Reseller Negotiations – What You Need to Know about Registered Deals

By Rich Staas

Director of Client Services, NPI

February 28, 2014

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If you’ve bought hardware lately, there’s a good chance you’ve purchased it through a reseller. Buying through a reseller has its advantages, but it also adds another layer of complexity to the process. In some cases, it challenges the sourcing best practices many buyers use for direct-from-vendor purchases.

For example, many companies' procurement policies require three competitive bids for price comparison (or justification for sole sourcing). That best practice serves its purpose in a direct purchasing scenario, but doesn’t always get the job done when a reseller is involved. Here’s why…

Resellers are highly motivated to register their deals with hardware vendors. This ensures that resellers get special bid pricing, which typically translates into better pricing for the buyer (as well as higher margin for the reseller). The problem is that this “special pricing” is only given to the first reseller to register the deal. Every bid thereafter will be higher by design. In other words, when a hardware vendor allows the first reseller to register a deal to obtain special bid pricing, you are essentially sole sourcing the purchase. This certainly helps the vendor and reseller secure the revenue and profit margins they want, while removing the competition and your leverage to obtain better pricing.

There are a few ways to combat this. First, if there are viable alternatives to the vendor’s solution, look into them and use that as leverage. A Cisco reseller will be more inclined to lower price if a Juniper reseller is brought to the table. Second, tell your reseller not to register the deal with the vendor. Remember, deal registration is a tactic used to reward resellers for creating revenue opportunities – the reseller secures lower pricing, but can also pad the pricing with extra margin before a final bid is passed to you.

Finally, allow market experts to benchmark your purchase to see if it is in line with fair market value pricing. Just because your reseller was the first to register the deal with the vendor doesn’t guarantee you’re getting best-in-class pricing, and not every reseller will agree to forego deal registration. This additional pricing insight will level the playing field.