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Sun 1 Apr 2007 10:53 AM

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Distributors intent on raising the bar

As well as emphasising the strength of the IT channel, the recently-published 2007 Power List revealed that many distributors are firmly dedicated to enhancing their proposition. Such investments should be applauded.

A combined workforce in excess of 1,700 staff, annual sales north of US$3 billion and extensive coverage across the entire Middle East and North Africa region. The combined headline figures of the 15 largest UAE-based distributors - as documented in the 2007 Power List published by
Channel Middle East

last month - served to remind us how integral the wholesale channel remains to the regional IT sector.

Vendors might be able to bypass the distribution tier in more developed markets, but in the Middle East it is simply a waste of time to even ponder such a strategy, let alone implement it.

Yet although the 2007 Power List illustrated the sheer scale and influence of the distribution channel in the Middle East market, it also uncovered just how much of a transformation is happening in the channel.

When
Channel Middle East

published its inaugural Power List three years ago, the emphasis was firmly on revenue figures and top line growth. Last year, meanwhile, it was all about the margin as distributors acknowledged that a ‘sales at all cost' mentality isn't particularly conducive to healthy, sustainable growth. So what do we have before us in 2007? The answer is a distribution market firmly tuned in to the twin aspects of customer satisfaction and value creation. "What can we do to make customers spend more money with us and how do we ensure they keep coming back?" are the questions being posed by senior distribution managers in the Middle East.

The good news is that many distributors believe they have found solutions to this dilemma. At least four distributors in the 2007 Power List outlined radical plans to heavily invest in new purpose-built facilities designed to take their logistics, delivery and customer services capabilities to a whole new level.

These distributors are acutely aware that if they are to properly engage with customers then they must have the systems and operational infrastructure in place to do so. In any industry, change is routinely met with opposition, but distributors with a progressive outlook understand that these investments represent the key to their future growth.

During the next 12 months, distributors are likely to take an even closer look at how they are structured internally. In some cases this will mean developing dedicated business units that encourage true market and technology focus.

The advantages of this resourceful model - which is designed to give value to both vendors and resellers - are numerous, as several distributors have outlined to
Channel Middle East

over the course of the past few weeks. Meanwhile, other distributors are placing increased importance on strengthening their product portfolio. Whether it's components specialists moving into finished goods, or networking players adding security brands, distributors are clearly eager to position themselves as a one stop shop for their customers' needs.

Additionally, there is a much stronger commitment among the largest distributors to expand geographically and build true economies of scale. The pros and cons of in-country coverage in the GCC countries are well debated, but we are now starting to hear Dubai-based distributors make a beeline for markets in North Africa, East Africa and even the Indian sub-continent.

Let's not kid ourselves though. Middle East distributors are operating in a highly competitive environment facing its own set of unique challenges. As the 2007 Power List showed, several distributors experienced flat or even reduced sales last year, exploding the myth that growth is always easy to come by in so-called ‘emerging' markets. But the investments that the largest 15 distributors - and many more for that matter - are making should be applauded. The channel has a much better chance of evolving in a healthy way if companies are prepared to act on their forward vision.

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