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Mon 31 May 2004 04:00 AM

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Word on the Street

Khalid Bin Al Waleed road in Dubai is known in the Middle East as Computer Street, the place customers come to for IT. Channel Middle East went to the heart of the Middle East IT industry and spoke to channel movers and shakers about the important issues they face.

Channel Chatter|~|sidepic1.gif|~||~|Khalid Bin Al Waleed road in Dubai is famous in the UAE and beyond for being Computer Street, the place customers visit to for whatever IT product they desire. The other well known site for computer hardware and laptops is Computer Plaza, just around the corner from the Street. These two locations are the heartbeat of the IT industry in the Middle East and home to many channel movers and shakers. Channel Middle East spoke to several major resellers and distributors on the Street and in the Plaza to learn more about the real issues facing the channel. Gaurav Brahmwar, director of Computer Depot; Shailendra Rughwani, CEO of Experts Computer; Omar Saleem, marketing manager at Smart Touch Computers and Harish Kanjhan, director of Computer Care discuss the Street and the issues they face in the channel.

CME: What are the respective roles of Computer Plaza and Computer Street in the IT channel? How do they compare and contrast to each other?

GAURAV BRAHMWAR: The Street is where customers can find every type of vendor’s goods. This is the only channel vendors have, the only way that they can reach the end user. It has always been a tradition in Dubai to have all the resellers in one place and the Street is it for IT products. We are the real distribution outlet for vendors.

SHAILENDRA RUGHWANI: The Street is the showcase for distributors and manufacturers. This is the place where the latest technology products are displayed and sold to the end user, whether he be a consumer or even a corporate customer.

HARISH KANJHAN: Computer Plaza is known for laptops. Here you can find all types and varieties of laptops, all available to customers at low prices. We are the most well known market for such products. Out of every 100 laptops being sold in Dubai, 65 are sold through the Plaza.

OMAR SALEEM: On the Street most of our business is for export. Prices are very competitive, people are competing with one another and there is no big retail market. Computer Plaza is a very profitable retailing market and nothing more. The kind of end user who comes to the Street is different from the end user who goes to the Plaza.

Cme: How important is this place in the overall IT market?

GAURAV BRAHMWAR: The Street is incredibly important. Everything gets sold through us here on Computer Street. Of course there are a few companies in Dubai who are not here and who prefer to do business far from this area. But you can get every IT product you want on the Street.

SHAILENDRA RUGHWANI: We here on Computer Street play a vital role because this is where all the new products come first. Customers can view the latest in computers and laptops. For distributors, most resellers are to be found on the Street. People need to come to a place like this to check, touch and feel the product and then they make a decision to buy.

HARISH KANJHAN: For customers, Computer Plaza is the most convenient place to come and shop. Here everything is under one roof. If we were not here then shoppers would have to go to Computer Street, which is not such an enjoyable shopping experience. The street is half an hour walk from end to end. Here there is parking and 30 or so IT outlets in an air conditioned environment. The consumer often gets better prices here than in the Street as the Plaza is a retail environment.

OMAR SALEEM: The Street is where the IT market in the UAE first promotes new products and introduces them to the end-user. Here on the Street is where you find the real potential. If I want to promote something I go to the Plaza and display my product. But if a customer is asking for this product, the wholesellers will come and take it from me here. ||**||Client base|~|sidepic2.gif|~||~|Cme: What type of customer base are you serving?

GAURAV BRAHMWAR: It is a mix of customer types. Most of our business is walk-in consumer retail. Much of that is through word-of-mouth. We have corporate clients as well as re-exports.

SHAILENDRA RUGHWANI: We are a distributor for some product brands so we conduct most of our business through dealer channels — but we do have a showroom here on the Street. Mostly our business caters to resellers, dealers and system integrators.

