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Distie channel sitting with high PC inventory

Resellers concerned that high stock levels could lead to product over-stuffing

Distie channel sitting with high PC inventory
Tantawi says the local distribution channels are sitting with 90-days inventory supply.

Following recently released IDC figures that the Middle East and Africa (MEA) PC market reported mild year-on-year growth of 4.8% during Q2 2012, with a total of 5.4 million PCs shipped, Channel Middle East has learnt that the Dubai channel is sitting with high inventory levels.

According to sources close to the matter, the local distribution channel is facing inventory challenges as most PC distributors are sitting with high stock levels.

One reseller that spoke to Channel Middle East on condition of anonymity, said it is concerning that the current turn of events could be the start of things to come as the channel could experience product over stuffing and open-up price wars. "We are just hoping that it will be okay post-Ramadan, but we are worried that all the gains the channel made in the first four months of the year will be wiped out," said the reseller. "The market is very tight as sales have slowed down. I hope bodies such as the Dubai Computer Group (DCG) can step in to resolve this matter with all channel stakeholders."

Hesham Tantawi, vice president, Asbis META and DCG board member, confirmed that the Dubai channel is sitting with high PC inventory levels. "We are talking of 90-days supply that the local channel is grappling with and it is stack among channels. This is too much for distribution and if it's not corrected, it could have ripple effects in the Dubai and regional channel," he said.

Tantawi said as DCG, the association is concerned with the high PC stock levels and with GITEX Technology Week around the corner, PC vendors will be pushing for more volumes in the market and things could get worse. "We would like to urge DCG members to exercise prudence and not expose their businesses to risk. However, resellers that will be less exposed to risk are those that have continued to conduct ethical business, have invested their time, effort and money in developing their own niche markets," he said.

According to IDC, one of the key reasons for this slow growth was the combination of high volumes shipped by several PC vendors during Q1 of 2012, combined with a notable slowdown of demand from end-users during Q2 of the year. The analyst firm confirmed that certain key vendors in the MEA region had exited Q2 2012 with high inventory levels among their channels.

"The slowdown in demand was experienced mainly due to a number of factors, including the 'cannibalisation' of PC demand by media tablets, especially in the larger markets, such as Saudi Arabia and Turkey," said Fouad Rafiq Charakla, a research manager at IDC MEA. "At the same time, political instability has played a key role in slowing down demand in other parts of the region, such as Egypt, Kuwait and Bahrain."

In the past, the problem of product over stuffing in the local channel has caused ripple effects in the local market with some resellers and IT traders defaulting on their debt obligations and exiting the channel.

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