Factors influencing SA hardware imports
South African PC hardware consumers often face fluctuating prices from one month to the next, and frustrating after-sales service. There are many factors at play for local import and distribution companies.
Influencing Factors
Explaining what influences hardware prices in South Africa, Matthew Greenway, Managing Director of local distributor Cyberdyne Systems said: “Pricing is ultimately determined by three key factors: How much mark-up the respective distributors and channel partners add on; the prevailing exchange rate, [since] the vast majority of product is purchased in US Dollars; and the respective foreign supplier’s pricing.”
Economies of scale will obviously have an effect on pricing, Greenway added, but this raises concerns about stock shrinkage and obsolescence.
Anamika Budree, Business Unit Manager for HP PSG with local distributor Drive Control Corporation, added: “The market is still dominated by larger brands, who to an extent control the degree of competitiveness in the market. A shortage of skills in South Africa also places pressure on companies to retain their current employees or train new ones, creating a higher cost to do business.”
Local versus international pricing
Local hardware prices are often much higher than the same equipment in other countries. Greenway attributes this again to economies of scale with regards to the size of foreign markets versus South Africa.
“The State of California for example has a GDP that is approximately five times larger than South Africa – that being a single state within the USA. This consumer buying power results in greater scales of economy and ultimately results in companies being able to sell at a lower margin because the volume of sales they generate will more than offset a lower mark-up,” said Greenway.
Greenway also said that unlike many international markets, South African distributors often do not have the equipment and expertise to repair defective products, and if they are serious about honouring the manufacturer’s warranty, they need to factor in the cost of shipping back any defective products.
Another factor driving up the prices is crime according to Budree, “It has become a trend for hijacking syndicates to target trucks carrying the hardware to or from distributors. This creates an additional risk for importing valuable goods,” said Budree.
And then there is the usual freight and shipping insurance fees which according to Greenway is the single biggest cost component for any importer regardless of where they are based in the world.
Bottom line is that doing business is South Africa is costly and those costs are ultimately passed on to the consumer. The trick is to ensure that the market is competitive so that consumers can rest easy knowing that they are getting the best prices possible because market forces dictate that the most competitive distributor rises to the top.
SA computer hardware imports – discussion
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