Computer and Office Equipment Distributors
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Industry Overview
The US computer and office equipment distribution industry includes about 10,000 companies with combined annual revenues of $180 billion. Large companies include Ingram Micro, Tech Data, SYNNEX, Avnet, and Arrow Electronics. The industry is concentrated: the top 50 companies account for almost 60 percent of industry revenue.
Competitive Landscape
Demand is strongly affected by the level of business activity. The profitability of individual companies depends on merchandising and efficient operations. Large companies have economies of scale in purchasing. Smaller companies can compete effectively by offering specialty products or superior service. The industry is highly automated: annual revenue per employee is about $600,000.
Products, Operations & Technology
Major products include computers, packaged software, copiers, data drives, and printers. Computers account for 25 percent of industry revenue, packaged software for 10 percent, copiers for 10 percent, data drives for 10 percent, and printers for 5 percent. Other products include a large number of peripheral computer devices and supplies, such as networking equipment, scanners, and ink cartridges.
Distributors buy products from equipment manufacturers or importers and resell them to local customers. Distributors are especially important for small manufacturers that can't directly reach end-users. Most distributors operate one or more warehouses, but in some cases merely process orders shipped directly to customers from a manufacturer. Large warehouses exceed 100,000 square feet. Orders may be taken over the phone by a product specialist with technical knowledge, or received electronically over a website or by electronic data exchange (EDI). Companies monitor performance measures such as "fill rate" (the percentage of orders filled in a period of time, such as 24 hours) and "stock-outs" (how often ordered products are out of stock). Products typically are shipped using independent shipping companies.
To minimize inventories, purchases are made according to recent sales mix or only when requested by customers. Major suppliers include Hewlett-Packard, IBM, Xerox, Cisco, Seagate, and Microsoft. Trade shows are a major source of information about new products and suppliers. Large distributors may buy from several hundred suppliers and sell to thousands of customers, but many small distributors specialize in the products of just a few suppliers. Contracts with suppliers may designate a distributor as an "authorized distributor" and specify a sales territory, but contracts are often non-exclusive and can easily be canceled. Authorized distributors may provide services such as installation, maintenance, repair, and training for the products they sell.
Computer systems are heavily used. Radio and bar code scanning allows real-time inventory tracking and improves the accuracy of order fulfillment. Information systems also enter documents to streamline accounts payable and accounts receivable processing.