Frankly speaking

A handful of movers and shakers from the retail channel community debated some of the topics shaping their businesses at the recent Digital Consumer Channel event. Channel Middle East and Channel Arabic were on hand to moderate the discussion and hear why listing fees, stock allocation and brand development were some of the major issues on their minds.

At the table

Among those who attended the roundtable and feature in this transcript are:

Khaled Abu Ayash (KA), Middle East sales and marketing director at Promate

Imad Ghandour (IG), buyer of electronics at Beirut Duty Free

Malik Hammoud (MH), senior category manager for non-food products at Kuwait-based chain The Sultan Centre

Ali Mohammad Akbar Khan (AM), general manager at Bahrain-based wholesaler Mars IT Distribution

Vernon Vaz (VV), head of the COE division at UAE-based Nishat General Company, an office products distributor for brands such as Dymo and Kobra

It has certainly been a tough year for IT retailers in the UAE, in addition to the usual margin and sales pressures. What has it been like in your market?

IG: Today, in Lebanon, we don't feel any pain. There is not yet any effect although I guess we are going to see some soon - possibly at the end of June. It has been said that the Lebanese who lost their jobs in Dubai will be coming back home and we have the elections too. Up to now we haven't really been affected, but it is possible that might change.

AM: Bahrain has felt it slightly. You can certainly feel this quarter that it has been affected. If you talk specifically about retail then it has only affected the electronics business. As far as I know, I don't think many people have lost their jobs and hopefully this situation won't change. Our problem is not a recession one, it is that there is too much competition. It is not like before. Sharaf DG has opened in Bahrain and its style is different. The market was not ready for this style and some vendors have dumped stock with it in Bahrain.

KA: Have you seen a shift in the product mix? Are people buying cheaper products or different kinds of products?

AM: When you talk about retail, if there is a major promotional sale then it does well. Normal sales are slightly affected in retail electronics, but not in government or everyday food and groceries.

IG: No, we haven't seen any changes. Maybe it is going to be tougher for the salesmen to sell a product that costs US$2,500 as it might be harder to pay cash and we don't offer any installments on payments at the airport.

MH: People have heard the crisis rumours and held onto their money even though they weren't affected so we have done promotions on basic items to keep the people from being afraid of spending. We were more affected in Dubai because we had a deal done with all our suppliers and were supposed to open 10 outlets at the same time. We were opening in small communities such as Dubai Investment Park and Jumeirah Beach Residence, but the problem was that the developers were supposed to have 80% occupancy in their areas and it turned out to be 30%. On top of that, they didn't finish our sites on time. We had our trolleys, fixtures and everything else coming in and it had to be reshipped back.

Retailers often complain they don't receive enough support from vendors. But at the same time, vendors say there are a lot of barriers to partnering with retailers - particularly listing fees and other costs.

VV: Space is an issue, yes. Basically, we have to pay for the space, which is a problem. That expense goes onto the product at the end of the day, which they should realise. I'm not going to take my margin and just give it to them - both parties have to work for it. They have to give me that certain percentage, which I can work with, rather than putting me against the wall. This is what the retailers are trying to do right now.

MH: Not all retailers are doing that, actually. I will tell you one thing that is happening. Let's say you are a distributor for a brand and you are coming to sell to me. I am more than interested in buying from you if the price commitment is there because this is one of the major factors. And if you have any promotion it must be upon an agreement with the supplier so that it doesn't lead to issues for them in the market. If I have it on my shelf for US$3, for example, and you give it to somebody else for US$3, where is my back margin?

I have overhead costs, I operate all hours of the day and I am giving you exposure. My rent is very high and my overheads are very high. However, we give space, we don't sell it. I wouldn't accept a distributor coming to me and saying, "okay, I'll pay you US$3,000 for this space for a year." We don't do that. I need more margin. What happens is the distributors get marketing support from the mother companies and they put it in their pockets, let's be frank here, most of the distributors do that.

AM: There are two partners running the show - the retailer and the company supplying the product. And both are working for the end-user. So this attitude of, ‘I'm the boss and I'm giving you this much space so you should give me something in return' is wrong. It is a matter of approaching these things hand-in-hand. You have to support your vendor or distributor, and they have to support you as well. At the end of the day you will get a margin and they will get a margin. If you screw the distributor so much in terms of rebate, marketing or shelving that it does not get anything then do you think it will care about you?

KA: I have another question. If I look at Dubai Duty Free then it is able to sell a lot more electronics - I think the number stood at around US$200m in 2008 - compared to Beirut Duty Free, or Jordan or Qatar for example. Why is this? Is it just because of the traffic or is it because of product management?

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