Desperate dealers return stock to distributors

IT dealers in Dubai are resorting to giving unsold stock back to distribution partners as they struggle to cope with current pressures

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By  Julian Pletts Published  January 29, 2009

IT dealers in Dubai are resorting to giving unsold stock back to distribution partners as they struggle to cope with the current pressures felt in the market.

Some traders in the WiFi Computer Zone, a local hub for IT hardware sales, have told distributors pursuing payments to instead reclaim goods they have supplied to them because they are not able to meet the terms. Given the impracticalities of pursuing legal action and the modest sums thought to be involved, distributors are electing to recover the stock in the hope they can sell it on elsewhere.

Experts claim such measures are virtually unheard of in the channel, but serve to illustrate the challenge facing dealers that have been hit by softening demand and reduced credit availability.

Rakesh Bohra, general manager of the WiFi Computer Zone, confirmed he was aware of the issue and acknowledged it was an unusual step for dealers to take. “I haven’t returned any goods but I know some people that have and most of the distributors have taken the goods back instead of waiting to get the money,” he said.

As well as citing the impact of the global credit crisis, Bohra blames the fact that sharp price declines between buy-in and sell-out are making it difficult for traders to operate healthily. “If it continues to happen like this I don’t know how we are going to stabilise our market and we are going to vanish,” he warned.

Sources cite Fujitsu Siemens as one brand that has been hurt by the returns, but Mohan Choudry, general manager at authorised FSC distributor Distributech, denied that is the case.

He said: “We have four or five resellers [in the WiFi Zone] and most of them have given stocks back. I have had a return rate of nearly 30%. But it is not FSC alone. Generally it has been the case for all brands — in my opinion the least returns have been FSC.”

Choudry insists Distributech is willing to offer assistance to resellers that find themselves in difficulties, stressing that returning products should be the very final option.

“They should not think about returning products, but instead work with the distributor and vendor and use the same shelves to clear things. Sending back stock is not solving anybody’s problems,” he said.

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