Charming the channel

What do resellers really think of the distributors they buy from? CME delved deep in the second tier channel to discover the word on the street.

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By  Alex Malouf Published  August 25, 2004

Home truths|~|DinaArabi.gif|~|Dina Arabi, sales manager at Dubai retailer ArabNet|~|All distributors claim to offer top quality service to the channel, but is there any truth to their talk? Channel Middle East did a non-stop tour of the region to find out and canvassed a wide range of opinions to discover what resellers really think about distributors. Dina Arabi, sales manager at Dubai retailer ArabNet; Elie Boujaoude, general manager of Lebanese company Teledata; Mohamed Mohsen, manager at Egyptian reseller Nashar Computer; Magdi Michael, managing director of Abu Dhabi outfit Cyber Systems and Networks and Razwan Khalil, joint owner of Bahraini Mars Computers discuss what distributors do right, what they have to improve on, and how those above them in the channel should understand more about life on the IT street in the Middle East.

CME: How important are the incentive and rebate schemes that distributors run either in-house or on behalf of vendors? Do they make much difference to your business?

DINA ARABI: Such schemes make all the difference. Often our margins come from rebates and incentives. We are also afforded a chance to roll out marketing plans for products with the extra cash, and for us in retail this is very important. Distributors in Dubai don’t issue a lot of marketing material, so we have to arrange brochures, advertising material and base a marketing strategy on the funds from rebates and incentives.

ELIE BOUJAOUDE: Actually I don’t support rebate systems, and am against this. I prefer to get the discount up front and hence know what our net cost is. I don’t like the idea of rebates and follow up as it takes a lot of paperwork and office time. For us HP’s rebate programme is not working at all. With Intel there are some problems but it’s working. But again it is much easier to know exact costs when there are no back-end rebates in place.

Cme: How many distributors do you typically buy from and how loyal are you to them?

ELIE BOUJAOUDE: I buy from seven distributors: Logicom, Aptec, CIS, PC Deal Net, Mindware, Image Systems and Al Haseb. We are, on the whole, loyal to these seven as we are happy with their service.

DINA ARABI: I buy from four at the moment: Tech Data, Aptec, FDC and Empa. We keep buying from them, but we don’t know how loyal they are to us on pricing. If I buy 50 products from them, I don’t know if I will get the same price per unit as a customer who buys 200.

MOHAMED MOHSEN: My main distributors are Gamma, Metra, and Better Business. As for loyalty, I have found it difficult to establish good relationships with distributors due to the financial conditions they impose on resellers doing business with them. Resellers with money behind them gain better service and warranty guarantees than the little guys.

RAZWAN KHALIL: We buy from all the big names: Emitac, Tech Data, Almasa, Redington and Aptec. We do regular business with these distributors and buy on a monthly basis. So overall we are pretty loyal to these large distributors.

MAGDI MICHAEL: There is FDC, Layout Middle East and ITM — they are the people I do business with regularly. I have to be loyal to certain distis as they hold exclusive rights to some of the products I need.

Cme: Who is the best distributor that you deal with and why?

ELIE BOUJAOUDE: Overall it is Logicom, as they give us better pricing, support and payment terms than others but there is no one distributor that excels in every area. Aptec are also very professional, but we do more business with Logicom as they sell items critical to us.

DINA ARABI: There are many first rate distributors in Dubai, like Tech Data, FDC and Aptec. But there is no distributor that stands above the rest. They all operate in a similar fashion, and are constantly looking for numbers rather than building up product knowledge.

MOHAMED MOHSEN: For me it has to be Gamma. They always provide me with a good warranty on purchases and they don’t run short on the products that I need.

RAZWAN KHALIL: It has to be Tech Data and Redington. Tech Data has a local hub in Bahrain which is a big plus for us, and so we always receive a very speedy service. Redington provides us with an equally impressive service in terms of delivery yet their rates are always low.

MAGDI MICHAEL: FDC is my preferred distributor due to price protection on products I buy from them. But there are others who give me better payment terms.

||**||Superior service|~|EgyptMallShop.gif|~| IT malls in Cairo are doing brisk business|~|Cme: What differences do you see in the quality of service that distributors provide you as a reseller?

DINA ARABI: Some are very professional, and a good example is FDC. They deliver on time and process the payment smoothly. Their sales manager even visits my shop every day, to see what I need, to listen to my views, and talk to my customers. From my side it is very encouraging to see such support and it makes my customers feel more comfortable to buy products. More distributors should take this approach to channel service, as it makes such a difference to doing business.

MOHAMED MOHSEN: I don’t feel there is much difference between the distributors that I deal with. Each one treats me in roughly the same way.

MAGDI MICHAEL: There are some distributors who provide excellent service. Emitac will send you an SMS when the product is ready for pickup. FDC has a very speedy RMA service. Others should aspire to this level of support.

Cme: Do distis discount for bulk orders? Do you prefer buying volume or replenishing stock frequently through small orders?

ELIE BOUJAOUDE: I go for small orders as this is easier for storage and for payment. But discounting for bulk orders varies from one distributor to the other. Sometimes they know you will buy a certain amount and try to lure you into buying more by giving a lower price.

DINA ARABI: I don’t buy bulk, particularly during summer. During these months business is very slow and traders can’t just buy and keep stock. But distributors do often discount for bulk or sell bundle packages. I’d rather keep product moving than buy large volumes simply for a discount offered by a distributor.

RAZWAN KHALIL: There are discounts on certain products but this depends on the vendors more than the distis. HP does bulk discounts. We prefer to buy in bulk so that we have a constant supply of stock.

