Matt Royle, marketing director, Probrand
The IT industry is one of the most complex markets in the world – there can be a million price changes in a single quarter and up to 19,400 new product introductions per day. Of course, there aren’t enough hours in the day to scour that many products, let alone manually analyse and compare costs. Without a solution in place however, buyers can get left behind when trying to keep on top of new innovations. This can also lead to that sinking feeling that you’ve overpaid or could have chosen a product better suited to the user’s needs.
A three-tiered supply chain
Understanding the supply chain is critical in giving IT buyers the confidence to navigate and negotiate better deals. Consisting of three tiers built on a network of global manufacturers, distributors and resellers, everyone is looking to make money, and this is where it becomes complicated. Each tier has multiple ways of dealing with the next, adding pressure at each stage which can have an impact on the end price, with costs passed through the value chain.
Understanding the lifecycle of products is critical here. This is where buyers need to look closely at what manufacturers are doing. They are the people responsible for forecasting trends, planning product development and deciding exactly what’s going to hit the shelves and when. This is a biggie because, as soon as a new product launches, it affects the cost and availability of everything else.
For example, a manufacturer may launch a new smartphone which looks like it’s great for all your needs. But it’s brand new and you will be expected to pay a pretty price as vendors seek to maximise perceived value. Should you buy now, or wait in hope that the price goes down? And can your team wait that long until they have that product in their hands?
Sometimes it helps to hang around. That new smartphone’s value will decrease when newer products start arriving on the market. It can also pay to look around for similar products already on the market, that have already been bumped down in price. If you know there is an abundance of stock still in the market and a new product on the way, you’ll know with a degree of certainty that suppliers will start discounting to get rid of older stock and make way for the new.
This is where Value Added Resellers (VARs) can prove invaluable, by passing on insights from conversations with manufacturers around trends and what the future technology market looks like.
The impactors at play
As well as product lifecycle, there are several other impactors at play that can affect price and stock changes. With most IT across the supply chain bought first in dollars, and then GBP, keeping an eye on currency fluctuations for example, means buying teams can spot patterns and predict the smartest time to buy, depending on when the strength or weakness of a currency falls in their favour.
And of course, we cannot ignore the impact of geopolitical factors, such as Brexit. Following the vote in June 2016, Britain was left in shock as the pound plummeted to a 31-year low.
The weakening of the currency had a profound impact on the cost of technology in the UK. With so many components going into tech products being bought in dollars, manufacturers needed to protect their margins. Many vendors, including Apple and Microsoft, subsequently announced major price increases in the UK – some by as much as 50%.
Seasonal trends are also important. Chinese New Year has a significant impact on the supply chain, with factories shutting for as long as a month. Resellers often forward buy to ensure mid-February doesn’t yield stock shortages. And then there are shut-downs which are not planned. Natural disasters like the Japan Tsunami cut the Hard Disk Drives (HDD) supply chain stock ‘buffer’ to just 80 days and so UK prices rose sharply. When floods in Thailand hit an area producing 70% of the world’s HDDs, it stopped production for 56 days leading to a shortfall of 20M units per month. HDD prices increased 25% and end product prices rose in line.
Keeping abreast of key impactors means you can spot when margins are unnecessarily inflated – and question why – versus identifying whether a socioeconomic issue may have had a knock-on effect.
The rise of the B2B marketplace
There’s little doubt IT suppliers capitalise on the fact that most organisations struggle to keep track of supply chain dynamics or product lifecycles to supplement their margins. In the past the alternative was to turn to Google to carry out manual research, which could take up huge amounts of time – especially as online retailers often seek to attract web traffic by quoting low prices on low stock, or even out of stock, products. No sooner have you found what you think is validated data than it is out of date.
To help streamline this process, we’re now seeing the emergence of digital marketplaces that can deliver real-time stock and pricing information. This follows the emergence of similar consumer platforms like Skyscanner and Airbnb that allow buyers to access suppliers directly, monitor prices, obtain information through a variety of forms and tailor experiences for themselves.
It’s all about embracing a way of transacting which accounts for how people really want to buy, but also allows them to talk to an expert – via a web platform or even on the phone if needed. In such a complicated market and supply chain, trusted advisers remain a vital ally to IT buyers looking to reduce the level of complexity in the market. When you also have a hybrid approach that doesn’t distinguish between online and offline approaches, it will serve IT buyers better.