Street life

Khalid Bin Al Waleed Road - better known as Computer Street to those familiar with it - remains a vital hub for the resale of IT products in the MEA region. But how is life changing for residents of this busy Dubai district and, more importantly, what does the future hold? Channel Middle East investigates.

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By  Andrew Seymour Published  June 15, 2008

Khalid Bin Al Waleed Road - better known as Computer Street to those familiar with it - remains a vital hub for the resale of IT products in the MEA region. But how is life changing for residents of this busy Dubai district and, more importantly, what does the future hold? Channel Middle East investigates.

If you're looking for an IT product, new or old, chances are you'll be able to find it on Khalid Bin Al Waleed Road, home to the region's most vibrant reseller and trading community.

There have been some major changes to the Middle East IT channel over recent years, but the endurance of companies based on and around ‘Computer Street' is testament to both their ability to survive and the regard in which they are held by every vendor eager to increase its market reach.

One month sales might be up and then the next month the vendors will come up with a huge price drop. But what happens to the stock already in the market? They should be worrying about that.

Indeed, one of Computer Street's strongest assets is the influence that it continues to wield in the wider region. Markets such as Iraq, East Africa and the CIS would be impossible to penetrate were it not for the traders that have cultivated long-lasting relationships with customers from these territories.

Like any group operating in an increasingly commoditised environment, Dubai IT traders face some enormous challenges and they will readily admit it. Building a healthy business has become a harder task in recent years; a combination of inflationary pressures and competitive factors clearly taking its toll.

Over the following pages some of Computer Street's most established names give full and frank assessments of the issues affecting their business, sharing their views on everything from vendor support to distribution service.

In addition to that, well-known faces from the Al-Ain Centre and the WiFi Zone - other mainstays of Computer Street - also provide a fascinating insight into how they rate their future prospects.

What's clear from these accounts is that the Dubai reseller community is prepared to do everything it can to protect a position that has taken years to build up.

Channel Middle East spoke with a number of Dubai Computer Street residents including Sunny Menghani (SM), managing director at King Computers; Tarun Nandi (TN), managing director at Bluebell Computers; Mohamed Giado (MG), managing director at New Computer Trading; Sunil Lalwani (SL), director at Q-Line Electronics; and Talal Ahmed Al Zaabi (TA), chairman at Grandsys Group.

What are the biggest challenges facing companies operating in Computer Street these days?

TN: The biggest challenge is controlling the cost and maintaining the profitability. A couple of years back the Street was totally different. People used to sell 70% OEM and 30% branded, but now it's the other way around.

With the branded products you need to maintain a profit margin, which is not easy. The vendors have to take more responsibility to deal with the fact that they might not have continuous growth.

For instance, one month sales might be up and then the next month the vendors will come up with a huge price drop. But what happens to the stock already existing in the market? They should be worrying about that.

TA: The expenses are the biggest issue because they are becoming very high and I don't think the margin in IT can cover it. For example, we have a branch in Sharjah and between 2005 and 2007 the expenses - which cover rent, government fees, salaries and staff accommodation - increased by AED300,000 (US$80,000). You have to pay these costs, but the biggest challenge is how to reduce them.

SL: Traffic and parking are two challenges, but as far as business is concerned we are facing fierce competition from short-term businesses that disturb prices and then disappear. Nowadays, the so-called distributors are also turning out to be our competitors.

But one positive aspect of Dubai is that the market size is growing, although as the numbers increase you have to keep the stock so it is more challenging than it was seven or eight years ago.

One other issue is that the price of the hotel rooms has gone up so the frequency of buyers visiting has gone down, but their quantities have gone up to cover their costs.

What is driving the re-export market in Dubai and how do you see it evolving in the future?

TA: The local markets in the GCC and North Africa are very important - they are buying locally in Dubai and re-exporting. It does keep changing though. Sometimes the Saudi market is strong, sometimes its Libya or another African market.

Lately we have seen customers from overseas opening branches in Dubai to purchase and ship.

Others are brokers who will develop sources in the market and then quote back to their customers. In my opinion, most sales that are conducted locally are still going to a destination outside Dubai.

SM: The re-export market is still okay and we are surviving on that market because we have customers ordering regular quantities and Dubai is growing. That growth is taking place in the corporate sector, so companies supplying to that market are doing okay.

But you never know if the re-export market will change in the future.

Russia took off one day and for four or five years it was a good market, then suddenly Africa came in and everybody supplied to Africa. If new markets open up then Dubai always stands a chance.

We are selling to India, Pakistan, Afghanistan and Iraq too. Iraq's a good market nowadays; they come and buy from Dubai.

SL: It will keep growing because Dubai is a hub for emerging markets. Seven or eight years ago we were treating Iran. Now Iran is self-sufficient - distributors are sitting there and the Iranian street buyers are receding.

Four or five years back you saw Africa, Russia and the Indian sub-continent. New markets are coming up everyday, which is a good thing.

CIS buyers used to come and buy from the Street, but they are fewer in number now. Now it is mainly African and Indian sub-continent customers that are coming over.

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