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Shift Happens: Thoughts on Industry Change

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_hm
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Good margin
_hm   1/14/2014 8:52:32 PM
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As a parts distributor, 12.5% is considered very good margin. Technology risk is minimum and value addition is almost nil. I consider this to be very good margin.

 

Hailey Lynne McKeefry
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Re: Good margin
Hailey Lynne McKeefry   1/15/2014 2:40:49 PM
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@HM, i have to disagree. If my boss came and told me that i was going to make four percent less next year, i'd be really unhappy. Even if he said, but even at a four percent loss you are still making a good salary! Loss is loss and less is less.

_hm
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Re: Good margin
_hm   1/15/2014 6:46:02 PM
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@Hailey: It happens. One need to take deep breath and move along.

 

Jacob
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Margine and volume sales
Jacob   1/15/2014 10:56:13 PM
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"Margins have fallen from 16.5 to 12.5 in the last eight years, he said, and they are somewhat out of the control of distributors.  "It should be much cleaner for us to set our own margins, because we know the services we set for the customers," Smith said. "We give them terms, days we hold inventory, do programming. We should be in charge of our own margins, instead of suppliers setting margins for us using ship and debit."

suzanne, the effect of such changes in margin can be nullify by volume sales. Normally for large volume sales distributors or vendors used to offer further discount by reducing the margin. For them, they can sell the second product without much effort.

prabhakar_deosthali
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Market growth rate vs the reduced margin
prabhakar_deosthali   1/17/2014 6:32:12 AM
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In my opinion, the reduction in margin can be countered by having increased sales so that the net profit remains same.

So to get the correct forecast of the coming year we need to know what is the growth rate of the component industry. If the growth rate is more then the distributor makes more profit in net terms though not in percentage terms.

Hailey Lynne McKeefry
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Re: Margine and volume sales
Hailey Lynne McKeefry   1/24/2014 7:46:15 PM
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@Jacob: you said:
suzanne, the effect of such changes in margin can be nullify by volume sales. Normally for large volume sales distributors or vendors used to offer further discount by reducing the margin. For them, they can sell the second product without much effort.


Distributors are quite sensitive to margins and margin changes--and sometimes margin decrease can't be passed on readily to price-sensitive customers. I bet this is one of those "easier said than done" moments.

Jacob
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Re: Margine and volume sales
Jacob   1/26/2014 10:58:50 PM
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"Distributors are quite sensitive to margins and margin changes--and sometimes margin decrease can't be passed on readily to price-sensitive customers. I bet this is one of those "easier said than done" moments."

Hailey, most of the distributors are using dynamic pricing method so they can always keep a certain margin on all the sales. When price decrease, they can pass such benefits to customers and vice versa.

Jacob
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Re: Market growth rate vs the reduced margin
Jacob   1/26/2014 11:01:18 PM
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"In my opinion, the reduction in margin can be countered by having increased sales so that the net profit remains same."

Prabhakar, that's one option. Certain vendors are fixing margins in lot. I mean first lot certain percentage, second lot less margin than the next etc. so volume sales are beneficial for both customers and vendors.

Hailey Lynne McKeefry
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Re: Margine and volume sales
Hailey Lynne McKeefry   1/29/2014 1:31:36 AM
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@Jacob, i agree with you...i was talking about the other directions. prices going up are what put customer's on edge. :)

Jacob
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Re: Margine and volume sales
Jacob   1/30/2014 11:23:52 PM
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"i agree with you...i was talking about the other directions. prices going up are what put customer's on edge. :)"

Hailey, customers always have 'n' options to get the products at a better price. Negotiations, sourcing from alternate sources etc are some of the feasible methods.

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