Horses for courses

The ignominy of having an over-distributed channel remains a curiously sensitive topic in vendor circles, attracting a certain stigma that nobody wants to be saddled with. And regardless of whether it's true or not, all vendors will rigorously deny it is a predicament they face.

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By  Andrew Seymour Published  August 13, 2007

The ignominy of having an over-distributed channel remains a curiously sensitive topic in vendor circles, attracting a certain stigma that nobody wants to be saddled with. And regardless of whether it's true or not, all vendors will rigorously deny it is a predicament they face.

Indeed, while you're highly likely to stumble across a vendor accusing its nearest competitor of failing to keep a lid on their routes to market, the chances of extracting an admission that they face the same problem are virtually zero. This subject only has the potential to proliferate as vendors assess whether they have the right quantity of partners in light of the rate of growth anticipated for the region.

Any brand that has worked with a select number of partners for a substantial amount of time will already have pondered the feasibility of adding new channels as a way of not only increasing the level of competition within its channel, but ensuring there is enough inventory to satisfy the capacity of the market.

I've heard it suggested that several years ago a vendor could appoint a distributor without too much thought because the rewards would have been instantly visible and the backlash from any existing partners minimal. Nowadays, however, it commands a degree of diligence because channels in the region have become more developed and structured. Bringing on board a new distributor that overlaps with what an existing ally is doing is merely counter productive and guaranteed to create resentment.

Therefore, the move to appoint a new distributor has to be done in the context of where it precisely fits in a vendor's overall strategy. Dell's decision to tie up with Asbis in a number of Middle East markets last week will undoubtedly have raised more than a few eyebrows in the channel. On the face of it, it appears to be an unlikely pairing given Asbis is best known for its stealth in the hard-and-fast components space, where the name of the game is to shift mountains of CPUs, hard drives and memory devices to the reseller and systems builder community.

If you were going to put your money on Dell naming a distributor for the UAE market - the largest of the five territories included in the agreement - then Mindware would surely have seemed the obvious bet given it already holds a Dell contract in Saudi Arabia. However, after several months of negotiations between Dell and Asbis, the components distributor received the green light to begin shipping the vendor's commercial portfolio of PC and storage hardware.

The fact that Asbis doesn't carry any other competing systems brands could have weighed heavily in its favour. While a broadline distributor would seem a more logical choice as a partner, it has to be said that Dell has found a company that will only be focused on its kit. Had it gone for a distributor already carrying HP, Acer or Lenovo then it's brand would clearly be competing for prominence in the portfolio.

Yet the major factor that appears to have shaped Dell's thinking is the need to penetrate a specific segment of the market. Both Asbis and Dell have emphasised the importance of this tie-up in terms of developing Dell's brand among small and medium businesses - a major focus for the vendor at both a regional and corporate level given the launch of its Vostro line-up.

Clearly the reach that Asbis can offer into that market through its endeavours in the components space is a prospect that appeals to Dell, even if it is gambling to some extent on the assumption that those resellers currently buying boxes of flash drives and graphics cards will also want to place orders for notebooks or servers.

The point here though is that Asbis' brief to develop the SMB channel is what stands out a mile, and at a time when over-distribution remains an emotive topic in the Middle East that could prove to be a sensible move by Dell. Though Emirates Computers is already working for Dell in the UAE SMB sector, for example, bringing on board a pure distributor to develop a certain niche or market sector goes a long way to preventing the duplication and potential for trouble that a "catch-all" appointment could bring.

Earlier this year, Fujitsu Siemens' Middle East division pulled off a similar trick by handing PC International the task of specifically targeting accounts in the UAE power retail segment. FSC's visibility in this market sector had been limited at best, so the appointment of PCI was a solution to this dilemma without treading on the toes of existing partners.

With other PC manufacturers also expressing a desire to widen their wholesale networks in certain Gulf countries, I'm convinced we are going to see vendors dissect their distribution channels in a far more strategic way. Ironically, this could turn the very definition of over-distribution on its head by removing any stigma attached with employing multiple partners.

Theoretically, as long as the overlap is minimal and the pricing consistent, it wouldn't actually matter if vendors used a higher number of distributors because each one would be dedicated to a certain market sector. Whether the realities of this would dictate otherwise is a matter of debate - especially given the tremendous amount of discipline it would command from distributors and the level of management required of the vendors.

What are your thoughts on the way vendors get their products to market in this region? How big is the problem of over distribution? As usual e-mail your thoughts to andrew.seymour@itp.com

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