With the lines blurring between retail and IT distribution, what does this lack of clarity mean for the long-term structural development of the market and how does it impact vendor strategy? Does the emergence of power retailers spell doom for volume IT distributors in the Middle East?
Jamal H. Maraqa, MD at PRO TECHnology, says the company’s strategy has always and will always be based on offering channel partners value. Maraqa believes that today the retail business in the Middle East has developed over the years to become much more advanced in some areas unlike what it was a few years back. This, says Maraqa, can be largely attributed to the increased competition, market maturity and the emergence of tech savvy consumers that has happened over the last three to four years in the Middle East. “Today, the retail business, especially the power retail side has become sophisticated,” he notes. “In addition, they have started to look at what value any vendor or distributor can give them or bring to their partnership.”
Maraqa explains that PRO TECHnology recognised this a few years back and started developing a system and putting products together so that it could offer them in a manner that will add value to retailers and powers retailers, and make their job much easier and smoother to reach the end-user customer.
Selecting vendor brands
One key issue for any distributor of IT products is how to select a product, brand and technology offering. Distributors that form alliances with vendors that complement their value-add distribution models stand in good stead of making significant in-roads in both the traditional and retail channel.
Maraqa agrees and says product selection has been done and continues to be done carefully regardless of whether the company serves the retail or traditional dealer channel. “When we first decided to enter into this market, we looked at products that we felt would be accepted or required by end-users,” he recalls. “We looked at it from the end-user side and decided some 10-years ago to put focus on mobility products.”
He adds that when PRO TECHnology started with its mobility strategy then, not many IT distributors had enough knowledge on mobile IT solutions. Today, says Maraqa, mobile solutions have become widely adopted with most mobile products serving travellers and business executives on the move. “We knew then just like we know now that mobile IT solutions will grow to have a greater impact on people’s lives and lifestyle,” he notes. “Since then, we have kept on signing new products and adopting new innovations around mobility solutions.”
Maraqa points out that one of the guiding principles for PRO TECHnology when selecting vendor products is that the company strives for best-of-breed quality solutions that adhere to the highest standards. “We always take to the power retail channel products and solutions that are more expensive than other competitor products but really deliver and satisfy their and the end-user expectations,” he says. “The end-user in the Middle East does not only like quality, but also likes image, design and the packaging, all these are important factors that PRO TECHnology uses when selecting a product for distribution.”
Maraqa says today, in the retail distribution division PRO TECHnology has five brands and these brands are complementing each other in this business unit. He reveals that part of the company’s approach in the market and part of its way in conducting business in the Middle East region has been inherited from its history and association with Apple. “We learnt over the years that the approach of Apple on how the vendor developed its brand and how it developed its image, has had some influence on how PRO TECHnology as an Apple partner does business as well,” he says. “I admire the way Apple works and even colleagues in our company are getting to know more from the way Apple is engaging with its partners in the region.”
Growth for consumer business
Maraqa says PRO TECHnology sees growth coming from the devices that are tailored at the digital lifestyle in the consumer line of business. He adds that most consumers in the region are looking at IT devices that have converged with digital lifestyle gadgets. “We believe this is where the growth is and typical products that are meant for personal needs will step by step become volume products,” he predicts. “For us as PRO TECHnology, we are seeking products that fit the digital lifestyle needs of people but also fit into our strategy of being a value business. We want a scenario where we will continue to grow, earn high margins but most importantly pass on these margin benefits to power retailers, resellers and their end-user clients.
Maraqa points out that although the company is into the value business, at this stage services is still a small contribution to its overall business. He reiterates that this has been done like this because retail distribution especially today with the kind of products on the market does not require a full-fledged professional or consulting services offering.
“The type of services we offer to retailers is through working closely with them in taking the products to the end-user, creating marketing campaigns, POS materials and other educational awareness campaigns. “This is where we really support our power retail partners,” he says. “One important issue that is part of the on-going processes at PRO TECHnology is that the company works regularly with power retailers and resellers in the Middle East in areas of partner training. “Training is part of the company’s value add that we offer to all our partners in the region. We have people in the company that go visit retailers, talk to and train retailers on the various products that we have to offer. This on-going training is part of the system that PRO TECHnology has for its channel partners in the market.
With the Kingdom of Saudi Arabia (KSA) and Egypt being the most sought after markets in the region at the moment, Maraqa acknowledges that these markets are important in the broader context of the Middle East geopgrphy. He adds that this year PRO TECHnology is looking more to the Iranian and KSA markets. Having said that, Maraqa adds that the UAE is still the number one market for PRO TECHnology’s retail business in the Middle East. “I feel that there is a chance to grow and continue growing in the UAE, although we are also aware that competition is getting fierce each day that passes especially in the retailer space,” he says.
Competition aside, Maraqa says what is surprising in the Middle East despite there being sophistication, market maturity and stiff competition in the retail space, is that so many power retailers are not making profits. “One is bound to ask why am I surprised that many power retailers are not making profit,” he asks? “My observations are based on how so many power retailers in the region conduct their business, adopt products and how they utilise the space that they have in their stores.”
He explains that there are several reasons why power retailers are struggling to make a profit in the Middle East despite the segment having the most informed customers and early technology adopters. “I do believe that their operations are not efficient. Most of them don’t take the best methods of managing a retail business so that they offer the end-users the best mix of products and technology to earn them decent margins,” he observes. “Most power retailers today, use the incentive a vendor is going to give them as one of the main issues they look at when selecting products.”
Consequently, Maraqa says little focus is given to the long-term viability of their business for a quick cash-in based on the short-term gains. “If we can educate the power retailers and retailers to change and adopt the ‘right’ business methods of doing and conducting their business, it will help in changing the way vendors operate and in-turn influence the way retailers ought to be conducting their business,” he adds.
Looking ahead, Maraqa says PRO TECHnology will continue to work with both the power retailers and the tradition channel by continuing to assist them to add value to the products that the company supplies to them. “We are not planning to bring on new products at the moment as we have no immediate plans for product portfolio expansion,” he says.
He adds that if there is anything that is an attraction and the company feels it can bring that particular product on board, it will look at that but at the moment that isn’t the objective. “Our objective for the second half of this year is to consolidate what we have and put that right with precise campaigns to the market,” he concludes.
The emergence of power retailers in the Middle East channel has compelled most IT distributors to sharpen their focus as they look for better ways to engage with this channel segment. Regional distributor PRO TECHnology shares some insights on why the retail channel in the region should not be ignored.