Toshiba reassures disties about ‘direct’ retail plans

Vendor insists it has no plans to trade directly with key retailers in the Middle East

Tags: Al Futtaim CompanyEl Araby Group (www.elarabygroup.com/english/index.html)Jarir Marketing CompanyPC DealnetSaudi ArabiaToshiba CorporationUnited Arab Emirates
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Toshiba reassures disties about ‘direct’ retail plans Santosh Varghese says Toshiba’s channel managers will look to engage directly with the top power retailers, but this will not change the commercial role of its distribution partners.
By  Andrew Seymour Published  August 15, 2010

PC vendor Toshiba has moved to quell fears from distribution partners that it intends to initiate direct trading relationships with key retail accounts by clarifying its channel strategy for the region.

The company recently revealed plans to employ a more hands-on approach to retail management going forward, but Santosh Varghese, Toshiba's regional general manager for the Middle East and Africa, insists the emphasis is on increasing its level of engagement with key retailers, not displacing the role of distribution.

He says the company has no plans to take any business away from its distribution partners, nor is it attempting to engineer direct transactional or logistic arrangements with retailers.

Varghese insists the company simply wants to supplement the work carried out by the distribution channel to give retailers more assistance in terms of areas such as business planning and product positioning.

"Our distributors have done a lot of market development even before Toshiba had opened up an office in the region and when we had minimum manpower. Now that we are expanding in the region - with a total strength of between 14 and 16 people - it is time that we directly meet the main partners," said Varghese. "But when I say ‘directly meet', what we want do is work with them alongside the distributor on business plans for the year or possibly six months."

Varghese says it is perfectly normal for vendors to want close relationships with the second-tier partners that generate the majority of their sales, insisting that it does not alter the part that distributors play in managing the logistics, credit and inventory side of the business.

Toshiba operates a tightly-controlled distribution network in the Middle East, with a single wholesaler in most countries expect for Saudi Arabia.

Its line-up includes Al-Futtaim in the UAE, Al Futtaim & Sons in Bahrain, PC Dealnet in Qatar, Bhawan Trading in Oman, ABM in Kuwait, El Araby in Egypt and SMS in Jordan.

In Saudi, where Toshiba operates an ‘open distribution strategy', the set-up includes ABM, Asbis and Redington. It also has a direct contract with Jarir Bookstore.

"Toshiba is a distribution-oriented company and when I say that it is because we have a lot of distributors which have partnered with us for the last 25 to 30 years," said Varghese. "Like any Japanese company, distribution is considered an extended arm of the vendor." 

Varghese insists Toshiba is now in a position where it has the channel management resources to work more closely with the channel and add value to the business overall. It has identified 10 to 20 retail accounts across the region where it believes it is realistic to develop quarterly plans in conjunction with its distributors.

"What we are going for is a semi-direct relationship - we are not signing any direct contracts," stressed Varghese. "The business part is taken care of by the Toshiba account managers and the distribution account managers, so there is more transparency and no ambiguity."

Over the past few months, the Middle East retail channel strategies of the leading PC vendors have come under scrutiny, with growing talk that some want to drive direct trading relationship with key power retail accounts.

Saudi Arabia is one market that remains firmly under the spotlight due to the existing direct arrangements that most suppliers have with local powerhouse Jarir Bookstore.

Varghese admits the nature of the Saudi market calls for a different strategy - as illustrated by its multi-partner approach to distribution in the country - but denied that Toshiba was speaking to any retailers there about a direct trading relationship.

"As of now the only direct relationship is with Jarir, which is a power retailer who controls about 70% of the market," said Vargese. "That is the only direct relationship with any power retailer as of now. At this stage distributors are core business partners for us and I don't see any immediate changes happening."

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