Resellers are not amused with the cartel formation

The reseller community is already bogged down by the bad market and to add
more to their woes the distributors coming out with cartels might hit them quite
hard. But before coming to any conclusions we need to look at the root cause of
such a practice.

Bharat Bhushan, Director, RR Systems (P) Ltd, was quite sympathetic towards
the distributors, "These distributors have been through a very rough patch
and have seen a lot of losses. In some way or the other they have to cover up
the losses and this is where they can do so. But I can't say when this cartel
will break."

Though most of the distributors disagree that they have come out with any
cartels, but according to market sources there are distributors who have come
out with cartels which might affect them if it breaks. People who already have
done bulk buying might be the hardest hit when the cartel breaks. Therefore,
there is a lot of apprehensions about the practice.

After the end of every financial year distributors come out with cartels for
certain products and at this time it is for printers.

Cartels are nothing but a close association where the distributors quote a
fixed price for the product and all the resellers have to do is it sell them on
that price. The association is not registered.

SP Rajguru, VP, Ingram Micro, denied that they have come out with any cartels
and rather pointed put the impracticality of the whole idea. "In today's
competitive environment such practices are not practical at all. Various people
have different goals and objectives and following such practices doesn't hold
much water."

Said Pawan Awasthi, Marketing Manager (North), Rashi Peripherals,
"Though we have come out with certain fixed prices but we won't call it as
cartel. Unlike other vendors, we have chosen selective persons who sell the
products. We have come out with schemes but not cartels where we give points to
resellers on the basis of the volumes of products sold."

There are people who feel that it is not only the distributors who are to be
blamed. The pressure from the principal companies compels them to take such an
action.

"There are times when the principal companies pressurize the
distributors into selling the products at a fixed rate. The whole idea is of a
very innovative kind, but what we need is a right kind of a business
model," felt Rajesh Agrawal, Director, Micro Max Technologies Ltd.

Added Anil Sachdeva, Director, Kadam Marketing, "No doubt this whole
concept of cartel is very beneficial for the resellers, as long as the prices
are stable. But the moment this breaks all hell would break loose. We already
have done buying at an escalated price and if this breaks the prices would come
down and we would run into losses."

The last time a cartel broke was in the consumable segment which had tried to
come out with standardized prices in December 2001, where the reseller had given
their nod for a stable price. "What we created was not a cartel but an
effort to stabile the price in the market. But unfortunately it broke in the
first week of May 2002," pointed out Puneet Singhal, Director, Pioneer
Enterprises. "The main reason for its break-up was the company pressure
followed by the overburden of targets."

Pankaj Bandlish, Director, Compro Computers, also reiterated the point that
the concept of a cartel with standardized prices is no doubt good. "Such a
concept if followed properly can no doubt bring stability in the market and
regulate the business."

But here he differs a bit in his opinion that it is because of the principals
that the cartels break, when they start giving discounts on certain products or
start selling the backends.

Summing up the whole argument it can be concluded that cartels no doubt can
help bring the much needed stability in the market. Though some cartels,
according to market sources, have been formed to help the resellers and no doubt
they are without any ulterior motive, but certain pressures lead to its break
up. And if something can be done about it then no doubt it will prove to be a
win-win situation for the resellers.

Shweta Khanna and Karma Negi