Margins on Reselling IT Hardware | Startup

Hi Guys,

I have been reselling few IT hardware and accessories stuffs online from past few months. It has just been break even at this point. I have signed up with distributors like Leaders, Dicker Data, Synnex. When I see their offering price and compare to what market competitors are offering there’s literally no margin. How do they do it? Wondering if any of you guys are doing so or have knowledge around it? Appreciate your comment and feedback.

Comments

  • +10 votes

    The margins are very very low in IT hardware. Where the money is in volume. You may only make $1 on selling a SDD for example. But if you sell 100000 of these, you make 100K.

    You also need to factor in returns and warranty which makes a small time operation just not worth it.

    •  

      Yeah generally there is no margin on gear. Most places do it on services attached to sale - eg installation, ongoing maintenance etc

  • +2 votes

    I have signed up with distributors like Leaders, Dicker Data, Synnex

    Can you elaborate on what you signed up for?

  • +4 votes

    Spend more with the distributors and the bigger the discounts and returns. Back in the day Ingram used to send us PS4's after many pallets.

    When covid hit we got a couple pallets of HP luggage. Many online stores resold them.

  • +1 vote

    You are about 20 years late.

  •  

    When I begun my career in IT in the 90s I was able to sell IT hardware with 15-30% margin.

    I remember in 1999 margins were already so low that it was not worth while for a small business like mine to sell hardware only. I had to evolve and begin to offer IT support service, server room and cabling installations.

    I do miss the 90s :)

    •  

      And how is it now, if you know…

      •  

        I think it is just like websterp mentioned below, the profits are very low and the competition is cut throat.

        You can compete by having stock at hand and with good location where people could pop in and grab what they need but it's like every new week some new technology comes to market which makes your 1 week old stock obsolete.

        That's why I think many companies now buy stock from overseas and try hard to sell them before they arrive to Australia.

  • +1 vote

    Too late mate. You will never be able to compete with the MSYs, Centrecoms, BPCs (just few examples) in the industry as they will get quantity discounts from the disties that will never be offered to you. I was in your position few months ago and quickly wrapped up within 3 months before I got burnt hard. In my case it wasn't really an issue as I was only testing the waters as an additional income stream. When you can buy the same part at a chain computer store cheaper than what the disi is offering you then you know there is no future. It is too late for the small guy, perhaps there was an opportunity 20 years ago but not any more. With already tiny margins and your competition being large vendors and overseas grey imports(think Amazon US or Kogan) it is impossible to make a buck unless you have a strong service arm or find a niche line to exploit that the disties aren't offering.

  • +1 vote

    Rebates. That's what a lot of the larger Retailers survive on, depending on their size and structure.
    Apple foe example have the smallest margins of all, and for the last week had 10% of, which is below cost. Money flows back in through the back door and in some cases the salesperson receives a spin depending on how much the supplier wants to sell.
    I assume you are cash up front with these distributors?
    The big guys all have different agreements, and can have anywhere from 7 days through to 30 days after EOM to pay.
    They may also get a 0.5% settlement discount if they pay early, so if they spend $10million a year, which means a saving of 50k.
    All the best, but this is what you are up against. :)

  •  

    Unfortunately in the day and age of the internet, competitiveness is at an all time high as you can literally be a dropshipper without actually setting hands on the product.

    if the maths don't add up maybe a new industry might be worth looking into. Something that you can value add to.

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    Believe most mark ups are around 5% now from our man in the middle supplier, although his price is pretty much the same as going to Dell directly..

  •  

    Scale bro, all through volume.

  • +1 vote

    In simple terms… Bundle, rebates and volume.
    Split the bundles (eg. X % discount when you buy the CPU + MB) etc.
    You will be lucky to get 5% across the board with drop shipping.

    Been in IT for 25 years with a long history/experience in various market segments; Distys, SI's, Wholesales/old school whitebox builder, vendor, etc.
    I owned and ran my own IT company for 10 years and covered - wholesale, whitebox building, enterprise sales, along with a webshop.

    If you want to 'try and make money' by just selling bits and pieces, you are probably best looking at having a side gig/day job.

    You need strong relationships with the distys, vendors, and a long list of clients!

    Wish you all the best of luck!