Reselling Reward or Ruin

A spate of reseller runaways in 2011 cast doubt on the health of the regional channel with stakeholders demanding that more needed to be done to restore confidence.

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Reselling Reward or Ruin
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By  Clayton Vallabhan Published  June 25, 2012

A spate of reseller runaways in 2011 cast doubt on the health of the regional channel with stakeholders demanding that more needed to be done to restore confidence. Now, however, there are signs of an upturn but what does this mean for the reseller channel? Clayton Vallabhan reports.

The Middle East IT market may be showing signs of recovery, but the channel business in the region is still as highly competitive as it ever was, and there are still resellers out there that are struggling to balance the books, identify new opportunities, and execute strong business plans to help them grow their business.

And balancing limited resources and necessary investments for business growth has not always been easy, especially now after the shakedown from the 2009 global economic meltdown. But how are resellers coping? What innovation are they brining to the game to ensure survival of their businesses?

Experts advise that the primary need at the moment is for reseller businesses to understand that it is crucial that they work with authorised channels in the Middle East region.

There are many reasons to support this, but perhaps the greatest of them according to Roger El Tawil, executive director, Almasa Value Distribution, is to provide organisations with complete transparency and be able to lower the risk of theft, counterfeiting and other issues. El Tawil said by being linked to official distribution channels, resellers wouldn’t have to wait to receive stock from their distributors.

Ossama ElDeeb, regional sales manager, AMD, META added that working with authorised IT channels is beneficial if resellers want to establish long-term partnerships. He advised against using unauthorised channels to make a quick buck.

“Being opportunistic and working with an unauthorised IT supply chains can be profitable in the short-term, however looking into long-term sustainability and profitability is a key element to success in this market. In addition to that, going through the official channels means that you get access to a number of privileges and incentives offered by vendors.”

ElDeeb said as an example, AMD provides marketing investments and sales opportunities as well as price protection to all its authorised partners and allows them access to training that improves their understanding of AMD and its products.”

Jai Shankar, marketing manager, Brother Gulf, advised that there was a lot to gain from authorised channel partnership. He said: “These channels are backed by years of experience and have also created a good reputation for themselves. There is also the advantage of knowing that you are dealing with distributors that have already made their presence felt in the market. After sales service and support is also guaranteed for the end-users.”

Whilst it is clear that authorised channel partnerships bring many benefits, in the Middle East unauthorised channels of distribution have contributed to some of the unethical business conduct among resellers.

Shailendra Rughwani, president, Dubai Computer Group (DCG) said: “The first quarter of 2012 saw business pick up quite well in the reseller channel, despite issues with some countries where business has been halted. This halted business accounted for approximately 20 to 25% of the entire business. There are however other countries where business has improved in the region.”

Rughwani said certainly from a regional perspective, the DCG has seen growth in major GCC countries in Q1. “The traditional re-export markets like West, East, Central and Southern Africa have been doing really well for the past six to eight months,” he noted.

He pointed out that new trading channels have been opened up and opportunities are emerging in countries like Sudan, Zimbabwe, Mozambique, Congo, Malawi and the CIS countries. “All this has compensated for the slowdown in business from the region due to projects being delayed or stopped because of the political instability,” he said.

However, Rughwani pointed out that April onwards, things have started to slow down and fears it could remain like this for the rest of Q2 2012. “The reseller channel has been good, and compared to last year, there has been no runaways in 2012 so far. The markets are slowly heading towards some stability, and distributors are cautious,” he said.

He added that credit facilities have been cut down with insurance companies scaling down on insuring businesses in the IT sector because IT is still considered a high-risk. “We feel it was a necessary step in the right direction because the channel marketplace needed some form of control. We hope as things stabilise, the will come back to normalcy,” he said.

Rughwani warned that if the current credit facilities or terms available to resellers go on for longer than six months, then that will start to affect channel businesses negatively, as credit is the main driving factor of this business. Even for genuine reseller companies credit is crucial and unfortunately the whole IT industry works on credit,” he said.

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