Thursday, July 19, 2012:
Inspan Infotech, a consumer electronics and IT distributor, has been in the business for about 14 years. It has 17 branch offices and works with over 100 system integrators and 5,000 channel partners. The distributor has plans to focus on consumer electronics (CE) distribution, as it wants to develop and increase its market share through CE. EFYTimes spoke to Sudhir S, managing director, Inspan Infotech, to know about the current state of the CE distribution and ways to handle the prevailing foreign exchange fluctuation in the market.
Tell us about Inspan's business.
Sudhir S: We are into distribution of IT products, along with consumer electronics, security and surveillance, and lifestyle products such as tablets and designer tablets. We sell security and surveillance products for shops, bungalows and apartments. We even sell Mercury tablets along with inverters, which come under CE category.
We have also been associated with the Genius brand. It manufactures cameras, speakers and other CE products for more than five years. We are the largest distributor for Genius in the country.
What are the kind of schemes you come out with for your channel partners?
Sudhir S: We come out with quarterly schemes for our channel partners. For each product line, we get along with the vendor and launch a scheme for our partners. Mostly, we take our partners to foreign countries such as Thailand, Singapore, Malaysia and others. We also give them white goods and other similar items as part of quarterly schemes.
How do these schemes impact the sales?
Sudhir S: These schemes do improve the sales. There is a month on month and quarter on quarter increase in our sales. For example, last quarter, we aligned three partners in some city. This quarter, we aligned one more partner and at the end of the quarter, we hope to see huge sales. Sales are always huge in the last two to three days of the quarter, since the channel partners also have to achieve their incentives.
Our sales increase by around 25 per cent minimum on an average every quarter. For Genius, our sales increased by 29.3 per cent last quarter.
What are the major pain points in CE distribution?
Sudhir S: We do face some challenges and hurdles while carrying out the distribution for CE products. The main problem is directly connected to the end users. So, we have to work together with the vendors and support them, else it can back fire on us on material sales.
Another problem is that technology keeps changing very quickly. There are chances of prices of a new product dropping within a few weeks. We have to be quick when dealing with CE items. We need to understand the existing market and adapt ourselves according to the forthcoming technology. The same product cannot be sold next month as the technology gets upgraded by that time. Hence, we need to keep upgrading ourselves.
Since, there is a lot of voltage fluctuation in cities, products like inverters and security solutions need to be upgraded often. We have suggested suppliers to provide us with inverters that have in-built stabilisers. If customers report any issue with inverters, we have to give them standby inverters till they get a replacement. So, we are asking the solution providers to provide inverters with stabilisers so that we can upgrade ourselves as well.
As you are directly connected to end users, you have to take care of after-sales services as well. Do you provide after-sales services on your own or is the vendor also involved?
Sudhir S: The vendor provides the after-sales services, but we have to co-ordinate with him. Our import label is mentioned on the box of the product. We have a separate support team, which takes calls, connects the users to the vendors, follows-up on the service and ensures that the customers' problem is solved. That is a value addition we provide to our customers.
In CE distribution, the first layer of the dealer segment is organised, but the second and third layers of the distribution are not organised. That channel does not bother to get in touch with the manufacturer. They will directly get in touch with us even if we do not offer after-sales service for the brand, but being a seller, we cannot ignore such calls. So, we have put in manpower to handle such calls, which is a huge exercise.
CE distribution is not structured yet and it is a big challenge for us. We are trying to meet this challenge by educating our channel.
Have your margins been affected owing to the current foreign exchange fluctuation?
Sudhir S: Margins are not very healthy as of now, owing to the foreign exchange fluctuation. It was a better margin about an year ago.
How has CE distribution been affected of late?
Sudhir S: It has been badly affected as we have seen 5 to 28 per cent of exchange fluctuation in a very short span of time. The margins are definitely not in double digits. When the margins are in single digits and fluctuation in double digits, the situation is difficult. By the time we go to the market after importing the product, the price becomes totally different. By the time we pay back the money, the dollar rate is different. So, we are facing a lot of road blocks.
How are you coping with the situation then?
Sudhir S: There is clearly no method to safeguard against the forex losses. