Disties dismiss freight charge reductions

Fuel was not the only factor in raising prices, while Ingram admits price increase hit EMEA profits
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Several of the UK's largest distributors have refused to reduce their freight surcharges, despite recent falls in the price of petrol and diesel.

Enta, Bell and Computer 2000 are among those who told CRN they have no intention of bringing prices down, adding that the summer petrol price boom was not the only contributing factor to the change in freight costs for their customers.

"Petrol prices were not the only driver behind us increasing freight charges – ­ it was also because average invoice values were coming down," explained UK managing director of Computer 2000, Andy Gass, speaking to CRN. "We are glad that we and the other distributors acted when we did because there is no room in the model to subsidise freight."

Bell Micro's worldwide distribution president Graeme Watt added that it would be a "crazy economic decision" for any of the broadliners to break ranks and reduce costs, while Enta vice president Jon Atherton said it was unlikely to reduce costs till the New Year.

"If it was the fuel surcharge that was the underlying reason for distributors raising their delivery charges, then it is only right and proper that they should pass on any reductions to their reseller customers as soon as they receive benefit themselves," Brigantia founder Iain Shaw told PC Retail.

However, Shaw is understanding that other factors may be weighing down on distributor's abilities to lower freight costs. "I suspect that this will not happen as worries about breaching banking covenants or renewing banking facilities is putting massive pressures on cash flow so that every pound and penny in revenue counts to hard pushed distributors.

Those factors, Shaw believes will cause changes to the landscape of the channel: "Personally I think the traditional distribution landscape is likely to change out of all proportion in the coming year."

Ingram in particular is in no rush to change its prices after it saw turnover fall by four per cent and profit slashed by almost half during the quarter ended September 27th.

Worldwide turnover was $8.2bn (£5.36bn), compared to $8.6bn (5.61bn) at the same point last year. Net profit took the hardest hit at $46.4m (£30m) compared to $72.4m (£46.9m) in 2007.

In EMEA, sales were down ten per cent at $2.86m (£1.85m) excluding current fluctuations. Declining sales and decreasing vendor rebates meant that the EMEA division made an operating loss of $4.7m (£3.05m) compared to a $29m (£18.8m) profit last year. Ingram put $3.1m (£2m) of that loss down to restructuring from its expense reduction programme.

Speaking about the results, Ingram's chief executive Greg Spierkel said: "Our proactive steps to walk away from unprofitable business and recover freight costs – combined with softening demand in our three largest regions ¬ had a negative impact on worldwide sales growth.

"However, these actions helped us maintain a solid gross margin and prepare for a stronger, more profitable future," he added.

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