How Much Do Distributors Mark Up Products?

Mark up amounts are a major contention within the industry, especially given their decline over the last decade. We recently had a great debate on markups in general. One hotly argued point was how much do distributors mark up their products? In other words, when you buy a product from Anixter or ADI or Amazon, how much do they mark it up before selling it to you?

This started with an integrator saying:

"I know I'm paying at least 100% to 150% mark-up on what my supplier paid the manufacturer."

With me retorting:

"That's almost certainly not the case, unless you are getting gouged by your supplier. The ADIs, Northern Videos, Anixter's, etc. are lucky to get 10 point markup on products (maybe 20 or 30% for people who are buying in super low volume). None of them are getting anywhere close to 100%."

However, a distributor / OEM objected:

"Just from my limited experience carrying some of the same cameras that they are carrying, that this is absolutely not true at all. They are making quite a markup, more than 100%. And I know, due to volume, that they are probably getting a much better deal than me when buying from the manufacturer. I am sure they can markup certain products more than others, but they are definitely not working on slim margins. This is just feedback from some of our customers who also buy from these places as well."

One important difference is how distributors like ADI operate compared to OEMs. Buying an Arecont camera from ADI is different from a Dahua camera through an OEM. With Arecont / ADI, Arecont absorbs the cost of global marketing, enterprise sales force, reps, technical support, etc. For a Dahua OEM, those expenses fall on the OEM. Because of that, the markup is higher for the latter case, reflecting the greater amount of work that the OEM needs to do.

I'm not going to post any numbers but John you are pretty close to the mark on your post. Not sure where these other Integrators or Distributor/OEMs are coming from.

Jason, I suspect the markups are higher on non-brands or brands with limited market awareness as the manufacturer then needs to compensate with lower pricing to incent / compensate the distributor / OEM to do more work.

Firstly, I don't care how much a distributor marks up his products so long as my purchase price is in the ball park with other integrators/installers.

It is not hard to find similar products from manufacturers oversees at a fraction of the cost and who are willing to sell to me. (below)

So why don't I buy direct? With so many similar products available one must assume that some of these products are better quality than others.

I choose to pay 3 times the cost of a similar product from my distributors in the U.S. as I would like to think they have spent time doing their due dilligence sourcing higher quality products which in turn gives me the confidence to mark up accordingly to further deploy in the field.

Whats more, with an RMA, I can usually deploy a replacement unit within a week and not the 4 - 6 weeks by sourcing directly oversees.

Were I deploying a much higher volume of cameras, I would certainly rethink where I would source the product.

US $119.60 / piece
2 Orders

I agree with Sean's statement: "I dont think slim margins is much of a common thing in this industry, even with manufacturers."

Sigh, I am happy to discuss these things, but this is a little ridiculous. Do you really think Anixter is marking up Axis cameras 100%? Really? Or any other major manufacturer? This is not happening. Continuing to assert that it does without any proof to the contrary is silly.

Anixter's gross margins are disclosed in their financials and is in the 20% to 22% range. While that includes many items outside security, such a range is typical for security products.

Unless you have some specific evidence that Anixter, Tri-Ed, Northern or other major distributors of major products mark up 100%+, please stop commenting.

Lastly, this comparison to manufacturers misses the point. Yes, manufacturers routinely sell products for twice what their cost of goods are. However, this is necessary to cover R&D costs, sales and marketing, etc. By contrast, distributors like Anixter do not have these types of costs. They have to and do operate on much slimmer margins/markups.

Finally, you can get random no name products online for far less, potentially allowing for higher markups but then you need to do / spend a lot more to sell and support it.

As far as Gross Margin goes: All I can say is that there are a few cameras that we carry that are not OEM that some of these larger distributors also carry, and I can tell you that some of them are 50% higher than what we sell them for! I am not interested in giving out my cost information to prove my point. Now given, This is just my experience with just a handful of products, I cant speak for a whole product line as an average. But I dont believe one bit that these larger distributors are paying more for these products than I am, actually I would think it to be the other way around.

Sean, what price point is 50% higher than yours? Their MSRP? Their price point for buying a single unit? Their 'preferred' dealer pricing?

Just because a distributor lists a price of X does not mean that's what their average selling price is. It's likely far far less.

Anyone who buys from a distributor marking up Axis, Arecont, Panasonic, Sony, Bosch, etc. 100% is radically overpaying and can easily find far less expensive options all over the place.

Its prices that my customers have told me what they used to pay at these places.

How many units are they buying? What are they discount level are they at? Are they are any discount level? What distributor is this? What product lines?

Once we dug into this, it would become clear that it is not representative of average deals for major products from major distributors.

It's one thing to have some anecdotes, it's another thing to pass this off as the norm.

Here's a chart of gross margins for ScanSource and Ingram Micro, note how low they are:

Are there people out there paying 100% markup to distributors for major products? Sure. But it is not common overall and those people are getting taken.

We sell both video and access control products to ADI, Tri-ed/Northern Video and we used to sell through Anixter also. I have never seen nor heard of a sales margin of more than 30% (or a mark-up of 43%) on our products or on any other manufacturer's products.

Video is a VERY competitive vertical market and margins are typically in the range of what John states, with access control and alarm being slightly higher.

With major brands like Axis, I would guess that the typical margins are in the low teens, no more. These products are available at almost all distributors as well as online - they simply would not sell any with 50% margins (100% mark-ups).

I agree with John. 100+% markups? What planet are you guys from?

Typical markup percentage varies with the cost of an item. While 100% and higher markups are quite common for small parts and accessories, the higher the dollar value of an item, the lower the percentage markup. This is true both in wholesale and retail. So a $1.00 item may cost the seller 25¢ while a $100 item would cost the seller $60-$70. A $1000 item would probably cost in the range of $900 +/-.

This is as true in Surveillance as it is in any other market, except maybe jewelry, luxury goods, and items in very limited distribution (think high-end audiophile equipment, etc.). It would be impossible for a distributor of products that are in general distribution to sell them at such high margins. The competition would eat them alive!