Land of the giants

The combined sales of twelve of the largest IT distributors operating out of Dubai and serving resellers across the Middle East, Africa, CIS (and even Europe in some cases) will surpass US$3.11bn in 2005.

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By  Stuart Wilson Published  February 23, 2005

The combined sales of twelve of the largest IT distributors operating out of Dubai and serving resellers across the Middle East, Africa, CIS (and even Europe in some cases) will surpass US$3.11bn in 2005.

Together, the dozen distributors posted sales of US$2.29bn in 2004 and employ more than 1,600 staff. Full details of the Dubai distribution power list will appear in the next issue of Channel Middle East.

The numbers, based on in-depth research of the local distribution landscape, do need to be treated with a degree of caution. With the UAE acting as a gateway for IT kit entering the region, product destined for customers across a massive geographic area is funneled through the local distribution market. And in the absence of published audited accounts, there is always the opportunity for the occasional figure to be massaged here and there.

Although a large slice of revenues are often booked as UAE sales, one market that needs to be carefully considered when attempting to size markets is Iran. There is little doubt that sales of IT products eventually bound for Iran contribute a sizeable chunk of revenue for some Dubai-based distributors.

Even if they can’t sell to resellers in Iran directly because of the outdated, ineffective and, to be perfectly honest, pointless embargoes still slapped on some IT products manufactured by US vendors, there is a thriving community of sub-distributors and re-exporters ready and willing to tackle this particular market.

Iran is a fascinating market and easily on a par with Saudi Arabia in terms of size, yet it remains something of an enigma in the regional channel landscape. There are some very good distributors in Iran working hard to build channels and educate resellers and end-users alike.

In many cases they have to do this with minimal support from vendors, who are not allowed to do anything in-country if their product is under embargo. This means they can neither appoint authorised distributors nor implement structured channel programmes with rewards and incentives for resellers.

With embargoes being flaunted so openly and every conceivable piece of IT kit from all vendors widely available in Iran, all the current legislation is doing is holding back the development of a structured channel. It has also prevented those distributors actually doing a great job in Iran from promoting their credentials to the wider market.

One distributor recently explained the situation regarding CPU sales in Iran. He estimated that the total addressable market for CPUs in Iran was 100,000 units per month. Of this total, he claimed that one vendor controlled 80% of the market and had an average selling price (ASP) of US$60 per unit, while another vendor held 20% of the market with an ASP of US$105. You don’t have to be a genius to fill in the vendor names in this particular instance.

Here’s what another distributor serving Iran had to say: “We are selling huge quantities of CPUs in this market. This is not a real embargo. All products go to Iran. So many companies based in Dubai are proud of their Iranian heritage and what they are doing in Iran but cannot say anything about it.”

What is becoming abundantly clear is that the distributors serving Iran are receiving short shrift from the vendors they ‘unofficially’ represent. Vendors are actively pursuing sales opportunities in Iran wherever possible, but the partners they use do not (and some would say can not) receive the levels of support given to authorised distributors in countries without embargoes.

They can never be ‘official’ or ‘authorised’ distributors in Iran and this means they are powerless to do anything about remarked product, fake product and grey kit finding its way into Iran; problems that can seriously damage a vendor's brand equity.

Some of the distributors working in Iran claim that it is actually the driving force — albeit slightly hidden — behind IT sales growth in the GCC. It doesn’t matter what IT sector you look at, sales to Iran are too big to ignore or pretend that they don’t exist. As one distributor concluded: “Where is the GCC market? About 80% of the product sold into the market is destined for Iran.”

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