IT Distributors End Free Ride on Shipping

IT distributor Tech Data will institute a $2 handling fee on all orders shipped, the company revealed during its earnings announcement and call Aug. 21. Tech Data's move follows a similar one announced by its larger rival Ingram Micro earlier in August.

A third IT distributor, Synnex, is "taking a wait-and-see approach" to adding such a handling fee, a spokesperson said. The company does not currently charge such a fee.

And Avnet's Technology Solutions group also started passing through fuel surcharges this month to its partner community for all orders shipped from an Avnet facility or one of its factory drop ship suppliers.

"It's a direct pass through—whatever they get charged by the shipping company, that's the amount they pass through," the spokesperson said.

Tech Data CEO Bob Dutkowsky told Channel Insider in an interview that rising fuel costs prompted the institution of the handling fee.

"For whatever reason, IT distribution had evolved to offer free freight while the vast majority of other businesses made you pay freight," Dutkowsky told Channel Insider. "That made sense when gas was 50 cents a gallon, but now gas is $4 a gallon."

Similarly, he said, back when a laptop cost $4,000, freight made up a small percentage of the bill. But now that laptop prices have dropped and freight costs have risen, shipping makes up a much larger portion of the total cost, he said.

The new Tech Data handling fee is a flat rate per order, so VARs that consolidate orders can reduce the amount they will pay. And many VARs may not pay the fee at all, but instead may choose to pass it along to the end customer.

"In the grand scheme of things $2 is not tremendous," Dutkowsky said. "$2 still does not cover our costs. This is not a profit initiative by Tech Data. Our goal is to defray some of the cost of shipping and freight."

Ingram Micro sent a letter to VARs earlier in August, announcing similar plans. "The operational costs of doing business in North America, and around the world, are steadily increasing—especially when it comes to freight and transportation," the company said in its letter. "…Ultimately, our goal is to address the rising cost of freight and use our core logistics expertise and scale to help you manage your costs as best we can. This was a difficult decision, but a necessary one. Ingram Micro remains committed to ensuring that your shipments reach their destinations in a timely and efficient manner."