Logitech shares its peripheral vision

Peripherals vendor Logitech is looking to strengthen ties with the region’s retailers as customers in the Middle East splash out on notebooks and other technology. Steve Daverio, general manager and senior VP, sales and marketing Europe, Middle East and Africa stopped by Dubai to see how his Middle East team have been making the most of the prospects offered in the retail sector.

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By  Dawinderpal Sahota Published  July 31, 2007

Peripherals vendor Logitech is looking to strengthen ties with the region's retailers as customers in the Middle East splash out on notebooks and other technology. Steve Daverio, general manager and senior VP, sales and marketing Europe, Middle East and Africa stopped by Dubai to see how his Middle East team have been making the most of the prospects offered in the retail sector.

Talk us through your distribution model in the Middle East.

We deal directly with power retailers. The focus of our business has always been the consumer. We still work with distributors - they are our logistics partners, but we go beyond; to their customers. Our focus is on power retailers and we've started to create a market for our products and drive our business. I think that's the way most consumer electronics and IT vendors work today. When we were in the Sharaf DG Times Square store I saw a group of Japanese fellows in ties and suits. It turned out to be the Panasonic team doing the same thing that we were!

With so few employees in this region, how do you intend to stir up demand for Logitech products?

The number of people working around the Logitech brand in this region will grow. That doesn't just mean our employees, it's also the merchandisers. We're putting contracts together in UAE and Saudi for a series of dedicated merchandisers, and from a quantity stance, the biggest increase in people working with Logitech will be these merchandisers. There will be 20 to 30 people in the Middle East dedicated to the Logitech brand within the next few years.

And what plans do you have to boost the level of support you offer to retailers in the region?

We're looking at a logistics facility in Turkey - the fastest growing part of EMEA is in the East; in places like Eastern Europe, and the South: Turkey, the Middle East and Africa. The distribution system we've had in place for the last 10 years is no longer optimum in covering the geographical footprint we have. We are revising that and we've been looking around the region and my preferred scenario is to have our localisation in a place like Turkey.

Why do you think retailers would be willing to step up their engagement with Logitech?

I think the most compelling argument is our business model. The centre of the IT universe is becoming the notebook, but competition is fierce and neither the manufacturers nor the channel are able to make a lot of money. The head of the largest retailer in Europe admitted to me that they made a loss from selling notebooks last year. They're not making enough money to survive on purely hardware sales so we find ourselves extremely popular with retailers because we're saving their lives, as far as margin goes.

So how much can a retailer expect to make from peripherals?

When a new notebook is launched you can make margins of 5% to 8%, but things move so fast you can't sustain that margin. By the time it ends its life, retailers have to drop the price below cost. Compared to that, retailers in this region are making 20% to 25% on accessories. Plug-Ins can sell a notebook with a webcam and they might, in absolute terms, make the same amount on the webcam as they do on the notebook.

What major challenges do retailers in the region face when selling peripherals?

A notebook is made to be mobile, it's already got a keyboard, touchpad and a webcam fitted so the consumer doesn't realise he could be buying peripherals to go with it. A customer might go into Carrefour and see a special offer on a notebook and buy it. When he gets home he realises the touchpad is not a good as a mouse, so he'll go back, but not necessarily to Carrefour. He might go elsewhere to buy the mouse and that company is going to have the real benefit as far as profit goes. The attachment rate is key for retailers now. They work with us to make sure that when customers walk into a store, they walk out with piles of accessories.

So what are your plans for the region over the next 12 months?

We're getting ready for the big boom; looking at all the apartment buildings being made. It seems there will be around 10 million people in Dubai soon so we need to need to make sure retailers can support that. The biggest challenge now is the rest of the region as we're beginning to get the UAE under control.

And what plans do you have for the rest of the region?

Saudi Arabia and Egypt are major markets and we want to grow our presence there. We'll be getting merchandisers in to create demand and it's challenging in those markets so we'll be appointing distributors in Saudi Arabia, and possibly Egypt, to support that.

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