Channels across India condemn distis’ handling charges

It indeed was a post Diwali dhamaka. The IT channel community across India were in for a major shock on Monday when they were informed by the three distribution majors–Ingram Micro, Tech Pacific and Redington–about the introduction of the ‘handling charges’, without any prior notice on the whole issue. While on the other hand doing away with the transportation cost.

As per the handling charges, Rs 3 per kg of IT goods will be charged, irrespective of the fact if the resellers order it from the warehouse or transport it themselves. Earlier the channels had to pay Rs 100 for the transportation and as going by the charges levied now the whole thing will cost around Rs 5,000.

All across India the move has been strongly condemned and has generated a lot of discontent among the channel community.

They are enraged by the manner in which the distis have introduced the policy, without taking the channel community into account and not even bothering to inform them of such a decision beforehand.

“On Monday we received a call from the distis informing us about doing away of the transportation cost and introduction of the handling charges,” said a distraught Shyam Modi, Director of Delhi-based Modi Peripherals. The distis have passed on the message only verbally and nothing in writing has as yet been given.

According to PK Sharma, Director of Delhi-based Comnet Vision and also the Chairman of DCTA, “Certain distis have made a cartel and imposed certain charges on the IT people. No prior notification was given in respect to the whole decision, which is unethical as per industry standards are concerned. Before taking such a major decision the whole IT channel should have been informed.”

The reason quoted for the introduction of such a policy is to cover the increasing operating cost that the distis incur. One more interesting thing is that some products like APC UPS etc, have been exempted under this new policy.

According to Mumbai-based Ashwin Kukreja, Proprietor, Realtime Computers, “I got a mail mentioning the Rs 3 charge per kg. This is not fair to the channel partners as this is charged also while collecting from the warehouse. I want to approach associations like TAIT who should be talking to distis and resolving the issue.”

Sudhir Budhey, President of Nagpur’s VCMDWA, said, “At the meeting held two days back we had put forward two requests, first on the backends which should be added in the bill, second on these freight charges. There was no result at the end of the meeting, taking freight charges is not right as it should be part of their business expenditures, they take freight charges from us without even giving us any additional benefits, they are trying to increase their profitability, in fact Tech Pac sources also told us that they had their overheads increasing because of which they were charging us. But with increasing volumes the distributors must be able to increase their profits, at least price must be reduced by one percent, this brings out a lot of price disparity.”

In Chennai the same sentiments were aired. “The new `Warehouse (godown) Handling Charges’ of Rs 3 per kg of goods is totally unjustifiable and we really wonder why distis often come with new concepts and change of policies affecting the trade and reseller community,” questioned P Naresh Kumar, CEO of Chennai-based Sagar
Infosystems.

Added MC Jain, CEO of Chennai’s Mahavir Computer Spares and Secretary ITTA, “If distis cannot calculate their margins and profits well, it is their problem and they should not tax the channel partners with such new charges. Today, there is a heavy competition among the distributors and in volume products, they often get confused with the selling price and margins.

However, channel partners should not be burdened with such charges as we are also facing tough competition. Moreover, I believe, they are not charging this `Warehouse (Godown) Handling Charges’ on all IT products and we are waiting for an official communication from them.”

As this was not enough, the distis have also decreased the credit period to 14 days. “It has to be understood that earlier the credit policy differed for different sectors, but now the distis want the same credit policy for every sector except the retailer,” informed Keshav Madhav, Director of Delhi-based Vidur & Company. “Earlier the credit policy varied from disti to disti, while TechPac charged Rs 75 on a purchase of less than Rs 10 lakh, Ingram Micro charged Rs 60 irrespective of how much one ordered.” According to market sources, the credit policy in the past few months has been through a lot of changes. While some resellers are talking about stopping to buy products from them, there are others who say “we have no choice but to buy from
them, as certain products are with them only.”

While Sharma of DCTA said that he will ‘wait and watch’ before deciding upon anything, his counterparts down south seem to be more pro-active.

Said Jain of ITTA, “From our association, we will first demand with the distis to remove this new charge by forwarding a letter signed by all the resellers. In the next stage, the association would call for a meeting and decide the course of action.”

Said another leading reseller of Chennai, “Nobody (reseller) is agreeing to it and we are sure there will be a lot of protest and boycott from our side until they give up this new system.”

Meanwhile, there is a report that Kerala resellers have already joined hands together and are protesting this move of charging ‘Warehouse (Godown) Handling Charges’. In addition, there is a rumor that Samsung’s logistics partner–Sembcorp–is moving out and there will be new logistics arrangement by next month and Samsung will not deliver its goods anymore at the distis’ door. Hence, distis will have to pay for the transportation and the same will be passed on to dealers/resellers before it reflects on the final price to the end-users.

As top officials of Ingram Micro and Redington are traveling, there is no official comment on this from the companies. The next-level of officials refused to comment saying they are not authorized to speak on this. Clarifying that not only volume products but all goods will attract this new charge, K Jaishankar, CEO, Tech Pacific, said, “I don’t want to comment anything on this now.”

When contacted GS Paul, CEO, eSys, commented, “The thinning margins have compelled them to look for new alternatives.

Right now eSys has no plans to follow suit but maybe two months down the line we might come out with such a plan.”

On the other hand, Biju Bruno, Director (Sales), Compuage Infocom was very emphatic and condemned the whole episode.

He said, “It does not make sense for the distributors to charge Rs 3 per kg. Products are calculated according to their value.

If this is done for covering up their margins which they need to make or have to make this will not be taken well with the channels.” As for Compuage joining the bandwagon he concluded, “Compuage has no plans of charging their channel partners any such kind of charges.”

Karma Negi,Nancy Sudheer & S Gopikrishna