Distributors pass shipping costs onto VARs

We’re feeling the impact of the rising cost of fuel in almost every aspect of business. Distribution, in particular, are feeling the strain, since their entire business model is based on shipping freight. In the past, many provided free freight to their VAR customers – but that’s changing.

Over the past month, Ingram Micro, Tech Data and Avnet have all announced new surcharges or handling fees as a result of rising fuel prices – and the rising cost of doing business. Synnex is one major player that still offers free shipping – at least for now.

Earlier this month Ingram sent a letter to VARs, stating that the operational costs of doing business are increasing, especially with freight and transportation, so it will begin increasing minimum requirements of orders to qualify for free shipping – and adding a $2 handling fee on top of that.Avnet customers are now paying a fuel surcharge, which is charged separately from the standard shipping charge on a customer’s invoice (and applies to all orders).

This fuel surcharge is being charged by freight carriers to help offset increases in the cost of gas and diesel – and the distie is passing that straight on to its VAR customers.

Tech Data soon followed suit with its own announcement – that, like Ingram, it will charge a $2 handling fee on all orders shipped. This will likely cause VARs to consolidate orders, or make one big purchase instead of several smaller ones. Or, it’s been suggested that VARs could simply pass on this cost to the customer.

But in a business where tight margins reign, VARs may not feel comfortable passing on these costs to the customer, even if it’s only a few bucks.

To be fair, VARs have been getting a sweet deal for years with free freight. In almost any other industry, you have to pay for shipping and handling. But, when you’ve been getting something for free from the get-go, it’s sometimes hard to see it that way.

Take airplane food, for example. It’s the same attitude many people still have – myself included – about spending $5 on a-la-carte airplane food, when a meal used to be included in the price of the ticket.

Sure, it’s only a few bucks, but for many customers, it feels like nickel-and-diming – like they’re being squeezed at every possible opportunity.

Of course, $2 won’t cover costs for Ingram Micro or Tech Data, though it will probably help to at least alleviate those costs somewhat. At the same time, for VARs who place smaller orders, and many of them, these fees could start to add up, and they may turn elsewhere – like Synnex – to keep costs under control (unless, of course, Synnex decides to follow suit).

We’ve become a global economy. We outsource and offshore and have moved much of our manufacturing capabilities abroad to save money. Ironically, the cost of shipping those goods back to North America is steadily increasing. Now we’re finding ourselves in a position where the channel – disties and VARs alike – have to eat those costs.

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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