Under attack

Relationships in the channel are going to be severely tested as companies take whatever measures necessary to ensure their progress in the Middle East.

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By  Andrew Seymour Published  June 1, 2008

You're going to see relationships in the channel severely tested as companies take whatever measures necessary to ensure their progress in the Middle East market goes unhindered. Nowhere is this poised to be more visible than at reseller level, although not necessarily for the reasons you'd imagine.

In the Dubai market - especially - there are several emotive scenarios playing out which are leaving some parties perturbed by what they see. Resellers and re-exporters speak of several emerging, and ultimately threatening, trends they now face that simply wouldn't have seemed conceivable as recently as a year ago.

The most notable of these is the increasing veracity of competition from the distribution channel. Distributors in the region have traditionally been content to sell into resellers and re-exporters, but now it seems that arrangement no longer satisfies them and they have started targeting their customers as well.

I'm not talking end-users here - although alarmingly that accusation has also been levied - but reseller or sub-distribution customers in other Gulf markets or parts of Africa that source from the Dubai trading community.

The commercial pressure on the big distributors to expand their business and widen their account base is the most logical explanation for this behaviour, although it offers no consolation whatsoever to traders that are seeing customer relationships they've spent years nurturing come under attack.

This trend is also intrinsically linked to another rising issue that has riled some traders: the loss of sales staff to distributors.

It is not unheard of for mid-level disties to woo sales talent from Computer Street - and indeed it's common to witness personnel movement between traders - but channel sources insist the market's big distributors are now getting in on the act too. For them, it merely compounds their fear that with the Jebel Ali-based business already sewn up, these distributors now want a larger piece of the Dubai re-export pie.

Traders claim distributors never previously crossed this line, but now they have no qualms about recruiting from the street community. Why? Well, it comes back to their desire to ramp up business by directly addressing the same customers that the traders and re-exporters previously regarded as their own.

A star salesman with lengthy experience of working for a trader is worth his weight in gold - not for his technical guile or product knowledge, but for his contact book. And that's what the distributors are after at the end of the day.

The bond between a reseller salesman and his customer tends to be much stronger than you could expect to see at other levels of the market. He'll personally get involved in each deal and manage that relationship on a very close basis, while the customer will probably insist upon only dealing with him rather than anybody else in the organisation.

Just as significantly, the salesman will know what it takes to serve that customer and what needs to be done to ensure the product reaches them. In this region, that kind of know-how is invaluable as distributors are quickly realising.

It also means that the customer's loyalty is tied to the individual, as opposed to the organisation, so when that salesman heads off to his new distribution role the customer will invariably follow him. In fact, the salesman will probably have already informed the customer of his new venture and promised the same kind of deals and favours when he gets there.

Now you could argue that a reseller or trader on the receiving end of this scenario has nobody to blame but themself for failing to retain their staff, but that doesn't really legislate for the realities of operating at this tier of the market. These companies aren't made of the same financial mettle, nor do they have the resources of a large vendor or distributor, to cope with such a loss in a matter-of-fact way. If their long-serving star salesman has been poached by a distributor - as happened to one trader I spoke with only last week - it has seriously disruptive consequences for the business.

It is possibly a reflection of the demands placed upon the second-tier channel that has led to this kind of conflict occurring, and it is difficult to see where it will end. It certainly threatens to alter the dynamics between some distributors and traders existing in the Dubai market, although the long-term impact would appear to be far more detrimental for the latter simply because of the time and cost involved with developing a contingency policy.

This is just the sort of issue that could give the Dubai Computer Traders Group an opportunity to show how effectual it can be when it launches later this month. I'm sure many traders would welcome any kind of advice about how to overcome some of the latest challenges to befall them.

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