Kuwait uncovered

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Adam Dent, Optoma.

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Alghanim is the largest IT retailer in the Kuwait market.

BDL's Sodhi - who has served in the Kuwaiti channel for more than 11 years having previously worked for Almasa - offers an insight into the strategies required to prosper in a market where the level of competition exceeds the market opportunity.

He says that rather than trying to sell to everybody and risking the possibility of companies fighting over margins, BDL's policy is to identify a couple of key customers to purchase stock. "The kind of pressure we have from vendors doesn't allow you to sell to everyone. If we did, then the market would shrink and we wouldn't get our share because a lot of other distributors are there and the reseller wouldn't get any advantage buying from me," said Sodhi. "If they buy from me they will have the advantage that I will probably take a SKU and give it to them. I will do a good deal on that so that they can sell it."

Local dealers and sub-distributors claim to have seen more Dubai companies approaching them for business in the wake of the downturn although it is common for Kuwaiti traders to source products from outside the country.

Krishnan at Andalus Trading says this is an aspect of the business that companies have to manage carefully if they are to stand any chance of making money. "If you are bringing in laptops, for example, the best way to do it at the least cost - because it is a price-sensitive item - is by road. That would take about a week to 10 days maximum including payment and all the formalities. The other way, if it is a smaller quantity, is to get it by courier, while air shipment would be feasible if it was a larger quantity," he commented.

With many wholesalers operating as resellers or sub-distributors it can be difficult to discern a multi-tier structure, while credit availability has become more constrained since the turn of the year. Dubai distributors, especially, are said to have dramatically pulled back credit facilities as they take stock of their exposure in the market.

Even local distributors such as Al-Sarraf, an Acer, Epson and Creative specialist, admit to taking a more cautious attitude to extending credit. "You cannot trust some of the companies due to the current situation so you have to be careful in giving credit - it is not like before," said Ghassan Badran, dealer channel manager at Al-Sarraf. "The terms have not necessarily changed, but we are very careful in who we are giving credit too."

Although the government, oil and finance sectors have been the driving forces behind the market's growth, the SMB sector is rapidly emerging as an equally attractive area for IT suppliers.

Avaya - mainly present in Kuwait through tier-one partners Al-Alamiah, Alghanim, Computer Data Networks and Universe Computers - is keen to ramp up its existing coverage of the SMB sector.

"On the enterprise side we have the right partners to grow our business and the volumes are bigger, but the SMB segment is the fastest-growing segment and we see that opportunity in the market," explained El-Tawil. "How we address that market in Kuwait is through distribution and the smaller resellers that have the relationship with those customers," he added.

A spike in SMB sales will also be welcome news for the trading segment of the reseller channel. Bin Khaldoon Street in the Hawalli part of town continues to serve as the recognised hub for hardware trading, although there is no denying that the market has faced intense pressure of late.

"Those companies that are big or financially strong seem to be surviving, but the weaker ones or those that have just one or two employees are not able to survive longer than four or five months so they are closing down," insisted Badran at Al-Sarraf.

There are believed to be anything between 200 and 400 companies plying their trade in Hawalli, according to local commentators. "It remains a prominent place where people go to buy IT-related goods, but you have to understand that it is completely price-driven, many of the shops don't offer warranty on the products," explained one observer.

One issue that threatens to harm both the commercial and consumer markets is software piracy. Its prevalence has led to a piracy rate of more than 60%, the worst in the Gulf.

Microsoft - under the leadership of new boss Ehab Mostafa who took over in February after joining from the vendor's Egyptian operation - has traditionally been the most vocal advocate for eradicating piracy.

There are now signs that other industry counterparts are also taking the problem seriously after CAD software vendor Autodesk entered into a co-operation with Kuwait's Intellectual Property Department to promote copyright protection locally.

"Our plan is to prepare for a long-term agreement and campaign with the IP department, which is aimed at significantly curbing design applications piracy in the country," stated Asdaf Al Khalidi, IPR and license compliance executive at Autodesk Middle East earlier this year.

Such efforts will no doubt contribute to making the Kuwaiti IT sector a more attractive place to do business and reinforce its reputation as an important destination for vendors and suppliers building a pan-Gulf business. But it also stands out as one of the most competitive markets in the region - as any local IT provider will testify.

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READERS' COMMENTS

GCC IT Market
Posted by labib, London, UK on Wednesday 24 June 2009 at 02:57 UAE time


Thank you Andrew for this great article as ever.
Indeed, the kuwaiti market is small but plenty of business opportunities are going.
Can you please tell me how the IT sales are organised in the BtoB category for the GCC countries?
The customers deal with vendors or resellers often?

Thanks

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