Store wars

Is the current consumer spending boom a great time to be an IT retailer in the Middle East?

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By  Dawinderpal Sahota Published  June 4, 2007

They are: Neelesh Bhatnagar, managing director at Emax (NB); Hicham Hage, general manager at Lebanese retailer Domtech (HH), Leon Beuyukian, CEO at EON (LB); Gaurav Brahmwar, managing director at Dubai-based Computer Depot (GB); Dikran Tchablakian, vice chairman at CompuMe and senior vice president at Saudi mobile retailer i2 Group (DT); and Mohamad Kabbani, general manager at CMAX in Syria (MK).

Not many companies have been opening or reopening in Lebanon recently, so things aren’t really looking that good for the IT retail market.

How would you assess the current state of the Middle East IT retail market?

NB: The present scenario in the Middle East IT retail market is that it's growing rapidly so we're not in any hurry to catch up with our competitors. I think there is scope for everyone to grow and be profitable. We're all developing a culture amongst consumers of shopping in a specialist store, rather than going to souks or hypermarkets. Collectively I believe we are raising standards and creating an environment which is professional, technical and specialised.

DT: What customers are looking for today is design and functionality. The consumer has matured and they are asking for more from the vendor. We, the retailers, have to display all this and bring it to the standards of what the customer is expecting. The health of this industry is very strong and it will grow stronger. Just look around. Eight years ago we were the only store. Today there are hundreds of stores with different concepts throughout the Middle East.

HH: In Lebanon - at this stage - it's really bad. Looking at the situation, things are really not very stable. This is basically to do with the political situation in Lebanon. As far as the industry's running, it's okay, but the problem is that not a lot of sales have been happening. Not many companies have been opening or reopening in Lebanon recently, so things aren't really looking that good for the IT retail market.

Which products or services that you retail in your store provide you with the biggest profit margin?

NB: The biggest opportunity to make profit is at the lower-end of brand positioning - basically the Chinese brands which are not already available in the market, and that's what we plan to introduce in the next few months. Top of the hierarchy are Japanese brands such as Sony and Panasonic, then there are Korean brands competing with the Japanese. The market is yet to see Chinese brands, which will compete with Japanese and Korean brands. This is something that's happening across the world, but not in the Middle East yet.

MK: The accessories bring us the biggest margin. Notebooks also make good margins nowadays, but the accessories are still top. Any accessories - not peripherals - for notebooks, and maybe some accessories for desktops, offer the most margin. The consumer who buys a notebook is usually willing to pay much more for accessories than a consumer who buys a regular desktop so we always look to find better quality accessories for notebooks.

Talk us through the operational challenges of being an IT retailer. What are the main financial costs that you incur and what can you do to keep it to a minimum?

LB: The biggest financial cost is the cost of the elements; the products. Retailers in the Middle East cannot work with margins less than 15%, and that's not where we are, we're at much less than 10%. Look at laptops - 7% to 8% - and that's what drives the business. If you sell a laptop, you need to sell the accessories with it, but you can't sell accessories unless you're selling the laptop. When the hardware is driving the business, and if you're only getting 5% to 6% margins on it, that doesn't really make sense.

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