The snowball effect

Faisal Jamal, COO at Despec MERA

Despec Mera has been working hard on strategic expansion plans and has successfully signed one of the first agreements with an African government to set up a regional export hub.

Despec MERA, a division of Despec International, embarked on its journey in the Middle East 15 years ago with a core emphasis on growing the company’s printing supplies business. At the time, the organisation served its various customers across the larger Middle East and African markets from a central distribution base in Jebel Ali, UAE.

“Four years ago, we decided to change our strategy realising that our customers needed to have our products stocked closer to them. Traditionally, customers had to deal with a delivery lead time of anywhere between two to four weeks, roughly the amount of time needed to ship the products from Jebel Ali to where the customer needed them,” says Faisal Jamal, COO at Despec MERA.

Since then, the company has set up in country operations across almost of its core markets including Jordan, Lebanon, Kuwait, Saudi Arabia in addition to a free zone facility in Dar-E-salaam ,Tanzania to serve the East  and Central African markets. In addition, the company has also set up local warehouses in Kenya, Tanzania and Uganda.

“The Middle East has always been our core market contributing to about 60% of Despec Group’s total revenue and the decision to set up physical operations across emerging countries has served us well. We’ve witnessed a significant growth across all our operations, for instance, Despec Jordan and Lebanon have reported 100% growth while Despec Saudi Arabia has reported revenue growth of 35%. In addition, Africa contributes approximately 36 million dollars a year and what’s best is that the market is still showing signs of growth,” he proudly adds.

“Most importantly, when I talk about having physical, in-country operations it’s more than just about having a local sales office there. The move is about setting up operations to stock products on the ground in addition to ensuring the right levels of customer and technical support across the brands we carry. This was also a huge challenge for us because we needed to change our mindset. We were used to working from a single location with a centralised set up, team and stock. Setting up in country operations meant that we had to go through the process of acquiring the right licenses in order to legally establish a business entity that could stock goods on the ground. We then had to invest in teams to manage the stock and operations on the ground, in addition to managing credit availability for the in country channel,” Jamal explains.

Having invested in expanded operations, Jamal is careful to point out that the company continues to centrally manage core operations like working capital management, IT, marketing and product management, among others to avoid inflating costs.

“We’ve seen some distributors have huge operations spread across their various in country locations making the task of offering the customer a competitive price quite difficult. The last thing we want to do is establish a great in country set up, the burden of which falls on product prices and ultimately the customer. That doesn’t work well for us. We are careful about maintain the balance between regional and in country operations and workflow,” he says.

Strategic roots

The company’s recent move into Africa is a testament to Despec’s commitment to better serve its customers while leveraging market opportunities to boost the business globally.

The group initiated investments in Africa not only because it’s family’s roots originate in the vast continent but also because the team saw massive unleashed potential in the young but rapidly developing market.

“If you look at the demographics alone, East Africa- Kenya, Tanzania, Uganda, Burundi, Rwanda inclusive of Ethiopia, represents a population of over 250 million people that will require IT supplies over the next 10- 15 years. Even if a business caters to just 10% of that population, 25 million is still too large an opportunity to miss. In addition, over the last couple of years we bore witness to the massive investments made by local government authorities in Africa in a bid to establish a robust infrastructure that ultimately resulted in most IT businesses operating the region reporting significant double if not triple digit growth,” says Jamal.

“So, we started 3 years ago with a simple operation in partnership with a local sub-distributor in Kenya. At the time we thought the business had a maximum potential of generating revenues of $200,000 or $300,000We were wrong, today; our operations in Africa generate considerable revenue monthly  East Africa represents a huge focus area for the business with operations in Tanzania, Kenya and Uganda,” he adds.

It was during this phase of initial growth that Jamal realised that the channel community in Africa was actually missing the presence of a regional hub.

“Most vendors were shipping products either from Dubai or Europe to customers in Africa, a task that took at least four weeks. In addition, vendors shipping in had to keep in mind the mandatory import costs such as VAT and other duty and taxes that actually questions the feasibility of the total investment required to sustain business in Africa,” he says.

Not shy of a challenge, Despec saw this as an opportunity to initiate dialogue with the Tanzanian government to understand their strategy to boost the larger IT trade industry in the region. Suffice to say, the dialogue was a success. The company went on to establish an export hub in Tanzania to serve the wider East African community. As a result of this initiative Despec has set up a free zone entity in the country to stock goods locally saving them huge costs earlier associated with VAT and import duty. This also means that the company can now carry additional stock at Despec Africa EPZ (export processing zone) to deliver products to customers across Africa at much shorted lead times (three to five days).

We are one of the first distributors setup the regional hub similar to the one we have currently in UAE which we believe will benefit the entire community.  We are in the process of building our regional warehouse in EPZ in Dar-e-salaam in close proximity to both sea and airports,” Jamal says.

