Cutthroat competition cuts customer care
The regions computer resellers are seeing their profit margins decline despite the strong and consistent growth of the local market for computers and upgrades.
The regions computer resellers are seeing their profit margins decline despite the strong and consistent growth of the local market for computers and upgrades. In addition, the increasing cost of operations, combined with declining prices due to technology advancements and customer price resistance, there is pressure on computer resellers to decrease prices, says Dubai based reseller, Soft Magic Systems LLC.
“We make a maximum margin of 3% on branded computers,” says Rohit Bachani from the marketing department at Soft Magic Systems LLC. This, he explains, affects not only reseller profitability but also the end-user experience as they focus on increasing sales rather than providing service.
Bachani explains that on the service side, resellers refrain from providing customers with value added services especially when these require relatively high levels of investment. “We sell 8 to 9 systems a day and we offer full technical support. But these are cash and carry because the margins do not allow us to do on-site installations,” he says.
Eng. Mazen Al Sa’ad, general manager of Wahab Technical Supplies, explains that the lack of support comes from high operating costs. “Rent in Dubai is high, and other expenses such as telephone bills and transportation are major burdens; even the mobile: my monthly bill is not less than 4,000 DHS,” he says.
It appears as if the solution to declining profits may lie in non-branded hardware. “We assemble computers and have our own brand that gives us at least a 10% margin, which is not applicable to branded machines,” says Bachani.
However, while this boosts the components channel and hikes profits for resellers it also affects the quality of the products and the after sales support that are delivered to the consumer. “Cheap products make you sell to people, and the turn your back on them,” says Al Sa’ad.
Al Sa’ad adds that the answer lies with the vendors. Recently, Tech Data and HP announced a multi-million dollar deal to supply more than 2000 laptop computers with specs and prices to compete with the “no brand” notebooks. “Similar deals in the channel could steer prices down, ensuring higher margins for resellers and at the same time, giving customers better service and quality,” he concludes.