"Box Sale" Margins For Integrators?

I've heard and read that the majority of profit for integrators comes from setting everything up; the labor hours for configuration etc. Also some markup on subcontracted cable and electrical work.

I've heard and read that "box sales" don't account for much revenue for them. When I just want a camera from an integrator, but I install it and configure it on the VMS, the integrator doesn't get much. This is my impression.

What is a typical margin on a "box sale" camera? I assume there are a hundred variables, but what would you say the average margin is?

Has IPVM already done a poll on this subject? I feel like I've seen one in the past.


30% margin is our goal, but it isn't always possible.

IP Camera Pricing and Markups Statistics 2015

Average markup in the survey was 35%, which equates to 26% margin.

That's very interesting. I also followed and read the link to the Integrators Oppose Labor Only article.

That's the opposite of the two integrators I do business with. When I just want a box sale, the larger integrator puts me last on his list of things to do, and is always pushing the labor and integration. The other smaller integrator still shows me good customer service, but again just always pushes the labor part of it.

John, I think a good follow-up poll would be what percentage of revenue is driven by product margins.

In other words, if the product margin is 30%, but only accounts for 5% of the total pie, that tells a totally different story than if that product revenue is 50% of the total.

We've done other surveys over the years, product and labor are roughly 50/50 when it comes to revenue.

I should have mentioned before that I would never sell an end user a camera for self install. It is not a principal thing where I won't do it because I am missing out on labor. There are a few reasons why I wouldn't do it:

1) Warranty - I would never support or warranty any item that I didn't install myself. It is way too easy to break or not properly install this type of product. We will end up pointing fingers.

2) Value add - What value am I adding to the box? If you don't need my expertise installing it, what use am I? Surely you will call during install asking for this info, for free no less.

3) Spend your own time hunting it down on eBay/Amazon/Aliexpress if you just want a box. I have spent many years finding the best places to buy my products (balance of cost and support). This time and effort is to grow my business, not necessarily yours.

4) Capital - Why should I tie up my capital for your convenience? Just as in #2 where I am not adding anything of value for you, you are only taking from me, by the way of tying up my capital, which could be used to support the sale to a better client.

3) Spend your own time hunting it down on eBay/Amazon/Aliexpress if you just want a box. I have spent many years finding the best places to buy my products (balance of cost and support). This time and effort is to grow my business, not necessarily yours.

So you would have no problem with me calling my Anixter rep and buying the camera 30% cheaper?

Please do! If you have the means and source, what help could I possibly be, other than a nuisance? I don't pretend that I am a good match for every single end user out there. There are some that won't chose me, and I know for damn sure there are others that I choose not to work with. No hard feelings.

That's completely reasonable, but the second problem is that the Anixter rep is scared to death to sell to me... afraid of the backlash if any integrators found out. I know your opinion is just yours, but would you say your opinion on this particular matter is common among integrators?

Does my Anixter rep have any legitimate fear of selling security products to me directly?

He doesn't want to support you.

I do $300,000 with him annually. We've worked together for 12 years. He's afraid of integrator backlash. I assure you it has nothing to do with support.

I highly doubt he has many $500k+/year integrators that he is protecting. Smells fishy.

Channel partnerships and contracts in place between Anixter and national integrators...lawsuity stuff... no specific integrator he is protecting on a petty level of account size.

So you are saying I can drag you over the coals, because if you can't buy it from Anixter, you are willing to pay a ransom to an integrator? Find another distributor who WILL work with you. Better yet, create a new "Integrator" division of your firm.

More specifically..... you wouldn't put on the quote "All Equipment supplied by XXX, but not installed by XXX, shall only carry the standard manufactures warranty and applicable state laws. Labor cost to repair shall be billable. Separate Warranty and Maintenance Agreements can be purchased." ??

Or go a step futher and actually put an hourly rate for support on the quote, so there's no question about whether or not you will make money if/when they actually call you for help?

Wild guess: Jon Dillabaugh's end-users don't have Anixter reps.

I highly doubt it.

4) Capital - Why should I tie up my capital for your convenience? Just as in #2 where I am not adding anything of value for you, you are only taking from me, by the way of tying up my capital, which could be used to support the sale to a better client.

This one also seems slightly unreasonable. Why should you tie up your capital for my convenience? Because I'm paying you money. 30% more money than it costs you in temporary capital tie-up. I am only taking from you? Yes, I'm taking a $300 camera from you... then you are taking $350 from me.

Am I misunderstanding your position?

I misunderstood your original question as "How much do you mark up your products" as a general rule. We aren't in the business of being a distributor, so why ask me to be one? I don't have the space or capital to be a distributor. It was never my goal. It isn't my business model.

If all you need is a box, buy from a distributor yourself. Why buy from me for the additional 30% margin? What do I add to that box that is worth the 30%? Honestly, that 30% is to cover my time researching, buying, warranting, and stocking the product. That really isn't much to make a successful business out of, selling a few boxes here and there.

No thanks.

According to John H. rough numbers above, the integrator industry participating in past IPVM polls show product/labor revenue being about 50/50.

If product margin is 50% of your revenue, it seems senseless to turn your back on prospective buyers. The concern about the customer coming back to you with complaints and difficulties with setup is valid, but it seems like a simple disclaimer in your quote and an hourly rate for optional support could fix this concern very easily.

I would need a lot more than 30% margin for it to be 50% of my revenue. If you meant 50% of my net profit, that would be closer to true, but still not accurate.

That's basically right in line with my OP, minus some semantical differences.

Your labor is where you make your money. Not box sales (if you did them).

So this begs the question... if integrators are making most of their money on labor/service, then why are they so concerned with lower cost hardware (hikvision) if that part of the business is an afterthought?

And not specific to you, but to the integrators in the polls that John posted above... if lower cost hardware is going to squeeze profits, then why are integrators so opposed to labor-only service?

"Your labor is where you make your money."

That's not what we hear from most integrators. The more typical integrator position is that the 'bonus' / 'extra' / 'super' profits come from selling hardware.

Integrators typically make some profits from labor but their total profits are driven by how much markup they can generate from the associated product sales. This may not be true for all integrators, but is a typical pattern.

I don't speak for all integrators here, but I would MUCH rather sell you only service than only boxes. In fact, I fell like we simply cover our costs associated with procuring and warranting hardware and not much else. Had we based our business model on huge product margins and low labor rates, I could see why that would not be something I would want to lose.

The way we sell boxes is pretty much a tipping point in my eyes. Sure, we make enough to make it worth our while, but not enough to make a business doing so.

I could care less if you want to research, design, shop, RMA, and store all of your own boxes. I would install them, as long as it was products I was familiar with and didn't have a good reason to dislike.

When I was in the low voltage cabling business, this is how it worked for me too. There was a markup on the cable and jacks etc, but really just to cover the cost of ordering and storing and just dealing with it. The money was in the labor of installation. So I understand your model very well, as described.

It seems like most integrators, however, do not subscribe to this model.