At the moment, Despec Africa operates from a rented facility and expects to operations to its own warehouse in next three months. The company also has plans to open up subsidiaries in Mozambique, Rwanda and Ethiopia and is actively participating in smaller trade shows and fairs located away from the larger cities while investing in sales people based up country; away from the core cities yet closer to customers.

Formula for success

While Jamal and his team have rapidly expanded the group’s reach with local presence across growing markets in the region, the company has also consciously made changes to the products or brands they choose to represent.

“In the last four years we have gone from being a specialist in storage and printer supplies to now focusing on other products and even accessories. This doesn’t mean that we’re taking on brands just for the sake of it, but offering a customised assortment of brands across our in country operations depending on the market opportunities and the needs of local customer groups. Ultimately the customer is key to the distribution business, so while a company can talk about having availability, great staff, training and marketing; if the customers have no requirement for a product and aren’t willing to buy it the business won’t succeed. This is why we sit down with our customers to discuss exactly what products and solutions they want us to bring to the market, we then study these requirements against larger market demand and trends to finally decide on which brands to market,” he states.

For instance, the company has recently signed an agreement with D-Link to distribute their networking solutions in Jordan and Lebanon in addition to an agreement with Norton to market their antivirus solutions in East Africa, while in Saudi Arabia the company has added Samsung printers to its existing portfolio. According to Jamal, Despec has also recently entered the niche pen tablet business in partnership with Wacom, a business that has tripled in size over the last three years.

Jamal adds an interesting note saying that going forward, Despec will also base product assortment on the product knowledge and experience of the company’s staff.

“We won’t go from being aftermarket products to a company that supplied high end value services like serve rs overnight because I don’t believe that we have the knowledge for that. We will continue to expand what we’re already good at, so for example, in Africa, we’re in process of acquiring a company for services that offer customers after sales service and support for maintenance and repair.  Despec will gradually continue to expand along the products and brands that we are currently carrying instead of expanding into all new market segments. At the same time, we intend to stay specialists and will not take on every single printer brand because we don’t think this is will benefit any of the company’s stakeholders. We will continue to carry only select brands, expand into markets that represent significant growth opportunities and build our customer’s trust because that alone is the formula for our success,” he says.

So how does Despec go about brand selection?

“This we believe is a million dollar question. As distributors, we look to partner with vendors who can offer us the right level of support both technical and sales. This is an imperative for places like Africa where the market is yet maturing and establishing a business is often a long drawn process. For instance, Norton supports us with staff and marketing in Africa leaving us free to focus on developing market opportunities through client relationships and alliances. Secondly, we carefully choose brands that come with a significant degree of brand recognition, either good or bad. We believe, if the market already has some knowledge of the brand it is then easier to build on it, refresh it or altogether change the perception than to build a brand from scratch,” Jamal answers.

Jamal adds that at times it is the balance of the two elements that helps them decide on brand selection citing the example of popular brands in Africa that aren’t in fact even known to the Middle East market only because the level of support the vendor brings to the country. “People want to know that there is a face behind a brand, when vendors come and meet the partners and customers it is easier to develop the brand further,” he says.

Another critical element for success, Jamal believes are the people associated with it.

“A company cannot hope to sustain long term growth without the right people. At Despec, we work in a close knit environment representing a family that offers equal opportunities for growth for each and every member of staff. At the same time, we consciously welcome new members to our team who are self starters with a drive to contribute to the business. While we invest in training members of our team, we also believe in giving new hires the opportunity to take on responsibility to earn valuable experience,” Jamal says.

He delves into the details on a management training course that the company is looking to offer in the second half of 2012. The course will aim to enhance theoretical knowledge with practical training sessions focused on building both individual and team performance. It will look to educate candidates on leadership and management essentials.

In addition to employee training, Despec also firmly believes in the concept of partner training and reseller education. The company is actively involved in educating its partners on business and selling essentials as well as specialised subjects like the advantages of selling high capacity toners and educating them about counterfeit goods. Jamal adds that Despec Africa is scheduled to hold four such training sessions in Africa in the next two months.

Partners working with Despec also have the added advantage of leveraging the company’s support for marketing and product promotion activities. “We support resellers who don’t have the resources for marketing in return for a commitment that they will continue to buy the products from us. Despec offers its partners support through the creation of marketing material, campaigns and content that they can then pass onto their customers. This we believe is how Despec adds value,” he adds.

One thing is pretty clear; Despec has always been a distributor that values its employees, the channel it serves and the markets it continues to take by storm. A company that doesn’t fear a challenge but looks to take it head on armed with a keen knowledge of the objectives and how to go about achieving them. We have a feeling there’s a lot more to come. //


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