HARISH KANJHAN: We operate three different companies — Computer Care, Computer Circles and Essen. Computer Care is purely for retail customers. For Computer Circles we have wholesale customers as well as Carrefour-type customers who want bulk orders. Essen has a mix of both retail and wholesale customers. Most of the people who shop at our outlets are tourists, from the GCC and further afield. The major share of our business comes from these retail customers.

OMAR SALEEM: I am selling to wholesalers, re-exporting and there are a few sales to end-users. There are not so many end-users on the Street. Maybe in malls and Computer Plaza, but here no. Most of my business is re-exporting, and I am selling huge quantities this way. I am also supplying other people on Computer Street.

Cme: What sorts of volumes are actually sold through Computer Plaza/Street?

GAURAV BRAHMWAR: We do about US$1m worth of business monthly. We are a medium-sized company, so I think the market must be selling at the very least 15 times our turnover.

HARISH KANJHAN: Computer Plaza dominates the retail IT market, with 75% to 80% of the business. We sell a thousand notebooks a month. We guess that the other outlets here also sell that, so in total Computer Plaza sells 2,000 to 2,500 laptops a month.

SHAILENDRA RUGHWANI: The Street plays a different kind of role compared to IT souks in other countries because Dubai is a re-export hub. Most of our customers are from abroad. It is difficult to judge the volumes but most companies on the street are doing well in the re-export business as well as catering to the local market.

Cme: How carefully do you monitor the activities of other traders in the Street?

OMAR SALEEM: I monitor the activities of everybody else on the Street very carefully. There is intense activity in the Street because the competition is so fierce and I have to know what is going on in the market.

GAURAV BRAHMWAR: A colleague and I often head down to the malls, to check the likes of Plug-Ins and CompuMe. Twice a month we look around to see what’s hot and what’s not on the Street.

HARISH KANJHAN: We are the ones who set the trend for schemes, product branding and even display. The Plaza follows us.||**||Channel relations|~|sidepic3.gif|~||~|Cme: Are you happy with the way distributors treat you?

OMAR SALEEM: To be frank, not totally. I am a customer and customers are not satisfied all the time. The problem with distributors is the bigger they are, the slower they are. This is the price they pay for being so successful. I will not name companies, but the biggest companies are the slowest in terms of processing. Newcomers in the market are the best on processing my orders rapidly and meeting my target prices.

SHAILENDRA RUGHWANI: Some distributors are fine, but we have problems with others. We have had many cases where we are buying a product from a distributor and then selling it to a customer in another country. We will come to know that our client has been quoted directly by the distributor at a better price than ours. There are some major companies with whom we have raised this issue and some of them have promised to look into it. But still it is going on.

Cme: Who are you actually buying from?

GAURAV BRAHMWAR: We buy from all the major distributors, such as Jumbo Electronics, Redington, Aptec and Tech Data. We try and maximise margins by importing certain items and brands ourselves.

OMAR SALEEM: EMPA, Trigon, Almasa IT distribution and PC International are among the distributors we buy from, and we are happy with their service. We work with other companies, but I do not want to name them due to their poor service.

SHAILENDRA RUGHWANI: We buy mainly from Aptec, Mindware and Tech Data.

Cme: How important is credit to your business activities?

HARISH KANJHAN: Credit is a must-have because of the quantities we buy. If I am ordering 50 to 100 notebooks, I won’t be able to sell them all in one week. It may take 20 or 30 days. So a month’s credit is very important. There have been schemes where distributors have been pushing us to buy a fixed quantity and we have been given only a few days credit. We simply cannot afford to do this.

OMAR SALEEM: When the business is in a boom credit is essential because I will rapidly consume my capital. But if I use credit then I have to pay a price. All of the companies here have a hidden column, the price for cash. I have got very good prices by paying in cash. Credit is a double-edged sword which is essential at times. But with credit I will not get a good deal.

Cme: Do vendors assist you with merchandising and promotions?

