CDW's Pricing Prism

Has the time come for vendors to implement more stringent policies regarding CDW's use of MDF and volume incentive rebates?

That's a question each and every vendor should be asking as CDW moves to become a full-fledged multivendor solution provider power rather than a low price point product retailer.

STEVEN BURKE Can be reached at (781) 839-1221 or via e-mail at sburke@cmp.com.

And it's a question that needs to be answered by each and every vendor in light of this week's cover story, "How Low Can CDW Go?" by CRN Industry Editor Craig Zarley and Assistant News Editor Scott Campbell. The story takes a look at CDW's pricing power and how the company is using it to swoop in at the last minute and effectively snatch away a deal generated by another solution provider.

This CDW pricing advantage, in some cases, involves special pricing that is being rubber-stamped by a vendor channel representative working on-site at CDW. That CDW vendor rep is, in effect, being rewarded for driving lower margins and disrupting the delicate channel pricing ecosystem.

So what's all of this got to do with MDF and vendor volume incentive rebates? A lot, since those funds are aimed at rewarding VARs that generate net new demand.

CDW's size and product volume have always guaranteed the company a healthy MDF and volume sales incentive rebate pool. No one can dispute the company is a sales/logistics machine that has captured the purse strings and loyalty of a lot of tech-savvy buyers who know what they want, demand the absolute rock-bottom price and want it delivered quickly. A lot of those buyers were turned on to CDW by its once eagerly awaited direct-mail product catalog.

CDW has moved well beyond the product catalog era. Nothing hammers that home more than the company's blockbuster $184 million acquisition of Berbee Information Networks, a $390 million Madison, Wis., VoIP solution provider powerhouse. CDW Chairman and CEO John Edwardson aims to build on that solution base by acquiring other solution providers.

Let's face it—this company is no longer a point product power. It's a true solution provider. And its MDF and volume incentive rebate structure should be that of any other top-of-the-pyramid solution provider. That means vendors need to look at the perennial CDW pricing prism in a new light.

What do you think of CDW's pricing power? Contact Steven Burke at sburke@cmp.com or at (781) 839-1221