Retail detail

Value added services are held up as the way forward for re-sellers fed up with commoditisation and over-competition.

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By  Andrew Seymour Published  May 17, 2008

Value added services are consistently held up as the way forward for commercial-focused IT providers fed up with commoditisation and over-competition, but there is also ample room for the retail channel to explore its own version of this.

The rapid emergence of the retail channel has been one of the most striking features of the UAE IT market during the past couple of years. An increase in the volume of new outlets springing up, coupled with a spike in the number of competitors entering the field, has created a dynamic market environment.

Retailers have seized the opportunity to partner with vendors that previously regarded access to the consumer market as cumbersome and restricted, culminating in spectacular offers and compelling portfolios to generate foot traffic.

Although this development has arguably had a detrimental impact on traditional IT retail providers, the ‘power retail' segment has quickly carved out a reputation as the de facto source for cheap prices and wide-ranging choice. Whether signing exclusive agreements with vendors or advertising new product line-ups at a cost that rivals would struggle to match, the whole formula for success has been based on price and availability.

This, however, is precisely why question marks over the sustainability of such a model continue to endure. Because sooner or later there will always be someone willing to offer an even cheaper price; someone willing to stock a greater variety of brands if it means enticing additional customers.

But are retailers beginning to make provisions for that?

Just recently, IT and consumer electronics retailers have been sounding off plans to round out their proposition by developing more in the way of a services offering. Emax is shortly preparing to launch a local service centre, paving the way for it to provide repair and installation services, while only this month Sharaf DG announced its ‘Tech Doctor' proposal. Its plan is for technicians to travel offsite and diagnose any problems that technology consumers are suffering - before offering to fix it for a premium, of course.

I doubt whether such services will generate the thousands of dollars that a weekend's worth of LCD TV sales guarantee, but it is a sign that retailers acknowledge the need to be increasingly innovative as the overall market matures.

Differentiation is a word that every vendor uses in the context of channel development these days, and retailers must understand that applies to them as well. Introducing a stronger services element will become a vital tool for cementing customer loyalty, rather than merely engaging with consumers when they happen to wander into a store to seek out the price of a product.

Unfortunately, the emphasis on price and availability - and the relatively youthful age of the sector - has led many retailers to consider the term ‘service' as nothing more than asking the customer if they fancy buying a warranty at the point of purchase.

But as the likes of Sharaf, Emax and others are now demonstrating, there is actually a services-based opportunity for those that wish to grasp it, and are capable of marketing it in the right way.

As the market evolves, there is every chance that price and availability won't be enough to satisfy the discerning IT consumer, which is where the services aspect comes into play. What's more, it may also provide the perfect leg-up to the SOHO and small business market, which several large retailers in established markets now consider an important revenue base, having built it up from scratch.

Either way, the retailers that have radically changed the face of the market with their approach to consumer IT retail need to carefully look at what steps they must take to display a new degree of sophistication that isn't only confined to the product and its ticket price.

Opportunity knocks

It's nice to know that good old-fashioned opportunism is alive and well in the Middle East channel. Cisco's annual Expo show in Riyadh last week attracted more than 2,000 executives from the Saudi channel, providing an ideal platform for resellers to build relationships and explore new partnerships.

But it wasn't only Cisco partners that found their way into the event.

A business development manager from Exit40, a distributor of products from Cisco rival Netgear, also gained access to the exhibition hall where the networking vendor's leading allies were chewing the fat. After flying in under the radar, he promptly spent the afternoon trying to exchange business cards with Linksys partners that might be persuaded to switch brands.

Although it's not clear how fruitful his endeavours actually were, he certainly earns full marks for initiative. Cisco, on the other hand, may want to tighten its registration policies before next year's show or risk further infiltration from the opposition.

Andrew Seymour is the editor of Channel Middle East English.

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