Price Is Still Right

Solution providers buying from broadline distributors, specialty suppliers and alternative sources were in agreement: Pricing and availability is more influential than ease of doing business, product knowledge, breadth of product line and even relationships with sales reps, according to the study.

Interestingly, price and availability was chosen as the top reason why respondents did business with many specific companies, but in several cases it was also chosen for why they did less business with the same companies.

The survey results weren't news to many distribution executives who earn their living trying to differentiate themselves on things other than price and availability.

Slide Show: How Solution Providers Are Sourcing Products Today

"I'd have been surprised if [price and availability] wasn't No. 1. It tells us that this is, has been, and always will be a competitive market to be in," said Bob O'Malley, senior vice president of marketing at Tech Data. The distributor's surveys also reveal that price is the top consideration for its own customers, said O'Malley, who was named CEO of vendor InFocus last week (see page 12).

Price and availability was chosen as the most important reason for selecting a broadline distributor by 40.5 percent of survey respondents. Ease of doing business was a distant second with 12.6 percent of the vote. For specialty distributor customers, price and availability was chosen by 26.2 percent of respondents, more than twice as many that chose ease of doing business (12.6 percent). Price and availability was chosen by 57.3 percent of those buying from alternative sources.

Taking a closer look at pricing and availability, several VARs said each concept would earn a lot of votes on their own. After all, a low price doesn't matter if you can't get the product.

"When a client buys something from us, we usually need a quick turnaround, or we've quoted out a specific product and we want to make sure it's available," said Brent Morris, director of sales at Success Computer Consulting, a Golden Valley, Minn.-based solution provider.

Audrey Levi, president of Altek Computer Group, a Miami-based solution provider, also said availability is more important to her company than pricing. "If I order it and it's in stock, I expect it to go out the same day. That tends to play more into our model than pricing does. We're scheduling our resources around that and that's why it becomes critical," she said.

Most of Altek's customers are small businesses, for whom availability is particularly important, Levi said. "Once they've made the decision to buy, they need it three days ago."

Next: Price And Availability Among individual distributors, pricing and availability was the No. 1 sourcing reason more often for Synnex customers (56.4 percent), than competitors Ingram Micro (39.2), Tech Data (38.2) and D&H Distributing (30.4).

Price and availability was the top reason cited by solution providers sourcing from Avnet (35.7 percent), Westcon (27.3) and ScanSource (23.1), but for only 17 percent of Arrow customers, who chose ease of doing business (20.8 percent) more often. [Editor's note: In the overall scoring, Westcon finished first in price/availability because it was listed as a top five sourcing reason more often (57.6 percent) than any other distributor in that group.]

For alternative sources, price and availability was the single, main reason chosen 69.5 percent of the time by Newegg customers, followed by eBay (66.7 percent), CompUSA (62.7), TigerDirect (54.5) and CDW (47.2).

Dan Schwab, vice president of marketing at D&H Distributing, Harrisburg, Pa., said price is no more important now than it has been in years past. "Everything changes, but everything remains the same. From a distribution standpoint, we all work on single-point margins and most distributor pricing is very, very close. There's a need for great pricing, but there's a need for great service and delivery also. All of it is expected."

Peter Larocque, president of U.S. distribution at Synnex, said the Fremont, Calif.-based broadline distributor views business in terms of costs instead of price, and wonders if survey respondents aren't doing the same. In other words, Larocque said, they're viewing the total costs involved when choosing a supplier and not just the product price.

"Customers expect us to be efficient. If it's difficult to do business with us, that's a high cost [to VARs]," he said. "Regardless of the segment, people still expect you to be cost-conscious."

O'Malley agreed that the concept of pricing could also be interpreted as the cost of doing business with a distributor. In that regard, he said distribution's job includes teaching VARs to look for more profitable business.

"A good example is configuration," O'Malley said. "Tech Data can do a configuration at half the cost of a VAR. Why not give all the configuration work to us? Part of it is, there's a comfort zone around touching the equipment and being busy right in front of the customer. But in the future, those same technical people need to be doing more consultative kinds of things: site surveys for wireless, training on a VoIP system. These new consultative activities will drive more revenue and profit."

David Dechant, CFO of CSI Technology Outfitters, Easley, S.C., said pricing can be a differentiator for not just choosing between distributors, but also between a distributor and a purchase from a vendor. "The vendor itself gets involved because of the size of the deal and if we look for special pricing," Dechant said. Dechant said financing, ease of doing business and availability also are considered.

Distribution execs said they still plan to focus on providing more value to solution providers than pricing and availability.

Said Mike Baur, president of ScanSource, Greenville, S.C., "Obviously what we try to do is to offer other ways to become profitable without it becoming a price issue. We do everything we can to lower cost, without it becoming a price war."

"JENNIFER LAWINSKI contributed to this article.