Betting on telecom distribution
In less than two years, Kochi-based regional distributor Aldous Glare Trade & Exports has successfully built a ` 100-crore telecom distribution business
For Kochi-based Aldous Glare Trade & Exports (AGTE), the transformation journey began in 2012 when the company realized that its traditional business of PCs, peripherals and components would continue to decline. That is when the company decided to venture into smartphone and tablet distribution. Explains George Thomas, CEO, AGTE, “While the PC and related products are growing at a flat rate or in single digits, the tablet and smartphone market is growing at more than 30-40 percent. Margins in the IT distribution business are also declining, and looking at these business indicators, it was clear that we had to diversify and transform.”
According to Thomas, while the Indian PC market is just 11 million per annum, the smartphone and tablet market is six times bigger with annual shipments of more than 68 million units.
Initially the company decided to focus on importing a Chinese brand and selling it in India as the exclusive distributor. But that business took a hit due to dollar appreciation. Following this AGTE began focusing on distributing brands already having a presence in India. In April 2013, it signed on with brands such as Apple, Samsung, BlackBerry, Karbonn and Xolo for certain territories in Kerala; for some territories in Karnataka it signed up with Gionee and Xolo.
The decision was fraught with risk. AGTE had already established itself as one of the largest distributors in Kerala and some parts of south India. “We had to partner new vendors, change our business model, and also change the mindset of our organization. It wasn’t easy because IT distribution was in our blood for 18 years,” says Thomas.
The move led to a shrinking of its IT distribution business from ` 245 crore—made entirely from IT products—in FY2011-12 to ` 110 crore in the current fiscal. “In the current fiscal, we will hit a topline of ` 210 crore of which nearly ` 100 crore will come from our mobile devices business,” Thomas says. “That’s a transition we have to make if we have to survive and sustain ourselves in the longer run.”
According to Thomas, the business dynamics of telecom distribution are very different. “IT distribution is more about managing vendor and distributor credit, while telecom requires investments from your side. And while most of the IT distribution is managed out of your office, in telecom distribution you need feet on the street and a focus on sell-out. Today we have 20 field executives driving sell-out in the market.”
He says the best thing about telecom distribution is
In the current fiscal we will hit a topline of 210 crore of which nearly ` 100 crore will come from telecom distribution business
that it offers territory exclusivity. “The entire onus of developing business in your territory is on you, while in IT you have multiple distributors in the same region, hence there is no single ownership. The net margins is also 5-6 percent as compared to 1-1.5 percent in IT.”
AGTE’s entry into the telecom distribution business meant that several of its IT resellers also started selling mobile products. “We had built a strong micro-distribution practice in smaller towns in Kerala by appointing local entrepreneurs on a franchise model. We have borrowed the same idea and several of our principals now want us to implement it in other territories.”
Over the next 12 months AGTE sees its mobile business growing by more than 80 percent while the IT distribution business will grow in the single digits. With a wider mobile channel, it is looking at adding other digital products which can be sold through the existing channel.
Thomas’ advice to partners? “Every sub distributor has to move into new high-growth categories. PC distribution will consolidate as the market declines. The transition will not be easy, and for the first couple of years it will cause a lot of pain. But what needs to be done has to be done.”
The transition will not be easy, and for the first couple of years it will cause a lot of pain. But what needs to be done has to be done