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

CRN - - COVER STORY - — Ram­das S

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

GE­ORGE THOMAS

CEO, AGTE

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