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Study finds retailers are paying far too much to IT suppliers


A lack of transparency in the IT market is enabling supplies to inflate product prices, according to the latest KnowledgeBus IT Margins Benchmarking Study.

The annual study provides data on suppliers who often exploit the difficulty in identifying the best price for IT products – given the short lifecycle of products and the constant fluctuation of trade costs – and charge excessive margins to stakeholders in the retail sector.

However, according to the Society of IT Managers, organisations should not pay more than a three per cent margin to suppliers. Despite this, KnowledgeBus’ study revealed one supplier managed to charge a retailer a margin of 215 per cent for an order of cables.

Nonetheless, organisations across the retail sector are improving when it comes to scrutinising purchases and negotiating better deals with supplies, evident with how the average margin paid across the retail sector climbed down to 11 per cent in 2015 compared to 13 per cent in 2014.

“But the analysis shows that many purchases are far in excess of industry best practice,” KnowledgeBus’ head of benchmarking Al Nagar said.

“The most extreme example of excessive margins are regularly found on those lower volume, spontaneous, ‘as and when’ purchases. These are typically unplanned purchases consisting of items such as memory sticks, power adapters and cables.”

“Today’s procurement managers don’t have endless amounts of time to talk to multiple suppliers to find the best price. What they need is for there to be greater transparency between suppliers and customers.”

Published on Thursday 30 June by Elias Jahshan

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