Tough Times for Independent IT Dealers
Sales at XS International Inc., a 10-employee company that sells refurbished electronics like computers, disk drives and servers, have shrunk 50 percent in the past two years. The problem, the company says, is that it no longer qualifies for roughly half the government contracts it once did.
XS International is an independent seller whose business, while legitimate and legal, doesn’t follow certain requirements set up by large manufacturers like Cisco Systems Inc. (CSCO) and Hewlett-Packard Co. (HPQ) to qualify as an “authorized” dealer of those companies’ equipment.
Authorized companies, in most cases, receive inventory directly from the manufacturers and set prices based on manufacturer’s suggested retail price. Independent resellers sell used, refurbished or “gray market” equipment—factory-sealed equipment purchased on the open market—and set the prices for those products.
Independent dealers say large manufacturers in recent years have encouraged customers, including the government, to buy goods through authorized channels only, which the manufacturers say helps ensure the merchandise isn’t counterfeit.
