Threat of direct sales model breeds anxiety

Vendors in the region are exploring the viability of online sales stores, which does not bode well for the channel

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By  Administrator Published  November 9, 2008

Although product flow in this region can be a little hazy, it's always been the rule that vendors and distributors sell to resellers, and resellers then sell to end-users. Those who compromise that sequence are playing a risky game.

Signs that some vendors have been trying to disrupt the natural order of the food chain just recently by exploring the viability of online sales stores do not bode well for the channel. Resellers and retailers admit that they are keeping a careful watch of developments in the region.

Digital devices supplier Creative is one vendor that has given partners the cold shoulder by unveiling a web store to serve end-users in the UAE.

As revealed in the last issue of Channel Middle East, Creative has attempted to play down concerns that the move pitches it into direct confrontation with the channel by insisting the store will feature non-competing products to those carried by resellers.

Based on the initial reaction from partners, however, that disclaimer has done little to appease those unnerved by its actions.

They fear that even if the vendor initially sets out with the intention of marketing non-conflicting goods, there is nothing to suggest that strategy won't change in the future.

There is also anxiety that it will simply lead to consumers going in store to request the same products or offers they have seen online.

"Some of the customers may see Creative products online and come to us and say, ‘this is the discount that Creative is offering online,'" warned Nilesh Khalkho, CEO at power retailer Sharaf DG.

"It would be nice in that scenario if the discount they give online is made available at channel level as well."

The wider point that some retailers are keen to make is that once a vendor starts trying to do the job of its channel, it does nothing to encourage partner loyalty or strengthen relations.

There is a counter-theory that because multiple layers of distribution blur the lines between manufacturers, intermediaries and end-users in the Middle East anyway, vendors perhaps feel they can get away with targeting the client directly.

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