Zenith to get into distribution

Snigdha Karjatkar Mumbai, July 10

Zenith Computers has decided to foray into the distribution
business. It is reported that initially the company will focus on distributing
components. It has already signed up Taiwan-based motherboard manufacturer,
Elitegroup Computer Systems (ECS) for distributing its motherboards.

This is the first time that a vendor is getting into
distribution. Zenith claims to have 800 authorized dealers and 350 exclusive
retail outlets and will be leveraging the same for its distribution endeavors.
Sandeep Shah, COO, Zenith who will head the distribution division was not
available to confirm this news, despite several attempts to reach him.

So how are other distributors viewing the entrance of a vendor
into their domain? Navinder Chauhan, Head-Marketing Manager, Rashi Peripheral
welcomed this move from Zenith and said, "The major challenge for Zenith
would be to establish itself as a brand in distribution. Some extra efforts have
to be taken to make the brand more visible in the market of distribution. The
market has become more competitive. Almost all vendors are present in India and
have their own strong channel network. The channel relationship has to be
strengthened."

Other distributors said that the distribution business is too
cutthroat and Zenith will have to get its logistics and infrastructure well in
place if it has to succeed here. According to a senior official with a national
distributor the key challenge for Zenith would be to beef up its presence across
India. "Zenith's brand presence is strong in the western market. But at
the same time it would be more challenging to establish its brand outside this
region," said the official on condition of anonymity. This statement is
especially true when the company has to popularize not just its own brand name,
but also that of its principal companies.

Secondly, different regions have different taxes like sales,
VAT, octroi, road permit, which vary from region to region. Zenith will have to
get well acquainted with these region specific issues. With distribution players
already facing dearth of skilled employees, hiring the right professionals who
are well versed with these issues will be a key challenge for Zenith.

Also, distribution is a different ball game, very removed from
manufacturing and retailing. There are several issues that have to be taken care
of-including credit issuance, spread, supply chain management, market
development, and post-sales support, amongst others. Here, Zenith can leverage
on its warehouses at different locations, helping it by making stock readily
available for its channel.

There is speculation in the market as to why Zenith got into
distribution. Some feel it is because their PC and laptop business has seen a
slowdown and the

investment into Vu Technologies has taken a toll on its topline and bottomline.
Entering into distribution might change this tide in their favor.

Others feel that since Zenith has OEM tie-ups with some
component vendors, they can easily take up distribution of these products as
well. Said the GM of a well known motherboard company, "Zenith manufactures
6,000 PCs and laptops every month. They can easily start distributing
components, which they are using within their systems, through their channel
network. This will be easy for them as they have a ready channel in place and
they can bundle the components with their PCs and laptops."

Others in the market believe that the distribution business will
also help Zenith procure components at a reasonable pricing for its own
manufacturing unit.