Manufacturers are increasingly selling directly to retailers and consumers, hurting wholesalers
Los Angeles, CA (PRWEB) August 04, 2012
The Computer and Packaged Software Wholesaling industry benefits from consistently growing demand for computers, related accessories and software. According to IBISWorld industry analyst Dale Schmidt "despite stable demand for the industry, the rise of the direct sales model has dampened revenue." In addition, the recession caused revenue to fluctuate dramatically between 2008 and 2010; after a 3.0% drop in 2008, revenue plummeted a further 12.6% in 2009 only to rebound by 6.8% in 2010. Overall, industry revenue is estimated to decline by an average annual rate of 0.7% over the five years to 2012 to $339.6 billion. In 2012 alone, IBISWorld expects revenue to rise 4.0%.
While demand for computers and computer accessories and software is growing, revenue for wholesalers has been hampered by the practice of wholesale bypass. In this practice, manufacturers, most notably Dell Inc. and Hewlett-Packard (HP), forego wholesale distributors entirely in favor of selling directly to retailers. Industry players have sought ways to cut costs to counteract revenue lost from wholesale bypass, including automating their inventory control processes. In addition, the industry has consolidated, with the number of businesses in the industry contracting over the past five years to maintain profit margins in the face of the growing wholesale bypass trend. The top four companies in the Computer and Packaged Software Wholesaling industry are expected to account for only a small share of industry revenue in 2012, indicating a low market share concentration for the industry. The industry is characterized by a large number of small companies that generally cater to their local or regional market only. "Concentration remains low because it is difficult to gain economies of scale in this industry," says Schmidt. Having a nationwide presence in this industry would stifle profit margins because of the high cost for goods transportation. Thus, firms tend to operate regionally. Nonetheless, concentration in the industry has been rising in the five years to 2012. Many operators have consolidated to battle strong price competition while others were unable to survive the recession and exited the industry altogether.
Despite these negative trends, recovery is on the way; IBISWorld projects that industry revenue will grow at at a steady rate over the five years to 2017. This growth will be driven by a rise in unit sales of computers and computer-related products. Due to a combination of technological advances and manufacturers becoming more productive as a result of recession-era consolidation, the price of computers and related equipment will fall. Along with overall economic improvement, this trend will encourage consumers and businesses to increase their computer-related purchases, driving up demand for industry wholesalers. For more information, visit IBISWorld’s Computer & Packaged Software Wholesaling in the US industry report page.
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IBISWorld industry Report Key Topics
This industry comprises establishments primarily engaged in wholesaling computers, computer peripheral equipment, loaded computer boards and computer software. Manufacturers' sales branches and offices with wholesale functions are included within this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.