Are IT Buyers Receiving Special Bid Discounts from VARs?

Recently, IT products, services and solutions marketplace provider, Probrand, conducted a survey of 61 IT vendors in the UK to find out whether the discounts they offer are being passed on to the end-user IT buyers. Ian Nethercot, Supply Chain Director at Probrand, thinks ‘special bid’ discounts is a very interesting area which doesn’t seem to be getting the attention it deserves. Vendors don’t know whether IT buyers receive their discounts, or whether resellers are ‘pocketing the difference.’

Special bid discounts are offered by vendors for various reasons; it might be to generate interest at key times of year, target a specific market segment, speed up sales of slow-moving products or encourage bulk purchases. But lack of vendor visibility into whether these discounts are passed on to buyers raises significant questions about whether resellers are respecting the system or using it to inflate their margins when selling those products. Is it simply that the VAR lacks the sales and technical support or professional training that could better support the propositions and capture the whole value that the partner has to offer? Or is it simply that vendors just don’t have the required tools to monitor and track special bids through the supply chain – and do they care?

They might if IT buyers are paying higher margins for IT in an unregulated environment, which could reflect badly on the vendor, whether ‘reputationally’ or financially.

Either way, ‘this is bad news for buying teams who aren’t getting the deals they expect, and equally frustrating for vendors who offer more attractive and strategic discounts to move product through the supply chain,’ says Probrand.

The survey found a high likelihood that IT buyers are missing out on extra discounts, which they are entitled to, because vendors are unable to monitor whether these are being passed on by resellers. In fact less than 1% of vendors in the survey said they knew ‘with concrete certainty’ that special bids were being communicated to end users. This, Probrand says, ‘means IT category buyers could be unwittingly missing out and being asked to overpay. In many cases, they can represent up to an additional 20% off the sell price.’

‘‘Vendors are forced to place their trust in resellers to pass on deals IT buyers are entitled to, yet there’s absolutely no way for them to police the process and ensure that thousands of special bid discounts are being passed on,” said Ian. ‘‘More importantly, it is worrying for IT buyers that they are rarely seeing the added value these discounts offer, which means they are ultimately paying over the odds for products and effectively throttling budgets. This simply isn’t good enough.’’

We asked Ian to sum up what the findings are saying to the procurement community: "Neither the buyer nor the vendor wins here,” he said. “These discounts are offered because they benefit both parties. But, due to a lack of transparency within the current channel market model, these discounts may well be being snaffled up by resellers - inflating their margins and profits. This is another area where IT buying budgets are being eroded unnecessarily. It’s down to procurement teams and vendors however, to take action to increase their own visibility (the tools are there) and prevent money being poured down the drain.”

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