Matt Royle, Marketing Director at Probrand
The rapid state of change in IT product price and stock levels is seeing buyers struggle to achieve consistent value on purchases. Unfortunately, it’s often the case that, even when buyers believe they have secured best value, the reality is anything but.
Part of the problem is that the IT market is in a constant state of flux. Hundreds of new products are released daily – we’ve seen 7,000 released within a three-day period – and this has an impact on existing product prices. It’s not unusual to see these prices fluctuate by as much as 66% in a single day as a result.
With the needle constantly moving, how can buyers confidently assess the right time to obtain the best product at the right price? We carried out research looking at how IT buyers can secure best value on every purchase and we found that it’s a time-consuming task – with buyers spending up to one hour per day manually sourcing and comparing products and prices from multiple suppliers. Beyond the time and energy invested, buyers often ended up frustrated when the deal they discovered was no longer available due to insufficient stock levels.
With the market experiencing up to 30,000 price changes every day, it’s likely that the trade price for a product could change if the purchase isn’t made on the same day. These changes aren’t all caused by the release of new products, however.
Global events, such as supply chain disturbances, can also have a major impact on prices. An increase in raw materials and components costs, could squeeze manufacturers’ profits and force them to put up prices. Equally, currency fluctuations can see vendors looking to maintain margins within countries from one month to the next. Case in point, when Britain opted to leave the EU in 2016, the pound fell 13% against the dollar.
While we can expect prices on new technology to fall by up to 50% within the first two years following launch, after the Brexit vote manufacturers increased prices by 20% on average. Suppliers were also able to capitalise on rapid price inflation and the uncertainty amongst buyers. Many resellers simply increased margins across the board, regardless of whether trade prices had gone up or not – leaving buyers paying out more than necessary.
In the hope of delivering value, organisations might look to obtain quotes from a handful of selected suppliers. However, the manual nature of obtaining these quotes means buyers can be waiting hours, days or, in some cases, weeks, for suppliers to get back to them with the right information. In that time, of course, the price and stock levels may have shifted again, and so buyers are back to square one.
When slow responses are combined with rapid price fluctuations, it can be hard to police the prices suppliers are quoting. This isn’t helped by a lack of knowledge of the problems that exist within the market. Our research has revealed that 81% of IT directors have no awareness of the scale of price fluctuations.
It’s little wonder that, on average, companies pay an 18% margin above the trade price on all IT products – six times higher than the industry best practice level set by the Society of IT Managers (SOCITM). We’ve found examples of organisations paying ten times the trade price. Alarmingly, one local authority paid a 1,095% margin on an order of SD cards.
These inflated margins highlight just how much buyers are struggling to get a grip of this market volatility. If buyers want to keep a tighter rein on IT spending, however, they need to gain greater visibility over prices and stock levels available in the market.
When you look at consumer platforms, such as Skyscanner or Alibaba, why shouldn’t B2B buyers expect the same? After all, isn’t this the age of transparency? If suppliers aren’t prepared to offer this level of visibility, buyers should feel justified in asking why this is the case. It’s high time we started to raise the bar in the market to help IT budgets go further.