BIG ASK: Counting the costs

Costs are rising for dealers across the board – from products, to fuel, to utilities. What effect is this having on their businesses’, their prices and their customers? People from across the sector tell us what they think

Nick Munton, managing director, DEOS Group

The biggest challenges currently, not surprisingly, are the ones that we cannot control – the price increases from the manufacturers who supply us and the forecourt prices for fuel for our fleet of drivers and technicians. We have implemented some additional practices to help reduce deliveries and some of our clients, particularly the SMBs, have been understanding and accommodating of our requests to provide weekly deliveries rather than ad hoc ones.

Unfortunately, we are a client-driven business, and those clients who will not consider weekly deliveries for office supplies, for example, can always find someone who will supply them tomorrow if needed.

Many of our clients are in similar positions, no matter their sector, so the increased cost conversation is not that difficult to have. If you are at the right level within the business, then the knowledge, understanding and personal experience from their own business means that pragmatic negotiations are achievable.

The hardware and consumable manufacturers continue to apply increases and when you combine this with the stock shortages – specifically on hardware – then there is a very clear market being created that will ultimately create financial challenges for the less robust dealers.

The managed print market has seen many trying to win that race to the bottom for a number of years in the hope of growing their mif sufficiently to the point that the sheer volume of devices allows them to become profitable. The impact of COVID, the repayment of CBILS, reduced print volumes and the low prices that they pitched at initially puts them in a predicament – they have to make profit to survive, but the very low margins they secured the business at initially are now completely eroded so, do they pitch the client with a 25% increase, or continue to lose money and hope that the tide turns?

It gives me no pleasure to say that I think we will undoubtedly see casualties this year. While the acquisitions market might be a way out for some – it is certainly buoyant at the moment with talks – some people are, understandably, still hoping to attract the kind of exit price that they saw their business valued at pre-COVID and, clearly, those values are no longer achievable for many.

We have been fortunate to secure the additional stock we need to fulfil the wins from those dealers who have none, which is a positive, but it also brings with it the challenge of manpower for fulfilment. We are lucky enough to have some good partners for hardware deliveries for our excess deliveries, but their costs are increasing as well, which results in further costs for us upon installation so even positives have to be managed for their true costs. I think the takeaway is that internal cost management and remaining profitable are even more key this year than they are normally.

Find out more and read the full article with more sector experts in the summer issue of the Dealer Support magazine.