Creative defiant despite channel backlash

Defends recent launch of an online store that Middle East partners fear will directly compete with the channel

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By  Julian Pletts Published  September 29, 2008

Digital devices vendor Creative Labs has defended the recent launch of an online store that Middle East partners fear will directly compete with the channel.

While the vendor says the UAE portal is still an ‘experiment’ at this stage, it admits that partners were not consulted on its plans to sell directly to end-user customers.

“This is to target those people who want to go online and who do not want the hassle of going to the store and so on,” explained Jordan Lee, manager of sales at Creative Labs Middle East. “We didn’t talk to [partners] too much because we imagined there would be some kind of a resistance, but the main thing is that we do see this as a marketing tool,” continued Lee.

Creative says its motivation for developing its own online sales channel includes the lengthy time to market for products through traditional retail, competition for shelf space and the propensity for retailers to charge for store space. It also feels the online store will be more effective for targeting commercial and corporate end-users, which it hasn’t yet properly penetrated in the Middle East.

“One of the benefits is the time to market — sometimes we launch some products and it takes two or three weeks for the products to be listed in their store, not by mistake of the distributors or the partners, but more because the retailers have many brands and SKUs to list and they have limited shelf space,” said Lee. “Therefore some of our products do not get to see the light of day.”

Lee insists the portal will give Creative the chance to offer high-end products from its portfolio that existing partners might find too “high-reach” to carry — a move that it claims will avoid direct competition with the channel.

However, news of the move has been met with anxiety by retailers, who fear that Creative will eventually make all products available online.

Gaurav Brahmwar, managing director at IT retailer Computer Depot, said: “If the vendor starts opening stores then they don’t need resellers. They didn’t call me, but to be honest I don’t think it is a very good idea for a vendor to do that unless it is not confident about resellers promoting their products.”

Brahmwar suggests the move to open a direct sales channel may be an attempt by the audio devices specialist to protect market share from mobile phone makers that are increasingly offering MP3 capabilities on handsets.

Nilesh Khalhko, CEO at Sharaf DG, also raised concerns over how the move would impact the channel. “Some of the customers may see Creative products online and come to us and say, ‘this is the discount that Creative is offering online’. It would be nice in that scenario if the discount they give online is made available at channel level as well.”

Although Creative has said that there will be “online only” discounts for web buyers holding periodical discount codes, Lee insists channel partners are already able to offer similar incentives to their customers.

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