September 27, 2004

ITMJ Special Report: Distributors -- The great margin squeeze continues

Author: Melanie Hollands

Distribution is an ugly business. Five percent to 6 percent gross margins are typical; this is while trying to hold expenses to 4 percent to 5 percent in order to squeeze out a 1 percent net. The broad-based distributors tried to be all things to all resellers in the 1990s and are now getting back to the basics. The "pick, pack, and ship" component has viability across a variety of industries, provided they truly focus on that piece and essentially providing virtual warehousing for the resellers with customized services. At present they're still heavily dependent on companies such as Hewlett-Packard/Compaq Co., Cisco, Toshiba, and Epson to continue to feel the effects of the Dell component.

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