By Michael Thorne
Japanese consumer electronics and home appliances vendor Elekta is consolidating its existing channel distribution business with a major new warehousing facility in Dubai.
Japanese consumer electronics and home appliances vendor Elekta first set up operations in the Middle East in 1994 and has since established its regional headquarters in Dubai’s Jebel Ali Free Zone (JAFZ).
The company’s product portfolio boasts a wide range of consumer electronics and household appliance items, including washing machines, electric ovens, refrigerators and vacuum cleaners, in addition to plasma televisions, DVD players and audio goods.
Although the logistics operations involved with such a diverse range of products is often complicated, the company is planning to simplify its supply chain with a major distribution hub in JAFZ, consolidating its existing facilities into one centralised warehouse.
The new development, which will cover an area of 250,000 square feet, is scheduled to open in July 2007. It will also include 10,000 square feet of office space, accommodating the company’s operations staff and senior management, establishing it as Elekta’s global headquarters.
The popularity of the Jebel Ali Free Zone (JAFZ) for centralised warehousing and distribution, targeting the markets of the Middle East and often Africa, has been fuelled by the associated transport network and generous business incentives. By establishing a large warehousing facility in the free zone, Elekta will maintain stock inventory to ensure fast delivery response for customer requests across the region, while developing customised product bundles.
The investment also reflects Elekta’s improving market position on the back of its products being stocked in key retail outlets, helping it gain popularity among middle-income consumers.
“We are building the warehouse to a height of 12 metres to provide us with greater warehousing space,” says Rohit Dev, director, Elekta Trading. “In general, the height of warehousing space rarely exceeds six metres, however new developments in Europe, for example, are significantly larger. We’ve decided to adopt this latter approach as it will provide us with considerably more space despite the building boasting the same footprint.”
The new distribution centre will be located on a plot of land adjoining the existing Black and Decker head offices in Jebel Ali and have a capacity of five to seven thousand pallet positions.
“This will hugely benefit our channel partners in the Middle East,” says Dev.
“Elekta is one of the few companies that has close to 270 products in its range.
We’re not only providing the service, new products and designs but we’re also the best one stop shop for businesses looking to distribute a comprehensive range of consumer electronics items.”
The development will help Elekta target new and established markets across the region and surrounding territories. The company’s single largest existing market in the Middle East is Saudi Arabia, where it boasts dedicated sales and marketing offi ces.
“We established a local presence in Saudi Arabia last year,” says Dev. “Our business is doing very well there. We have one office in Riyadh that services the whole country.”
Dev stresses the growing influence of hypermarket chains on the Saudi consumer electronics retail landscape, claiming that new developments in the sector will see the country become, “the mainstay of the regional consumer electronics market”.
However, he also stresses that the UAE remains crucial to Elekta’s future plans.
“Considering the relatively small population, business in the UAE is phenomenal,” he explains.
While Elekta has found the Middle East market lucrative, it is determined to expand its presence in the relatively unsaturated markets of Central and Eastern Africa. Dev describes these markets as potential commercial gold mines for his business, given the lack of consumer electronics vendors currently operating in both regions.
He confirms that Elekta is looking to sign distribution agreements servicing up to seven new markets although he was reluctant to reveal further details.
“We recently launched our range of products in Tanzania, a market we believe boasts enormous commercial potential,” he says. “We’re currently negotiating further deals with partners targeting five to seven new markets.”
The increasing interest from vendors, such as Elekta, should help to drive increased business in the East and Central African consumer electronics channels. Jebel Ali is likely to prove crucial to this process, providing companies with a regional, tax-free logistics and distribution hub from which to scout commercial opportunities in various African markets.
However, Africa is not the only market that Elekta is looking to cash in on from its base in JAFZ. The company is also looking to establish a presence in the booming Indian domestic market. Dev also cites Iraq as having massive commercial potential for Elekta’s products.
“We have seen an annual growth rate in the range of 30% in Iraq,” Dev reveals.
“It’s not the high value goods such as plasma TVs that are selling strongly, but rather it’s mostly the home appliances that are generating huge demand.
Consumer purchasing power may be low but demand is very high. Distribution is generally organised through Jordan while deals are arranged in Dubai. Our distributor in Jordan is already doing a lot of marketing in Iraq to promote Elekta’s products.”
Dev explains that Elekta seeks to avoid potential conflict between channel partners in various markets. “The set-up depends on the dynamics of a particular market. In some countries, we separate the dealer channels into those that deal with white goods and those that offer audio-visual products. If there is a single channel for both streams then we will focus our efforts accordingly but we never have two distributors selling any one product in the same market because it often results in price wars,” he explains. “However, in certain larger markets we make exceptions, because we often employ different distributors to service particular regional markets in that country.”
Elekta’s products are manufactured on an OEM basis in conjunction with manufacturing partners in China. Despite this, Dev stresses that Elekta plays an active role in designing its product range.
“We design the product moulds and these are unique, we own them,” he says. “We then outsource production to a number of OEM partners. We are so confident in the quality of our products that we are willing to offer three year warranties on all lines. This is a key part of our branding campaign. There are other brands that keep touting the quality of their goods, however few of them offer such extensive warranties on their products.”
Elekta also trades in OEM supplies to almost 15 international brands, such as Murphy Richards and Tesco in Europe, Macro in South-east Asia and Best Buy in the USA. As an organisation, Dev explains that Elekta generates 50% of its turnover from its own brand and 50% from its global OEM partnerships.
“We provide value to OEM partners through our creative design centre,” he says. “We market our products according to the demands of specific territories and provide our distribution partners with spare parts for the lifetime of the product.”
This strategy is paying dividends for Elekta. The company claims to have recorded 45% to 48% growth overall year-on-year over the last seven years on the back of its expansion into new markets, while it says that its more established Middle East operations have also recorded consistent growth of 38% to 40% over the same period.
The company has grown from having just five full-time employees in the Middle East in 1998 to 165 servicing the region today. Innovation and improving the value proposition of its products for consumers is key to Elekta’s future strategy, according to Dev.
“We don’t compete against anyone, we compete against ourselves. We want consumers to get a better deal by providing them with a better quality product,” he claims. “We don’t benchmark our business against rival vendors because the moment you do that you limit your ambitions to competing in specific market subsectors where many others are already operating.”