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Sun 14 Sep 2008 04:00 AM

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Support lines

The Middle East channel for mobile devices can be a daunting arena given the ferocity of competition and increasing commoditisation of the hardware. So do retailers feel afloat in the turbulent seas unaccompanied or are vendors providing enough of a supporting life raft to help partners stay above water? Channel Middle East investigates.

The Middle East channel for mobile devices can be a daunting arena given the ferocity of competition and increasing commoditisation of the hardware. So do retailers feel afloat in the turbulent seas unaccompanied or are vendors providing enough of a supporting life raft to help partners stay above water? Channel Middle East investigates.

With global mobile communications vendors aggressively pushing the virtues of converged life on both consumer and commercial users, it would seem that times in the Middle East mobile devices retail channel couldn't be better.

In an indication of the momentum of the market, the number of mobile connections across the Middle East grew by an impressive 33% in 2007 to 173 million, according to research house Gartner Dataquest.

The larger proportion of product sales are in the business market, but this is still bought through the consumer business. It is not a case of businesses buying in bulk in the Middle East.

Five of the larger markets in the region have already surpassed the 100% penetration mark and Gartner estimates that the number of connections will reach 266 million users by 2012.

From a retail perspective, it is one of the strongest periods in the market's history. Average revenue per unit even rose by 2% last year after suffering several seasons of decline.

This progression, however, comes with its fair share of stresses and strains for retailers who are working hard to maintain margins as consumers become more demanding. Significant and unflinching support from the vendors that use this channel to promote their brand message is absolutely paramount.

So how much do manufacturers in the mobile device market buttress the work that the retail channel in the region does? And what more needs to be done? Although it is difficult to get vendors to reveal how much they are spending on the initiatives and incentives they are offering in support of their retailing allies, all of them profusely uphold the importance of such activities.

Sandeep Saighal, general manager of handheld phones at Samsung Gulf Electronics, admits that although he would like to see retailers develop more of a value offering, he understands that retail bosses have to analyse the bottom line.

He concedes that a large proportion of the responsibility for sales rests on the vendors' shoulders and the work they initiate with the retailer.

"We get involved in the sales process of our retail partners quite a bit," claimed Saighal. "We will drive the retail sales in a large way and most of our strategies are based on how each individual retailer makes sales."

Samsung also maintains that the work it does with retail partners has to be approached on a local basis and tweaked with varying SKUs based on the focus of each retail partner.

Mobile devices vendor HTC goes in to more detail about the specific initiatives and incentives that it has in place with its channel. The company believes one of the most important aspects of the assistance it provides is in-store promotional support.

"In terms of post-material fulfillment, we engage partners on a daily basis to ensure they have enough post-material, deal booklets, posters and other marketing material," explained Vishnu Vardhan, executive director at HTC.

But it is not just huge cardboard cut-outs and shiny demo products that are the most significant steps HTC takes to improve the sales efficiency of its retail partner's salesmen. The "frontliners" - as Vardhan refers to HTC's retail partner's sales staff - are well versed in all of the bells and whistles of HTC's high-end range of PDAs and mobile devices.

"We have our own merchandisers going around the retailers on a daily basis and conducting spot trainings of the frontliners," revealed Vardhan.These individuals are tasked with participating in an HTC product sale, to provide feedback, offer technical training and refreshers where needed. In the event that a salesman is under-skilled in any way, they will be plucked - in conjunction with the shop management - and given comprehensive personal spot training.

The company reveals that to date it has conducted close to 12 general training programmes with partners across the region and also regularly invites distributors and retailers to its office for product refreshers or general sales overhauls.

Nokia, one of the brands responsible for driving the rapid growth of the mobile devices sector in emerging markets such as the Middle East and Africa, is adamant that transparency in its dealings with the retail channel is the most important element of its partner strategy.

The money has to come from somewhere. If distributors have funding they will do it independently, but they will certainly tell us because we don’t want price variation or market duplication.

"Our product roadmaps are shared on a constant and regular basis," explained Nokia MEA's head of channels for the Lower Gulf, Hayssam Yassine. Nokia also claims that one of the most important investments it has made into the retail theatre is the development of "experiential zones", which introduce the end-user to the company's products in a tactile fashion.

Microsoft, which develops the Windows Mobile operating system for PDA and smart phones, says it is reliant on OEM partners such as HTC and Samsung to carry out a strong proportion of the support and training for the retail channel.

Tolga Altinordu, OEM director at Microsoft Gulf, says the strongest input that the software vendor has with regards to driving sales and aiding the retail channel is the promotion of the product in the Middle East end-user base.

"Our role is more to create the demand and the awareness by working with our partners and their channel," asserted Altinordu. "Our value is to evangelise the connected Windows experience."

Microsoft admits that business buyers represent the largest contingent of consumers and the retail channel should approach them accordingly. "The larger proportion of sales are in the business market, but this is still bought through the consumer business. It is not a case of businesses buying in bulk," said Altinordu.

Although vendors believe they are doing a good job of transferring their messages through the channel, some commentators believe retailers are more concerned with volume - regardless of how much vendors protest that one precipitates the other.

