Hardware resellers forced to rethink strategies

Notebook resellers are being forced to turn to services-driven business models, as they no longer derive revenue from the hardware market.

Late last month, resellers said that they were making next to nothing on notebook hardware sales and are now required to re-examine their businesses as the box moving death knell starts to sound.

Stuart Charlton, the owner of Blue Zone, a notebook shop located in North Sydney, started his store in November 2004 with the simple idea of selling notebook products.

Around eight months ago Charlton and his IT sales manager Rony Dagher sat down to reassess the business model of the store, as things were becoming tough.

Dagher said he and Charlton could see it was getting harder to bring in the margins from notebook sales alone.

"There are four notebook shops in North Sydney, then we also have to take into account we are competing with resellers all over Sydney and online. We are now in the era where everyone is dropping prices and we have no control over it," he said.

"Some resellers work at selling at cost and then depend on rebates from vendors and distributors to make up their margins. It might make their business look healthy but then it ruins the market for everyone else."

Dagher claimed the shop had to stop selling into the mainstream and shift into specialised fields. "We started to bring in convertible notebooks that sit on a swivel, and slates, which are notebooks without a keyboard and information was taken down with a pen.

"The margins on selling tablets won't cover what we once made on selling notebooks alone. However, it helps us to compete with other shops around here without having to drop our pants to get the customers in."

Blue Zone also became a reseller of Vodafone mobile connect cards, a GPRS data service that connects users' notebooks wirelessly to send/receive text messages.

"With notebooks there are only six to seven points to be made on a $2000 product. I don't believe selling components was the way to go either."

Services in niche markets could be the key differentiator for resellers. They already have the customer database, so they just have to find products which give them a competitive edge."

Dagher said Blue Zone was currently looking to open a second store in North Sydney, to capture as many customers as possible.

Brendan Williams, director of systems integrator Discovery Technology, is also seeing hardware margins spiral downwards.

"Originally we were a systems integration company, and we branched out into providing broadband and mobile data and firewall products," he said.

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