Raising the stakes in the retail channel

ITE Distribution is one of the most established names in the Middle East channel and well-placed to capitalise on a retail sector that continues to balloon in value. Shams Jafery, business development manager at Dubai-based ITE, explains what plans the Logitech, Palm and Targus distributor is cooking up to further its position in 2008.

ITE has always been seen a retail-focused distributor. Is that still the case?

Yes, we tend to deal with all the retail companies - Plug-Ins, Carrefour - plus the general business from Computer Street and the plazas. If you look at our portfolio we carry branded products, such as Logitech and Belkin, and they are automatically retail-oriented as well. In our profile we don't have notebooks, LCD panels or any of the other commodity products.

Is it a conscious decision to stay away from those products?

Yes it is. We were offered them quite a while back, but we are good at something so we might as well stick to that.

Doesn't that strategy limit you though? After all, commodity products have a very important role to play in the retail channel.

Yes, sometimes it does. It means that maybe there are things that the other distributors can do, but at the same time we took the decision to stay focused. Plus it has been profitable for us so we are very happy with that. We might not be doing the same turnover as Redington, for example, but profitability for us is important.

Margin erosion seems to be an issue for many retail-focused suppliers at the moment. What's your view of this threat?

Our biggest problem at the moment is that it is not just the margins going down, but the expenses going up because everybody knows how expensive Dubai is getting. So I think our main focus for next year is about keeping the expenses down. Hopefully by January we will have moved into a 38,000 square feet warehouse and the reason we are doing that is to consolidate.

At the moment we have three or four warehouses so we are consolidating all our resources into one place, which will also give us 24,000 square feet of office space. Because the retail market in Dubai is a very large part of our business, we will be keeping our Dubai warehouse facility as all the Dubai deliveries will be done from there. We intend to have a small office in Dubai as well to cater to the smaller shops.

What is happening to the more traditional retailers you dealt with before the power retail segment emerged. Is their business declining at the expense of the power retailers or is it still an important customer base for you?

It will always be important to us, but yes, the business has declined. I'd say that at least 70% of them are catering to a different market segment now. 30% are corporate-focused, but the rest are more focused on wholesale and re-export. Some of the smaller companies still have their own shop and will assemble a computer for anyone who walks in and needs one. They basically procure what the customer wants from elsewhere and just provide the service.

Are you finding that the demands of the power retailers are growing as the market matures?

Yes, in certain ways, such as when we talk about rebates and promotions for example. But at the same time I have to say that the market is maturing. The way the power retailers used to deal with us is totally different than it used to be four years ago. It is becoming more professional.

You've just opened offices in Bahrain and South Africa. What's next in terms of expansion?

As far as 2008 is concerned, there is a huge retail market when it comes to Saudi and all these other places. There is not a lot of emphasis on retail distribution so we will be concentrating firmly on that sector. As far as the UAE is concerned, I think we have done that, but to get to the growth it will have to come from outside. One of our plans is to open up in Kuwait or Saudi - that's next year's plan.

How much of your business comes from the UAE these days?

On a percentage basis, the UAE has come down slightly because the other markets have increased. We're looking at about 40% to 45% for the UAE.

The UAE retail channel has seen a lot of strong growth in recent years. What other markets in the region stand out for you?

I'd pinpoint a small market like Qatar, which this year has grown 60% for us. That is quite a good growth. And Bahrain, although it is quite a mature market, has grown strongly too. The next is Saudi, where there is the potential for growth that is much higher than what we are currently doing.

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