Defaulter database

Distributors should work together to build a centralised database identifying second-tier resellers defaulting on payments or selling below cost according to Sunil Dandawate, managing director at Dubai-based Kobian.

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By  Stuart Wilson Published  June 2, 2004

Distributors should work together to identify resellers defaulting on payments or selling below cost according to Sunil Dandawate, managing director at Kobian Distribution. Dandawate proposes an information sharing system whereby distributors work together to build a centrally held database of risky resellers. “Customers not paying for product is becoming an increasingly frequent problem for the market,” explains Dandawate. “Major distributors can help each other out by sharing information through a forum and possibly paying a subscription to access the information collected. Such a scheme would help identify the customers posing a risk and could also help address issues such as resellers selling below cost to maintain their cash flow.” A shared resource could be used to gather the names of defaulters and credit risks without revealing the name of the distributor that has been having problems with them. “If it is a clear-cut case of defaulting or selling below cost, all the distributors should be made aware of it,” says Dandawate. “Many of us know who is selling below cost or can go into the market and find out. Similar distributor forums exist in places like Bombay and have proved to be a great help for the local channel.” Working alongside their competitors for the greater good of long-term market evolution may be a difficult concept for some distributors to swallow, but Dandawate is adamant that everyone stands to benefit: “There is a conflict issue here, but we have to stop these players coming into the market. The problem of resellers abusing credit and even defaulting is hitting the distributors. Vendors are insulated from it. Given the margins that are being made on certain products such as motherboards, a couple of defaulters can make a big difference to the health of the business.” Recovering debt is often a long-winded and complex process in the region, meaning distributors could benefit from working together and sharing information. There is still a steady stream of companies riding the credit system for all its worth and even running off if it makes financial sense. In spite of wafer-thin margins on IT resell, new companies still start up. The Middle East channel would benefit from a scheme identifying credit risks, but to be a success it would require buy-in from major distributors.

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