OMAR SALEEM: Not all of them. BenQ should do but doesn’t. NSI does. Apacer too. Kobian is doing its best. Other companies are stepping behind the e-mails and sending me material which needs to be amended and forwarded to my customers. There are no actual promotional details. Intel are very far from promoting themselves. It markets its products very well, but not with us.

GAURAV BRAHMWAR: It depends on how much I buy from them but overall vendors do their bit for me. Vendors will assist power retailers first and then turn to help my company afterwards.||**||Market size|~|sidepic4.gif|~||~|Cme: How much stock/inventory do you actually hold?

SHAILENDRA RUGHWANI: We have a warehouse here in Dubai as well as one in Jebel Ali. They are always full.

OMAR SALEEM: Not much, especially for components. Intel’s policy is fluctuating all the time, due to the grey market. CPU prices are up then down. Memory has gone up Dhs30 since the last time I bought it. I made money but then I lost the money I made because the price dropped. I stock motherboards, cases, modems and accessories. Their value does not fluctuate. For peripherals HP is changing prices all the time and there is no stability. HP thinks that it is providing those offers for the benefit of the customer, but these prices are killing us.

Cme: What’s the margin situation like at the moment in the market?

HARISH KANJHAN: Margins are cut-throat. They are dropping drastically day-by-day. This is our main concern. The volume is there so we can survive, but margins are so low.

SHAILENDRA RUGHWANI: Competition is growing and companies are dealing in similar products. Margins have narrowed down from what they used to be a few years back. Our turnover has gone up over that time but to record similar profits to those of five years back we have to triple our turnover. Margins are low, anything from zero to 5%.

OMAR SALEEM: For assembled PCs there are good margins. For the wholesale business, the margins are nowhere near as healthy.

Cme: How much do you sell for re-export?

GAURAV BRAHMWAR: Our major business is retail but we sell about 25% for re-export. We also do some dealer sales as and when our neighbours want some stock urgently and we oblige to help them.

SHAILENDRA RUGHWANI: Re-export accounts for 60% of business, though we are selling to dealers here who also re-export our products. So it could be almost 75%.

Cme: How do you sit alongside the power retailers in malls and the large IT dealers?

HARISH KANJHAN: We don’t have direct competition with power retailers in malls as customers go to these places without the intention of buying IT products. The customer comes to Computer Plaza with the intention of buying IT products. We have the advantage. The serious customers are coming here to buy, whereas customers who go to mall-based shops go with an intention to buy other products, and most probably not IT products. We also have after-sales service and we give customers technical know-how which is not there in malls.

SHAILENDRA RUGHWANI: Power malls are hardware resellers who work every day from 10 till 10, even on Fridays, and have their own clientele. We work differently. They compliment us because we sell products through them. This benefits us as they are always open for retail sales and they have staff trained to meet consumers’ requirements. Although there are times when we have to compete with the big power retailers in the malls and shopping centres.

Cme: Do you expect everyone to survive the next 12 months?

SHAILENDRA RUGHWANI: Not all companies are doing business legally. Some are doing well and working hard but there are a few who have ulterior motives. They don’t look at survival. They want to make money and run off.

GAURAV BRAHMWAR: At least eight out of 10. Everyone has his own share of business. I see new companies opening every day.

Cme: What are the big issues on the Street at the moment?

OMAR SALEEM: For me it is memory price fluctuations. There are those who make big profits on guessing right, and those who lose big as well.

GAURAV BRAHMWAR: Wireless is the buzz word now. The Centrino way as Intel calls it. In the coming few months you will see almost everything being wireless.

SHAILENDRA RUGHWANI: Stability is the issue. In the last few months we have seen three or four companies go bankrupt. Credit is another issue. As soon as a company opens they want to buy on credit. On the Street we talk about people who are playing around, buying on credit and then selling below cost to get cash. So word of mouth is important. We have to discuss these things. There have been revamps by vendors on their distribution strategy. And of course there are always new products.||**||

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