The legal sector was buying at the highest average margin. © Getty Images
The legal sector was buying at the highest average margin. © Getty Images

IT buyers paying 'shocking' mark-ups

13 December 2019

Buyers have been paying “shocking” mark-ups to IT resellers, according to a study.

IT budgets have been “unknowingly wasted” with buyers paying an average margin of 14.08%, compared with a recommended one of 3%, according to technology provider Probrand.

In the most extreme example a buyer from the banking sector bought ethernet cables for £42.32 per unit when the trade price was 34p – a 12,347% margin.

Probrand, which carried out a two-year study covering more than £12m worth of technology spending across 20 sectors, said geopolitical factors such as Brexit had pushed up prices, along with a failure to police supplier contracts.

Ian Nethercot, supply chain director at Probrand, said: “12,000% profit has never been deemed fair and equitable for any product purchase, and IT buyers are fundamentally not getting the deals they expect or deserve.

“The volatility and complexity of the market, with a dose of human intervention in between, is seeing IT budgets unknowingly wasted. 

“We believe it is time for a change. Buyers demand fair deals from an open and transparent market and that is exactly what the industry needs to deliver.  Ultimately, it will help IT procurers save time and unlock more IT for their money.”  

The report found that the legal sector was experiencing the highest average margin at 23.61%, while the lowest average margin was in the emergency services sector at 9.4% – still 6.4% over the Society of IT Managers recommended 3% rate.

The products with the highest margins were ethernet cables, stylus pens, wax printer ribbon, and 16GB memory stick, with margins between 806.51% and 12,347%. 

CIPS said: “Probrand’s IT Margins report emphasises the need for organisations and procurement professionals to deploy digital tools to control and manage pricing.”

The report said that technology suppliers used Brexit confusion following the 2016 vote to maximise profits. 

“When a currency experiences a sharp fall in value, it becomes harder for buyers to monitor fair price levels and identify when prices are increasing because manufacturers are protecting their margins – versus when they are being unnecessarily inflated.” 

Recommendations on reducing excessive margins include: benchmarking tools to track real-time data, improved policing of supplier contracts, greater transparency across the supply chain to ensure discounts meet end users, and cutting out rogue purchasing to improve spend management.

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