Today distribution has progressed beyond pushing boxes to providing a whole raft of services including training and support.
Distributors experience first-hand, all aspects of today’s channel. Whether it is shaving additional margin for the vendor or providing help to the resellers, they are here to guide every stakeholder through the pitfalls and obstacles facing the market today. Distribution landscape has evolved and changed over the period. Today distribution has progressed beyond pushing boxes to providing a whole raft of services including training and support.
A report by global research and analyst firm IDC revealed that spending on digital transformation is forecast to grow at a compound annual growth of 15.5% from 2020 to 2023 to approximately $6.8 trillion.
The IDC says that, overall spending on information and communications technology (ICT) across the Middle East, Türkiye, and Africa (META) will top $233.8 billion in 2023, an increase of 3.9% over 2022.
As the region’s digital economy increasingly takes shape, IDC forecasts that digital transformation spending in the META region will top $48.8 billion in 2023 and accelerate at a compound annual growth rate (CAGR) of 16% over the coming years to cross the $74 billion mark in 2026.
As the Middle East is a dynamic market economy, exporters often rely on distribution channels for the marketing and sales of their products and services. In this backdrop it is incumbent on the distributor to play a crucial role in enabling the IT ecosystem. “They are the conduit between vendors and the rest of the market,” says Kamran Khayal, General Manager, Trigon LLC.
Pandemic has accelerated the pace of this change as traditional distribution is moving to digital distribution. “The Covid-19 crisis has fundamentally altered how distribution will be done in the future,” says Kamran. He goes on to add, “Distributors today have moved beyond pushing the box and have become the most trusted business advisors across multiple facets of business transformation.” .
Suchit Kumar, CEO, TEXUB, a global B2B marketplace, shares the same sentiments when he says “As the regional outlook continues to evolve, distribution today has moved beyond simply ‘promising’ to become trustworthy advisors across multiple channels.”
Being in the dynamic market such as Dubai where most of the distribution takes place for MEA region there are always challenges like stocks availability, over stocking, currency fluctuations in different countries, credit terms and pricing. “We at Experts Computer have been in this market since last 29 years and have over the years developed a system to overcome most of the listed challenges,” says Shailendra Rughwani, Chairman, Experts Computer Group.
“Leading vendors having Gold or Tier 1 partnerships enables them to buy directly from vendors which gives tough challenges for the channel partners who rely on distribution,” says Ashok Kumar, CEO, New Trend Computer Networks and Vice President, Dubai Computer Group (DCG). “With most Distributors getting into the marketplace which eases the process but can anytime remove channel partner presence as it is more connected with End Customers. The move towards the subscription model is changing a lot of things and this is putting even the distributors’ role at risk,” adds Ashok Kumar.
B2B marketplace business model
Of late, Middle East has recently been the focus of B2B growth. Many companies in the region are in the process of starting B2B platforms for many benefits the marketplace model provides to the businesses.
As B2B transitions online, the marketplace model is gaining traction. B2B eCommerce marketplace is rising rapidly over the years. “Going Digital is the aim for any trading company in present times. B2C e Commerce is already well established and as per our internal estimates, more than 60% of the B2C purchases will be online. We are seeing similar trend in B2B sale happening. Most of the distributors have started following the B2B ecommerce and with the launch of B2B market place websites, eventually the trade will move to the ecommerce,” says Shailendra Rughwani of Experts Computer Group.
Many companies are in the process of starting B2B platforms. “Since the B2B IT, CE and mobility sector continues to evolve, a B2B marketplace ecosystem has emerged as it’s a must-have platform for the traders,” says TEXUB’s CEO, Suchit Kumar.
He says, “As we have always been focused on digital transformation of B2B businesses, and the fact that there has been a remarkable industry growth, the distributors have the biggest challenge to enable their businesses online. Thus, the distributors are looking for opportunities to sell across third party marketplace platforms and enter into global potential markets.”
The B2B platforms are getting very popular for many advantages to business. The platform brings many advantages to both vendors and channel partners by keeping the human touch intact.
However, distributors are aware of their critical position with leading vendors signing up in the marketplace. In today’s conditions everyone is looking for a simplified process and the pricing difference is also not too much as they get global contracts to have a super volume price.
“Players in the IT distribution in other regions have already started their B2B portals and are running successfully and even in our region few have started and more in the testing stages. The only risk factor here is how they would segregate the pricing for the different levels of Channel,” says Ashok Kumar, of New Trend Computer Networks.
Digital distribution and Challenges
Businesses are in need to partner with a technology partner that has the requisite know-how to take them on the journey from transactional to digital. As traditional distribution is giving way to digital distribution, the challenges are there. Suchit Kumar of TEXUB says “We are a B2B marketplace and the IT, CE and mobility business eco system is still new to digital trading. One of the challenges is the inertia in an organization”.
Hence it is in the fitness of things that stakeholders are able to overcome their own inertia. “The best way to sustain the business is to get into multiple verticals and multiple geography and with digital trading that is possible with a low cost,” added Suchit.
Sustainable channel business
Distributors are experiencing constant pressure on margins. The pressure is coming from both the vendor and reseller communities. “Mapping of products and services considering the strengths of individual companies is a must from the distributor’s point of view,” says Shailendra Rughwani of Experts Computer Group. “Making sure that the channel enjoys healthy margins is important. The channel also needs to maintain decent margins for their long team growth,” adds Shailendra.
For Kamran Khayal of Trigon, the underlying challenge is credit. He states “More credit facilities to our buyers, investing in new technologies and partnerships and strengthening the supply chain and logistics operations are our prime consideration”
Organizations across the Middle East are in need of transforming the way they operate and do business to be able to stay competitive and thrive.
The traditional channel is giving way to a world of services and value-adds. Distribution will continue to be an integral part for IT providers and technology managers.