By Julian Pletts
With fierce competition and stiflingly tight margins, the retail distribution channel is a tough domain for a channel player to make their presence felt. But managing director of wholesaler Delta Business Products, Govinda Siddartha, claims that it can fight broadline distributors on their own turf with a combination of a wide ranging portfolio, efficient stock rotation system and innovative price protection policies.
With fierce competition and stiflingly tight margins, the retail distribution channel is a tough domain for a channel player to make their presence felt.
But managing director of wholesaler Delta Business Products, Govinda Siddartha, claims that it can fight broadline distributors on their own turf with a combination of a wide ranging portfolio, efficient stock rotation system and innovative price protection policies.
What trends are shaping the distribution channel?
In terms of retail, the market first started here about 10 years back and now some markets like the UAE are established and others are just starting. Delta covers the whole of the GCC and has local in-country operations in all GCC countries. Roughly six years ago we decided to focus a little bit more on retail distribution and the only way to really do this is to have in-country operations.
How would you say the retail market is shaping up for you?
If you look at the growth, every retailer is increasing their business but in this market it is a little bit fragmented in the sense that we don't have three names with 100 stores each. We have probably 100 stores with two or three names.
That changes many things here. For example, if you're a distributor or vendor in Europe you will go to a retailer and conduct a marketing or product programme and expect it to be carried in 100 stores across Europe. Here you have to go to 50 different retailers and talk to them about 50 different programmes.
That must make things very difficult for vendors and disties.
Yes - and it means the cost of servicing the channel is very high. For this reason, most broadline distributors and box- moving distributors do not have the infrastructure or the inclination to really offer coverage of the retail channel. They do retail distribution on a selective basis and often because the vendor is pushing them.
How do you make sure that you have the coverage required across the retail sector?
Basically we decided about seven years back to have a dedicated retail distribution team and a dedicated channel distribution team. We also decided we had to have in-country operations.
Then we carried out a category rationalisation. We highlighted that we don't distribute main bodies, which is PCs, notebooks, printers and we don't distribute components. But we do distribute all kinds of accessories and supplies. This means Delta is in a unique position compared to the competition because we are able to offer a wide selection in our portfolio without the customer having to talk to 10 different distributors.
With the retail sector growing and becoming increasingly visible, and with vendors investing in the retail channel, we see many broadline IT distributors trying to set up a retail team within their companies.
So how do you make sure you keep ahead of the broadline players that are moving into the retail space?
First of all, we were there before them and have a very good relationship with all of the retailers. Our portfolio is broad and we conduct a lot of merchandising, and offer stock rotation and price protection.
Some price protection we carry out with the vendor's support and some is done ourselves. Many big broadline distributors do not have a stock rotation policy, meaning they will not take back dead stock. We do. We do that with all products and all retailers. Most of the time we take the risk ourselves and are able to do so because we're on top of the stock on the retailer's shelves.
What development plans do you have for Delta this year?
We are consolidating now because we want to streamline our supply chain and stocking in different countries. We're investing in an ERP system for all GCC operations, centralised on one server to streamline all our pricing and logistical information. We're recruiting more staff and trying to fill in categories that we do not have in our portfolio by finding vendors to plug in so that when we go to a retailer we are able to offer them at least two brands in every category.
What are Delta's primary business objectives this year?
We're going to focus heavily on Saudi Arabia because we have a lot of work to do there. Also, Delta will be working very closely with Microsoft this year after signing with them two years ago and we will get aggressive in the market. What barriers to growth do you see in retail distribution?
The most significant barrier is that many retailers are still thinking like traders rather than organised retailers. They need to change, but that will only happen when they reach a point of no-return where it no longer make sense, financially, to only trade in commodities. When it reaches that point they will become more organised and mature in their approach. Many vendors also don't have a retail programme but are in the process of putting one together, so that will drive the market.