Why one is never enough

RIM’s appointment of Axiom just goes to show that one distributor is never enough

Tags: Axiom TelecomBlackberry (www.blackberry.com)Research In MotionUnited Arab Emirates
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Why one is never enough The BlackBerry will now be carried by two master distributors in the Middle East following RIM’s appointment of Axiom. (Getty Images)
By  Andrew Seymour Published  December 5, 2010

Almost every vendor that subscribes to an exclusive distribution model reaches a stage in its existence where one partner is no longer enough. Research in Motion (RIM), it would seem, has just arrived at that point.

The smart phone maker's appointment of Axiom as its second master distributor for the region is a move that speaks volumes for the durability of the sole distribution structure in the Middle East.

While other handset rivals have long served the market through multiple channels, RIM has been a one-partner outfit, relying on the efforts of Emitac Mobile Solutions (EMS) to ensure its progress in the region. Until now, that is.

The explosion of RIM's business in the region — not to mention the competition it now faces from the likes of Apple — would appear to have led RIM to review its strategy. While the single distribution set-up offers an obvious set of advantages, there is no denying it can also leave a vendor dangerously exposed and without sufficient bandwidth.

RIM seems to have realised that with the smart phone market tipped for even healthier growth in future, it is going to need stronger distribution coverage than it currently enjoys if it is to gain an ample share of the pie.

When I spoke with RIM's regional general manager, Khaled Kefel, last week he made it perfectly clear that the vendor's priority is to reach as many different sales channels as possible.

Bringing on board a second distributor is one way of doing that.

Kefel would not go as far as stating that the exclusive distribution model didn't work, but clearly EMS can only address so much of the market on its own.

RIM regards the independent retailer and dealer channels as particularly important sales conduits. The thinking, therefore, is that Axiom might be able to reach parts of the market that are going untouched.

Ensuring better sales control is also a factor in RIM's decision to appoint a second distributor.

Like several smart phone vendors, RIM faces the issue that sales channels in this part of the world will happily import from outside markets if they find it to be easier or cheaper than sourcing locally.

As an international vendor, there is only so long you can turn a blind eye to that. Kefel himself acknowledges that having a second authorised distributor in the region could bring about the sort of improvements in penetration and pricing that go some way to reducing the level of parallel importing.

He is less willing, however, to admit that credit availability was a major factor in hiring a second distributor, but there's no hiding from the fact that RIM should be able to benefit from this too. After all, expanding the level of credit sources available to the channel has been the primary motivation for many distribution agreements this year.

As the market continues to digest news of the RIM-Axiom deal, it will be interesting to observe how some other potential implications play out.

For a start, as well as the GCC, Axiom has the rights to distribute BlackBerry products in Jordan and Lebanon, two markets where it doesn't have any presence. How will it go about building channels there? Can it really add any value in those markets?

Additionally, will Axiom's retail stores be able to buy products at a more favourable price from its distribution entity than a rival retailer in the market might expect? These are valid questions that have added another dimension to Axiom's appointment as a master distributor.  

According to RIM, it is not planning to supplement the Axiom tie-up with a third or fourth distributor, at least not yet.

That might well be the case, but the bigger picture issue here is that its deviation from a sole supplier model illustrates that there comes a point when every vendor outgrows that sort of set-up.

One only wonders what RIM's handset rival Apple — a staunch proponent of the sole distribution model in the Middle East — makes of it. With the Mac vendor stepping up its business in the region by opening an office in the UAE, I'm sure it must be watching developments with real interest right now.

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