Trading troubles

Dubai's IT trading and sub-distribution community has had to navigate its fair share of obstacles over the years. In fact, some might say its enduring ability to provide customers with the products they need regardless of the circumstances is the reason why its role at the heart of the regional supply chain remains unchallenged. But is its stiffest test yet to come?

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By  Andrew Seymour Published  May 4, 2008

Dubai's IT trading and sub-distribution community has had to navigate its fair share of obstacles over the years. In fact, some might say its enduring ability to provide customers with the products they need regardless of the circumstances is the reason why its role at the heart of the regional supply chain remains unchallenged. But is its stiffest test yet to come?

As frequent visitors to Dubai's Khalid Bin Al Waleed Road will know, residents of Computer Street serve an eclectic mix of customers, many of which are companies and individuals that having been purchasing products for years, and often hailing from some of the most inaccessible markets in the world.

It doesn't take too many conversations with traders on the Street to realise that, generically speaking, the profile of these customers has changed over time.

Turn the clock back a decade, and it was business from the Russian IT buyers, and those from the former Soviet states, that helped prop up many resellers. At that time, Russia was still an unknown quantity for the majority of vendors. Few had established meaningful distribution channels in the country, while the prospect of having people based on the ground to develop the market was not really a serious option.

All that has changed dramatically in the past five years. Russia's emergence as Europe's most promising IT market has forced vendors to sit up and take action, culminating in the sort of investment that has allowed local channels to become self-sufficient. Sourcing products entirely from Dubai is no longer as necessary, and while the Russian influence in Computer Street is still significant, it's can't be described as the bread and butter business it once was.

Similar factors have altered the course of the GCC markets too, mostly notably in Saudi Arabia. The 5% customs duty that was removed from most IT products in Saudi last year, but is still imposed at the Jebel Ali end of things, remains a sticking point for Dubai traders. Why? Because it means Saudi customers are now in a position to source products directly from the Asian markets at a price they find difficult to match unless they sell at cost.

At the same time, virtually all of the region's major IT distributors are now present in Saudi and can tempt the market with local availability and stock. It's no coincidence that several Dubai traders complain their business has tailed off in Saudi during the past 18 months as business that once went to them has either been shifted to local channels or gone elsewhere.

On top of that, the groans that classic tier-two distributors are now directly targeting the dealer accounts that the reseller and sub-distributors from Dubai once considered their own are growing louder by the day.

So, if the Russian customers are not as prominent and GCC customers are no longer as dependable, where does that leave the Dubai traders to get their business? The answer is from Africa, which now forms the main source of sales for many resellers.

It's not difficult to see why this is the case. The African markets are still under-developed from a vendor point of view and there is little in the way of local channel infrastructure, while most traditional distributors regard such territories as too risky and unpredictable to warrant investment.

In other words, the profile of these markets plays perfectly into the hands of the Street community. Their ability to deliver in terms of pricing, shipment arrangements and flexibility, while at the same time taking more risks than you'd perhaps associate with regular distributors, leaves them sitting strongly.

Yet I can't help wondering what would happen if circumstances change in the future, just as they have in Saudi Arabia or the CIS. When vendors begin developing local channels in Africa - because at some stage they will - is it going to threaten the existence of Dubai sub-distributors and re-exporters? And are these same companies going to see their customer base eroded as distributors, desperate to increase customer breadth, start targeting African dealers as they have done elsewhere.

The chances are the answers to these questions won't become apparent for a long while yet, but when they do there is every possibility that it will test Computer Street's resolve. Traders on the Street have done a remarkable job of building loyal customers across multiple markets over the years, but their ability to find new markets and new customers will become just as important in the long-term battle for survival.

Calling all vendors

Don't miss your opportunity to clarify which distributors are authorised to carry your products in the region. Our forthcoming ‘A to Z of authorised distribution in the Middle East' will serve as an up-to-date resource on the distributors that manufacturers have entrusted with serving the channel in markets such as Bahrain, Saudi Arabia and the UAE.

If you're a vendor then you can guarantee your inclusion in the A to Z by taking two minutes out of your schedule and completing an A to Z listing sheet, which you can get by dropping me an e-mail at andrew.seymour@itp.com or calling +971 (0) 4 391 0889

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