Mathias Knöfel ia senior manager for corporate benchmarking and pricing research at Context