Channel proving difficult to knock off its stride

It seems an element of change is in the air at the moment as vendors and channel players engineer relationships which they hope will give their businesses fresh impetus.

Looking back at last week’s news it is clear that there are still plenty of significant developments taking place in the Middle East market, dispelling fears that the industry slowdown would lead to subdued activity inside the channel.

What in fact seems to be happening is that vendors are going over their strategies with a fine toothcomb, while distributors and resellers are demonstrating an appetite to grasp the practical opportunities that come their way.

Of course, it is difficult to know how many recent tie-ups and partnerships have been motivated by the recession. The vast majority are likely to be the result of months of behind-the-scenes work, initiated long before the market ran into trouble.

Take Virgin Megastore’s deal with i2-CompuMe. Its appointment of the Saudi handset retailer as the new provider of IT and mobile sales at its stores appears to have more to do with a desire to freshen things up and former partner Intertel’s bid to launch a competing business than the apparently conservative spending habits of customers.

Market sources claim Intertel is preparing to roll out its own store network under the ‘Tango’ brand. While the company hasn’t yet confirmed the name, it has verified that the first of several new UAE stores will be opened in just a few months’ time.

As far as i2-CompuMe goes, the more you analyse the deal with Virgin, the more it appears to be motivated by purchasing power.

The most viable way for retailers to bring in extra revenue is through store expansion but that strategy isn’t particularly compelling in the current climate. However, by striking a ‘store-in-store’ agreement, i2 is guaranteed space in 14 Virgin outlets across the Middle East and North Africa.

That will boost its negotiating power with suppliers tremendously and offer it the kind of additional volume that would only otherwise have been attainable through massive store investments of its own.

The one question mark is over how much autonomy i2 will actually be granted. As Virgin’s ‘concessionaire’ partner, i2 supposedly has free rein to oversee all aspects of the sales process for IT and mobile phones, but Virgin is known to operate strict guidelines when it comes to product and promotion management, leaving some onlookers to speculate whether i2 will enjoy the flexibility it anticipates.

Another development, also with potential implications for the retail channel, is Almasa’s proposed tie-up with Delta Business Products.

Official details on the agreement are due soon, although it is thought that some sort of back-office amalgamation could be at the heart of it, rather than a straightforward acquisition on Almasa’s part.

Again, I doubt if the pair’s decision to explore a partnership is induced exclusively by current economic conditions — more likely the mutual aspirations they share to further their businesses in an incredibly competitive environment. It is certainly not inconceivable to expect other distributors to be having similar conversations about reciprocal opportunities in the Middle East either.

If it does turn out to be an agreement based on common back-office functions then it will be interesting to see how the finer details are managed.

Presumably there are limitations to what can be shared given both companies are well-established and operate independent systems and processes, so it could be that the tie-up is more geared towards optimising brand and market coverage.

Elsewhere in the channel the signings have come thick and fast of late, with FVC officially confirming the appointment of Riverbed, ITE netting authorised rights for Microsoft hardware and Logicom finally getting its hands on a HP PSG contract after months of speculation that the PC vendor was looking to bring on board a new distribution partner.

Those who argue that instigating ambitious new partnerships is a brave step to take in the current volatile setting can expect a sharp rebuke from the countless vendors and partners showing there’s no time like the present.

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