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Thu 11 Aug 2005 04:00 AM

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Vendor overload

Too many vendors want to enter the Middle East IT market and there are just not enough quality distributors to go round. This is the stark assessment from several major international vendors keen to make their mark in the regional IT channel.

Too many vendors want to enter the Middle East IT market and there are just not enough quality distributors to go round. This is the stark assessment from several major international vendors keen to make their mark in the regional IT channel.

It sounds bizarre, but this is the sad truth at the moment and it should serve as a wake-up call to ambitious in-country and regional distributors that want to take their business to the next level and sign up more major vendors.

If these distributors can take their operations to the next level of sophistication, invest in the correct processes and build up the appropriate staff resources, they will be able to sign contracts with major global IT vendors.

At the moment, we actually have a bit of a bottleneck developing. There is a queue of vendors arriving in the Middle East looking for a quality distributor to work with. Many of these will survey the channel landscape, do some research and set their sights on one of the big players in the region, only to find out that the distributor in question is already representing a close rival.

In some cases, the vendors in question are so keen to work with a reputable distributor that they will sign up anyway — despite the fact that the distributor represents one of their main competitors.

This means their products receive minimal attention and in many cases doom the distribution agreement to eventual failure. The levels of expectation from the vendor and the distributor are so far apart that it is inevitable that one or both parties eventually become disillusioned.

The best course of action for new vendors entering the region is to take their time and consider all their options before taking the plunge with a distributor in the Middle East. This means assessing the current market landscape, studying the product flows that exist in the region and understanding the distribution relationships that rival vendors already have in place.

Too many Middle East distribution agreements flounder within the first year. There are a few vendors in this region that bounce around, appointing and dropping distributors left, right and centre and never building a strong lasting relationship built on mutual trust.

I spoke to a senior executive at one major distributor recently and ran through the vendor portfolio listed on its website. Out of the 25 vendors listed, the distribution agreements with more than a quarter of these companies had ended within the last year. Various reasons were given for each termination — unrealistic vendor expectations, channel stuffing, over-distribution, poor stock availability, not investing enough marketing resources in the region and even a failure to control the influx of grey product into the Middle East.

What this conversation highlighted once again was the need for vendors and distributors to clearly articulate their goals and aspirations from the outset when entering into a new channel relationship. Blame exists on both sides of the vendor-distributor fence.

Too many vendors come in to this region with a short-term business plan wanting to sign up a new distributor, sell them a few thousand units and get back on the plane and return to Europe, Asia or even the US feeling pleased with the deal they have secured.

It is a tactic that some vendors still believe works. Senior executives visit the region once a year, drop one distributor and add another in its place to maintain the sales volume in the region. It will not work for much longer. I like to refer to the vendors that do this as ‘seagulls’. They fly in, do their business and fly out again leaving a nasty mess behind them.

The ‘seagull’ vendors need to reform their tactics. Distributors are waking up to this type of behaviour and choosing instead to invest their resources in representing the committed vendors with long-term business plans and a genuine desire to invest real resources in the region and grow a sustainable channel-to-market.

As more vendors make a real commitment to the region, ‘seagull’ vendors will be forced to feed on the distribution scraps that are left behind. And the longer the 'seagulls' leave it before they see the error of their ways, the harder it will be for them to repair the damage that they have caused to their brand reputation among both customers and channel partners in the Middle East.

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