Distributors have historically played a key role across the technology industry value chain, acting as cost-effective “one-stop shops” for resellers and providing vendors with access to a global network of customers.
However, distributors increasingly face pricing pressure as some larger vendors look to bypass their channel partner relationships and sell directly to their major resellers, often at a lower price point than distributors can offer. For example, HP and Cisco recently formed direct sales relationships with CDW, a large reseller. Net margins for major distributors have already fallen to 1-2%, and the threat of Amazon’s entry into the market as a low-cost B2B wholesaler suggests that price-driven margin pressure could further intensify in the future.
The current market environment, therefore, creates a strategic imperative for distributors to optimize the way they manage costs. Purchasing and storing physical product inventory represents the most significant category of cost for technology distributors. Therefore, optimizing the product range to eliminate unprofitable SKUs represents a notable opportunity for cost reduction and margin improvement.
Learn more about how advanced analytics can help technology distributors mine data efficiently, manage inventory costs more effectively and improve overall margins.