Redington shows why it’s got the power

Redington Gulf has occupied top spot in the Channel Middle East Power List for the last two years. Director Raj Shankar reveals the reasons for the company's growth and urges vendors to be careful when it comes to setting targets.

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By  Administrator Published  April 1, 2007

Channel Middle East: Redington raised US$34m from its IPO at the start of the year. Presumably you can now pursue the plans you have to grow the Middle East business.

Raj Shankar: Our plan was to put the IPO proceeds towards setting up what we call distribution centres, or logistics centres, in India as well as Jebel Ali or Dubai. We also plan to expand the network of service centres that we have in the Middle East. That includes our own service centres as well as franchise centres. We plan to upgrade our ERP system to SAP and in India we intend to set up a panel repair facility.

CME: How many service centres do you now have in the Middle East?

RS: In the Middle East and Africa we have a total of about 60, out of which a little more than 12 are our own. The balance is made up by the franchise centres. We have always positioned ourselves as a distributor which provides support services for the products that we distribute. There are also some brands that we don't distribute but which we provide support services, such as Fujitsu Siemens in the Middle East for example.

CME: Why do you have so many franchised centres?

RS: There are some places - take Iran for example - where it is very difficult. About 65% to 70% of the business happens in Tehran, but then you have a number of provinces including Isfahan, Tabriz, Mashhad and many other places where 30% to 35% of the business happens. It is very difficult for us to be able to go and set up repair centres in each one of these provinces. It makes more business sense for us to tie up with a local partner. We qualify, certify and train them to ensure they have the capability to provide the services.

CME: Redington Gulf led the 2007 Power List with sales of US$640m. How does that break out?

RS: About 80% to 81% comes from the Middle East and 19% to 20% from Africa if you looked at it on an overall perspective. In terms of the Redington operation that went public about 50% comes from the overseas operation.

CME: Redington's sales growth last year was a lot higher than many other distributors in the Power List. What were the reasons for that?

RS: It looks like a very conventional answer, but we have had fairly interesting organic growth with the current brands and in the current geographies. If you look at any of the products that we deal in, whether it's with Acer or HP on the PCs, printers or supplies, we have managed to scale up the market share of each brand in each of the geographies we have been present. In addition to that we also have added a few geographies.

CME: Africa seems to have been a big focus for you just recently.

RS: In the past, our focus in Nigeria and East Africa was minimal so we have now started to really create a complete logistics centre, sales office and service centre in Nigeria. We have definitely added more people and brands and that has augmented this growth.

CME: You also talk a lot about Redington being a ‘supply chain consolidator' these days.

RS: From being just a country distributor we became a regional distributor. From being a distributor of one brand, one product, we became a multi-brand distributor. From being just one country service provider we set up a complete service network as a regional service provider and more importantly positioned ourselves as a supply chain consolidator. We have four stock points in the Middle East and two in Africa. This gives us the ability to service our customers a lot faster and more effectively so we are able to tap the tier-two and tier-three business.

CME: What is the sales split in terms of customers?

RS: If you take last year then about 20% was retail, 20%-plus was corporate and 60% was SMB.

CME: Are vendor expectations of the Middle East market too high?

RS: I think every vendor sees the Middle East and Africa as a growth engine. All the vendors did extremely well last year, whether it was HP, Acer, Toshiba or Dell. My only concern is if people go by the past to make their forecasts and estimates for the future. That's a little worrisome for me because the base was not very big and it's not possible to keep growing at that kind of pace and velocity. So to that extent yes, if some vendors set unreasonable targets then it's going to be a challenge. There is going to be growth, but it's a question of being a little more moderate.

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