Drop ships on the rocks
While Ingram's matrix may have brought greater transparency to its freight structure, it has revealed
a relatively high delivery charge for the lowest bucket - orders under $300. At $33 ex GST, it is double its major competitors.
Ingram is aware that it is less competitive in this bracket but it sees the higher charge as a stick to encourage consolidation of orders.
"We ship some pallet loads, but we're shipping a lot of one-unit shipments, right? Your freight recovery strategy will be different with those two approaches," explains Miley.
Unfortunately this strategy does not favour smaller resellers who often look after small and medium sized businesses which order smaller amounts of less expensive products.
Consequently it is harder for small resellers to reach the thresholds for cheaper or free freight.
Ingram's strategy also places pressure on a just-in-time business model favoured by online retailers - drop shipments which are couriered to the customer directly from the distributor.
Customers expect an order to arrive within a reasonably short timeframe and may not want to wait until the retailer or reseller can consolidate several low-value orders. However, customers are also unlikely to want to pay a $33 freight fee if the purchase is only $50 or $100.
Customer expectations aside, some resellers favour drop shipments because they reduce the risk of carrying inventory and the costs of running a warehouse, a logistics operation and a second delivery from reseller to customer.
A $33 minimum freight charge from the largest distributor could challenge that business model. Some smaller resellers have moved orders to competing distributors with minimum freight charges
about $10 to $15.
Mansfield and other resellers implied that at issue was the size of the minimum charge.
"No client complains about a $15 freight charge," said Mansfield.
Offers of free freight can also swing larger orders.
Paul MacNeill of Pro Integrations was disappointed at paying freight on a $4700 order with Ingram.
He put the order through Dicker Data, which promises free freight for orders over $500, and found that the goods themselves were $90 cheaper.
"I wouldn't have checked if the freight didn't make me," said MacNeill.
MacNeill claims he has moved $500,000 of business through other suppliers instead of through Ingram since its freight matrix was released.
In response, Ingram's Miley says the distributor is watching closely ordering patterns on the under
$300 bucket.
"We are getting some feedback that we are not always the most competitive there. But you have to take the total cost of procurement into consideration, inclusive of the price on product and the other services you provide," says Miley.
Even resellers who struggle with Ingram's minimum freight charge admit that the distributor's services still make it an attractive choice.
Although X Central's Mansfield says he buys more often now from other distributors, he finds it hard to find the same efficiency.
"Ingram is such a great distributor in that we order one day and it arrives the next and they very rarely let us down," says Mansfield.
And Techlink, Ingram's ordering portal, is a big time saver, says Mansfield.
"Techlink is the easiest to navigate. An order I could do in five or 10 minutes on another distie's website would take one or two on Ingram's," says Mansfield. "We speak to Ingram very, very rarely because we can find everything through Techlink."
The range is also a major drawcard. "Dicker is great for HP stock, but Ingram carries a whole lot of other brands. They are easily the most diverse distie."
While there has been disapproval of the minimum freight charge, Miley claims his statistics show that the percentage of drop shipments hasn't changed significantly. The exact percentage is a commercial secret.
"We are looking at this every day and looking at the trends that have occurred in our business since we implemented this. It's remained relatively constant with us," says Miley, who adds that most of his resellers are passing freight costs onto their customers "in some way or another".
Miley says at just four months old the matrix is still under review. He confirms that Ingram intends
to be competitive for deliveries of all sizes and that the company is "fighting every day" to earn its customers' business.
"The bottom line is we want to make sure we don't want to lose business. We do believe we are a cost effective model for the vast majority of our reseller customers."
Next page: How to save on freight
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