"There is a very shallow aspect of retailer and vendor relations," said Jonathan Ans, director of sales MEA and CIS at mobile devices distribution giant Brightpoint. "When you look at Windows Mobile, or even just Microsoft, less than 5% of customers actually know or understand the functionality of MS Windows or Office."

Ans feels that although vendors are focused on brand promotion, their attempts to educate the end-user through the channel is only happening with varying levels of success.

The work of the distribution channel and the extent to which vendors rely on them to facilitate almost all of their promotions and retail partner initiatives must not be overlooked.

"Effectively we are the value chain for them," said Ans. "And if they don't get that right then no matter how good the product is your brand equity will suffer if it is not on the shelf and you are not getting logistics right."

HTC acknowledges the role that the distribution channel has to play in the development of retail incentives and initiatives. Vardhan admits that a great deal of the funding for sales initiatives comes out of the distributor's pocket.

"The money has to come from somewhere. If distributors have funding they will do it independently, but they will certainly tell us because we don't want price variation or market duplication."

Even though he is uncertain about whether the Middle East market is fully appreciative of the level of sophistication of some of the more advance feature-heavy mobile devices, Ans at Brightpoint believes the way forward for the future of the business is to drive understanding.And this push - although it may come at a superficial level from the vendors - is executed on the frontlines by the retailer with the distributor's support.

"As the distributor you are the mouthpiece of the vendor so everything filters through us in terms of education material," said Ans. "We provide promoters and it is up to us to train those promoters to a reasonable level to where they are able to converse with Joe Bloggs."

Of course, much of the value that a distributor provides is through its ability to make sure that retailers have stock on their shelves. If some sources are to be believed though, there are retailers out there which are not making this job easy.

"There is one challenge we always face with our channel - the supply chain," said HTC's Vardhan. "There seems to be a gap between the back-office and the shop floor, which means the in-store replenishment takes some time. If the product is not on the shop floor we'll call up our disties and they'll say, ‘yes, the retailer has the products'. There seems to be no scientific way to replenish the stocks."

The answer to this problem, suggests Vardhan, lies not only in greater communication between retail management and sales staff, but also in more frequent dialogue between the vendor and all of the retailer's staff.

"We are getting the shop floor staff and the showroom managers involved with the meetings that we have with retailers," he revealed. "We have seen some of the big companies correct this problem by having the showroom manager involved in budgeting."

The distribution channel also feels that relations with retailers would benefit from a higher level of trust and communication. It seems some retailers are unwilling to share information because it contains details about the work they do with other distributors that are tied to different product ranges.

"When retailers start playing their cards so close to their chests we don't have visibility on stock issues and problems arise," said Brightpoint's Ans.

"We encourage our retailers to provide stock issues and sell-through each week. We run a quasi-VMI, but we don't get access to their systems and when you have that relationship as a distributor you try your hardest to make sure that you don't drop the ball. Then you will find that the relationship blossoms because you have the trust."

If vendors are to be believed then the retail channel could also do more to develop cross-selling opportunities in the high-end PDA and mobile devices arena as consumers in the Middle East become more sophisticated and demanding in their requirements.

Nokia insists that cross-selling is a major part of its engagement efforts with the channel. As far as it is concerned, retail partners need to maximise their business opportunities. "Nokia works very closely with its partners to develop the cross-selling of our products and services," claimed Nokia's Yassine.

Although retailers must cope with increasingly sizeable volume targets, tackle difficulties in supply chain management and develop the interests of multiple mobile brands, they are also facing serious pressure from brand-centric vendors to develop differentiation and value add that international vendors take for granted in other markets.

Mobile device vendors will continue attempting to secure in-store space for branding and promotion, but they need to ensure that it doesn't distract them from supporting partners with the resources they need to meet the market's demands.

Stunted growth

PDAs and mobile devices might be sophisticated pieces of kit, but does the retail channel have the skills to articulate the benefits of these products to both consumers and corporate users? Some commentators suggest more could be done to market the value of applications-heavy devices, although Jonathan Ans, director of sales MEA and CIS at PDA distributor Brightpoint, feels the level of maturity of the sector is now becoming reflected in the retail approach.

"There is some smarter stuff just starting to happen here that is the bread and butter in the other markets; the linking, the cross-selling, and the links to the service providers as well," he reflected. "But it is still a case of the retailer saying, ‘I have a product and I want to sell it' rather than ‘I have a group of products, how can I sell a solution?'"

The fact that HTC says one value add of the mobile devices retail channel is merely product availability - surely a pre-requisite in any market - indicates that the sector might not be as fully developed as some suggest. "Value add in terms of availability and having all of the models on the shelves is very important, as is having a salesman who can talk confidently about the product," insisted Vishnu Vardhan, executive director at HTC.

Samsung, however, is satisfied with the maturity of the mobile devices market, although it cites weaknesses in the add-on section of the business. "The mobile market is very mature and the accessories market needs to catch up," argued Sandeep Saighal, general manager of handheld phones at Samsung Gulf Electronics.

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