IT PANCHAYAT MANGALORE : Give us margins, not alms, demand Mangalore partners

Will dealers be able to sustain their business on the wafer thin margins that
they end-up making while selling to end-customers? The channel community in
Mangalore did not seem to think so. This is what came our clearly at the IT
Panchayat held in association with The DQ Week and DQ Channels on March 14.

The event saw participation from over 30 channel partners and the distributor
community was represented by S Dinakar of Rashi Peripherals, Santosh Kumar of
Redington India, Santosh Savalekar of Neoteric Infomatique and Madhvesh K of
Ingram Micro, while Vinita Bhatia, Executive Editor, DQ Channels moderated the
event.

Raising the issue of thin margins, Melwyn of Phelix Systems said, “While
fixing the MRP of products, neither vendors nor distributors keep in mind the
dealer who is selling to the end customer and has to make do with just one or
1.5 percent margin. That is not margin, but is charity. Why can't they keep
higher MRPs, and ensure that the entire channel has a margin of at least 30
percent to trade in?”

To this, Dinakar explained that MRP is decided at the time of import. Before
determining the MRP, the vendors figure out the customs duty they will have to
pay on the MRP, then decide the market operating price and then finalize the MRP.
“The role of a distributor is limited in this aspect,” he noted.

The distributor community was represented by S Dinakar of Rashi Peripherals, Santosh Kumar of Redington India, Santosh Savalekar of Neoteric Infomatique and Madhvesh K of Ingram Micro

What also compounded the problem was that distributors impose freight charges
on delivery of products. Earlier, all deliveries were freight paid, but over the
past few months distributors who do not have a warehouse within Mangalore have
started charging delivery charges. “The price is Rs 100 minimum and then Rs 5
per kg,” said Gopinath Pai of GS Distributors and President of the Mangalore IT
Dealers Association (MITDA).

Warren Fernandes of Belwil Softchip Computers pointed out that the freight
charges on heavy products like printers and CRT monitors is so high that is can
further erode the margins. “When we are already burdened with thin margins, then
how can distributors add freight to the entire problem?” he questioned.

Santosh Kumar noted that in some cases distributors did waive off delivery
charges. Pai quipped that this was usually in the case where other distributors
with warehouses in Mangalore were distributing the same brand.

Another issue that was raised was about the step motherly treatment meted out
to partners in Mangalore as compared to their peers in Bengaluru. Pai explained,
“The prices offered to partners in Bengaluru is much better than those offered
to us and they are also given better discounts,” he said.

To this Savalekar of Neoteric said, “Partners in Bengaluru buy more quantity
and therefore they get better prices and discounts from distributors due to
economies of scale. But partners in Mangalore buy smaller quantities so they end
up getting lesser discounts.”

Madhvesh of Ingram Micro also mentioned that in some cases the prices are
decided by vendors and then the same price is offered to all partners,
irrespective of the city. “It is a vendor driven market. Some vendors decide the
price that will be given to partners and we have to adhere to it. But usually
the discounting takes place when there are more than one distributors selling
one brand. In such a situation, one distributor will try to offer better
discounts to a partner in order to achieve their targets,” he explained.

Pai noted that MITDA would also take steps to create better business
discipline amongst its dealers so that they have a market operating price and no
dealer sells below this. This would ensure that there was enough margin and
business for everyone in the game.