MAGDI MICHAEL: I cannot buy in bulk as I will tie up too much money in the product. Unless it is fast moving product, I will lose money as market prices drop very quickly.

Cme: Which distributors understand your business best and how do they demonstrate this through their services and support?

ELIE BOUJAOUDE: Simply put distributors don’t understand our business. They want to move their product. But there are a few companies that do help resellers. Image Systems, a Lebanese distributor, agreed to provide us with space in a trade fair if we hit target. This saves us money while at the same time we gain major exposure at an IT event.

MOHAMED MOHSEN: Do any distributors understand how we work? After spending five years in the IT trade, my own belief is that they only want to make a quick profit.

Cme: Is it right for distributors to share information about your purchasing history and credit lines?

MOHAMED MOHSEN: Distributors have to know the ins and outs of companies that want to do business with them. It’s only natural that they want to protect their credit lines and financial resources and so I have no objection.

RAZWAN KHALIL: I would rather distributors didn’t do this. I don’t want them to divulge company secrets, such as volume turnover and purchasing habits.

DINA ARABI: It all depends on the reputation of the retail shop. If there is not full confidence in the reseller then yes, distributors should look at this point very closely.
||**||Channel concerns|~|MagdiMichaelmanagingdirecto.gif|~|Magdi Michael, managing director at Cyber Systems and Networks|~|Cme: Vendors are asking distributors for more detailed sales data so that they know what resellers are buying and can engage more closely with dealers and resellers. Is this a positive move for the market?

DINA ARABI: I don’t think that vendors even care about detailed sales data. They are always looking for achievement, and are not so concerned as to who is buying. Vendors are always looking for numbers, and not breakdowns of who sold what. As long as vendors hit target they are happy.

ELIE BOUJAOUDE: Intel started this long ago. They approached all the traders in Lebanon to move closer to the channel. This didn’t help them, because it made those people aware of Intel’s pricing system, and distributors found it hard to sell product at a good margin. Vendors should not approach lower channel tiers, as this makes life difficult for distributors.

MOHAMED MOHSEN: Yes, and I would welcome more contact with vendors. Such a move would increase the amount of technical support that we receive and vendors would gain a better understanding of the market, and what customers look for when buying.

Cme: How important is price when picking the distributors you buy from?

DINA ARABI: Nothing is more significant. Our shop exists in a mall with 72 others and we all sell similar items. Competition is very high and nobody follows the rules by sticking to price guides. We always fight over prices and so we have to get the best rates possible.

ELIE BOUJAOUDE: If you are comparing like to like — the same product from several distributors — then price is all important. There is nothing more significant for us.

Cme: Is it easy to get quotes from the distributors you work with?

DINA ARABI: Gaining pricing information can be challenging. With some distributors I can call the sales people at any time and they give me their price list. Others don’t even give staff mobile numbers! They tell me to call on the office line, during opening hours. I’m a retailer, and I work till 10pm. I need direct action.

MAGDI MICHAEL: On average it is not difficult at all, especially when we have good relations with that distributor. But for others it is not so easy, especially if I do not order in bulk. Emitac is one company which wants me to order products at a minimum price, but they don’t tell me what this amount is.

Cme: Besides price, how important is product availability, delivery time, credit availability and the friendliness of a distributor to you?

ELIE BOUJAOUDE: All of them are important, but service is uppermost in my mind when buying. If I suffer with RMA issues, then I will not buy from that distributor again. The cost of faulty goods is too high, and so I do not accept any delay or reluctance in replacing such products. If the service is not good then I don’t continue doing business with that distributor.
||**||Demanding more|~|ElieBouj.gif|~|Elie Boujaoude, general manager of Lebanese company Teledata|~|Cme: Which distributors excel in ordering systems and delivery service? How do they stand out?

DINA ARABI: I would say Tech Data and FDC. They are always on time for next day delivery. The sales follow up in FDC is better than Tech Data or Aptec. I don’t hear from Aptec, and I can’t call them, telling them I want to buy product.

ELIE BOUJAOUDE: Most of the distributors in Lebanon don’t do speedy delivery. We pick up product as we need it the same day. They may say they do next day delivery but we cannot wait. Al Haseb, our Lexmark supplier, is the only distributor who delivers the same day.

Cme: Are there enough distributors selling the product lines you need? Should there be more for some key vendors?

DINA ARABI: Yes, for certain brands we need more distis. With Linksys, there is only Tech Data in Dubai. So I think they need two distributors. As a buyer I always like to compare. I don’t feel comfortable if all the traders are buying from one person.

ELIE BOUJAOUDE: There are more than enough distributors selling the products we want. We are unable to make money because there are so many distis. We used to buy Intel from Logicom and were making good margins. Mindware then stepped up its activities, gave better prices to the channel, and Logicom responded. We had to drop our margins, and the channel is not making any money.

RAZWAN KHALIL: The big distis stock all the brands we want, especially global players such as Tech Data. But it is important to have more distributors on a local level, who can take stock from each other as and when needed.

Cme: What should distributors do to improve their service to dealers, resellers and retailers?

ELIE BOUJAOUDE: The only request is that they speed up their operations. It can take one week to solve an RMA problem. This is where we want to see an improvement.

DINA ARABI: Retailers like myself need more marketing assistance from those in the channel above us. Also distributors need to have systems in place to handle complaints and feedback. We can become stuck with product and sometimes we require some help to shift it.

MAGDI MICHAEL: Every distributor should implement a pricing strategy, so that dealers stop selling below cost and ruining the market for the channel. If resellers want to compete, then they should offer better services and not pull the pricing rug from under me. And they should recognise our achievements through ceremonies — make us feel appreciated.
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