Rising dollar hits distributor

A rising dollar might be good for buyers but IT products distributor Tech Pacific says it's hitting the company's turnover.

A rising dollar might be good for buyers but IT products distributor Tech Pacific says it's hitting the company's turnover.

"We've seen a drop in the average selling price of a PC of more than 30% in the past 12 months," says Tech Pacific head Tony Butler.

That hasn't been matched by a similar increase in volumes and while a lot of Tech Pacific's costs are based on the number of transactions rather than the value of the goods, "it's still been a challenging year.

"There's no ability to hold margins in the product as prices go down."

Warehousing stock at a time when the dollar is going up means the faster it moves, the better.

"Distributors are the main stock holders of the industry, ie in warehouses.

"Resellers in the commercial space don't hold stock, they order it from distributors."

A quarter of what Tech Pacific ships goes direct to end-users, on the instructions of resellers, Butler says.

"We've got $20-$30 million of stock at any one time in warehouses and to have it devalue by 30% across a year, obviously that has some impact."

The answer is to "turn your stock over as fast as possible."

"[The dollar has] gone a lot higher than we expected and we weren't hedged sufficiently to cover it."

Tech Pacific takes forward exchange cover, "but with the speed of the industry and most products being imported by air, the lifecycle of a model is very short.

"In that environment, it's difficult to do long term hedging."

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