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Thu 24 May 2007 04:00 AM

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Into Africa

Parts of the African market have always been closely aligned with the Middle East. But forming a credible channel strategy to address some of the emerging markets in this vast continent is becoming a task that more vendors are beginning to take seriously.

Parts of the African market have always been closely aligned with the Middle East. But forming a credible channel strategy to address some of the emerging markets in this vast continent is becoming a task that more vendors are beginning to take seriously.

In the last week alone, the importance of Africa to the prospects of companies operating a region-wide model from inside the Middle East has been clearly illustrated. PC vendor Acer announced it will earn US$3.5m from a contract it has won to supply desktops to the education authorities in Ethiopia, while storage integrator Pro Technology has just added to the existing African office it operates in Sudan by opening a showroom in Libya.

Creative — the manufacturer of digital music devices and other entertainment products — is currently in the process of trying to identify potential distribution partners to work with in Africa. Bosses from the vendor’s Singapore HQ have instructed Creative’s Middle East team to begin building channels into markets such as Kenya, Ghana, Nigeria and Sudan.

This is all taking place against the backdrop of other big-name brands, such as Cisco and Toshiba, appointing authorised distributors to develop channels in specific African markets during the past 12 months.

Of course, you can argue that countless vendors and distributors have been growing their coverage in east, west and central Africa during the past decade, but there is still a healthy dose of companies that are only just beginning to evaluate how they should go about chasing some of the opportunities on offer.

While it is typical for many vendors to address French-speaking Africa through their Gallic operations, it is invariably the responsibility of their Middle East subsidiaries to develop a meaningful business elsewhere in the continent.

Modest purchasing power, differential trading behaviour and the intricacies of constructing viable routes to market in some of the African countries will understandably make many suppliers think twice about the level of investment they commit. But others, such as Creative, believe the long-term potential of the region warrants an attempt, at least, to try and serve the markets more purposefully.

Just look at the handset market in Nigeria, where shipments of new GSM phones are forecast to rise almost 60% this year, according to IDC research. If that prediction bears fruit, Nigeria will become the largest market in Africa for GSM phone sales, ahead of South Africa even. And the fact that just 25% of the population owns a mobile phone offers further evidence if it was needed of the market’s enormous potential.

For some parties, however, the possibility of developing a channel in Africa places them in a compromising situation. With the prominence of such an effervescent re-export business in Dubai, there are plenty of vendors already doing very nicely from product being inadvertently sold into Africa.

And that puts them in a difficult spot.

Do they endeavour to establish official in-country channels with the expectation that it expands their total addressable market? Or are they too fearful of it disrupting the flow of sales that already comes their way via re-export or sub-distribution routes?

Let’s say you’re a reseller in Kenya who suddenly discovers that the computer accessories you’ve been sourcing from Dubai are now available through an authorised in-country distributor, either at the same price or cheaper. Why waste money on transportation or logistics costs if you can buy that product locally at no additional cost? Great news for resellers. Possibly not such great news for the vendor who suddenly sees a nice chunk of revenues from Dubai begin to dry up.

Vendors clearly have a lot of thinking to do when it comes to their African strategy, although I am still convinced that as the year progresses we will see more suppliers awarding authorised contracts in markets such as Cameroon and Ghana.

The financial outlays certainly won’t match the kind of investments vendors are making in Saudi or Egypt, but it will still signal the strategic role that many of the emerging African markets have to play in the wider MEA context.

There’s a new Sharaf in town…

It’s great to see that some retailers haven’t lost their nerve in the compelling race for consumer wallet share. IT and consumer electronics retailer Sharaf DG celebrated the grand opening of its new Dubai ‘big box destination outlet’ in Dubai last week by raising the bar in more ways than one.

Let’s not beat around the bush here. Sharaf has a mammoth task on its hands in making sure that its 100,000 square foot electricals temple attracts the volume of foot traffic required to sustain a store of that magnitude.

Which could explain why the company has audaciously revealed that any customer who cannot find the electronics product they want from the 300-plus range of brands it has on offer in store will receive the item free of charge.

Sharaf claims it will source the product in question — providing it is legally available in the country of course — and provide it to the customer for no cost. The promise applies to any product category Sharaf specialises in, such as TVs, DVD players, laptops and printers, according to Nilesh Khalkho, head of merchandising and vendor relationships at the retailer.

I’m not sure how loudly Sharaf plans to broadcast this pledge, but it emphasises the sort of lengths retailers are having to go to in their quest to win customer affection. The pressures of surviving in an increasingly crowded UAE retail market are there for all to see.

Sharaf has to be applauded for its show of bravado, but I do wonder if it is leaving itself open to exploitation by eagle-eyed shoppers determined to spot gaps in its portfolio.

Just imagine for a moment if thousands of shoppers took it upon themselves to take advantage of any holes in Sharaf’s offering. The retailer wouldn’t only lose out heavily on potential sales, but it would have to shell out cash on sourcing the product from elsewhere and giving it to the customer for free.

I can just envisage the scene at the management meeting when the sorry soul who dreamed up the idea of this ‘product promise’ is blamed for costing the company a fortune.

Clearly a case of who shot the Sharaf?

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