Auckland-based distributor Ferntech has closed down, citing difficult trading conditions and tiny margins.
For many years Ferntech was the sole New Zealand distributor for Singapore card maker Creative Technology, but last year August Christchurch-based Insite Technology was appointed as joint distributor. Ferntech was dealt a further blow in January when it lost the Creative agency altogether.
In February Ferntech exited the PC assembly business by selling its Advance PC business to Arche Technologies.
Ferntech managing director Alex Davidson set up a MCN Distributors to carry on the distribution operations of Ferntech but the company was forced to cease trading because of “difficult trading conditions and a high level of default by debtors”.
Davidson says he is disappointed at the need to cease trading. “With margins that defy accounting realities, it has become a very dangerous game. The only time anyone makes any money is during strong growth, and even then it’s largely an illusion. You’re only making a profit because your costs haven’t yet caught up with your sales. Once they do, the margins are so fine it only takes one mistake, or the slightest element of bad luck, to tip the balance the other way — and then you find yourself in a situation where every step you take to control costs has a negative effect on sales, only serving to make the situation worse.”
Davidson is critical of employment and consumer legislation. “The extensive powers available to employees and customers under this legislation are in marked contrast to the weak, almost non-existent legislative support that businesses receive to recover debts.”
Davidson is now in Sydney, having embarked on a joint venture in Australia with Singapore-based distributor Intresource, whose founder KS Chay is a former founding partner of Creative Technology.