IT retailers encroach on distributors

Will Best Buy or the local retail shop become the next distribution channel for VARs?

Retailers aren’t likely to replace established disties like Ingram Micro, Tech Data and Synnex, but they could become a more popular option for VARs looking at one-off purchases.

Now that most disties are charging for shipping and handling – aside from Synnex, of course – it doesn’t make a lot of financial sense to order one or two items and pay the associated charges, when you can probably buy that item for the same price – or cheaper – from a retailer that has purchased it in bulk (and therefore relies on the low-cost, high-volume Wal-Mart model).

And for VARs that don’t live near a major distribution centre, it makes even more sense, since they might end up waiting days for a distributor to ship out a part or a piece of software, when they could just run down the street and pick it up from their local retailer.

One analyst I spoke with recently said this could become more common for packaged software, such as security suites, since it might just be easier for a VAR to pick up a box at Best Buy or Future Shop.

Of course, this isn’t a new strategy – it’s not like VARs are just now discovering how to use the retail channel to their advantage – but with the increased cost of transportation being passed on to VARs, there may be more reason for them to bypass distribution on small-ticket items.

On the other hand, retailers that are fairly new to the IT world could pick up the slack. Grand & Toy, for example, is making a push into the SMB space through distributors such as Ingram Micro and Tech Data. It’s not just Sharpie pens and printer paper anymore.

For distributors, it may simply not be worth the trouble to carry low-margin, low-volume products. Just last week Ingram announced it would cut back on “lower return operations,” since it expected lower third-quarter profits after the chaos on Wall Street.

But is this really a bad thing? There’s always more room for efficiencies in the channel. If we truly want to play our part in saving the environment, then we need to be more efficient. Ordering one item and having it shipped from Toronto to Calgary doesn’t exactly make sense. And that kind of thinking is passé.

Retailers will never replace distributors. But they already sell low-margin items that aren’t doing distributors much good. So changing market forces and a whacked-out economy may mean an adjustment in how we do business, and with whom we do business with – but ultimately it could work out for the better. It means distributors can continue to focus on value-add and save money (and fuel) through consolidated orders.

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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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