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More Channel Stuffing?
Other solution providers said manufacturers might be turning to direct marketers such as CDW to dump excess inventory at the end of quarters, a practice formerly reserved for distributors.
Several years ago, distributors stopped taking the excess product and vendors may have looked to their next biggest set of partners, one large Midwestern solution provider, who asked not to be identified, said.
For example, the solution provider said he recently lost a big Lenovo desktop deal because CDW's price to the end user was below his own costs. He believes CDW bought several thousand monitors from an Asian vendor for cut-rate prices at quarter's end. CDW then attached the monitors to the Lenovo desktops and sold the package at a reduced price.
The solution provider said the vendors are hurting themselves by taking less money for deals they could have won with higher prices. Still, he said, it's up to solution providers to adjust their own models accordingly.
"If you're going to be in the hardware game, you've got to play the game the way the big boys play it," he said. "There are times you have to walk away from opportunities because some manufacturers gave people like CDW better deals. It makes the market not equal."
One distribution executive took issue with vendors that allow CDW to buy at singularly low levels, saying the practice of filling one customer's warehouse creates more issues for the vendor than it does to help.
"Manufacturers need to have clear lines of channel practices," said the executive, who asked not to be identified. "The ones that waffle cause some issues."
Some vendors do not sell to direct marketers because they want to keep distribution "more pure," the distribution executive said. "We appreciate that. It helps us know where we stand. Others say they'll have direct relationships with the CDWs, Insights, Zones and fill in with [two-tier] distribution. They're the ones that give us heartburn."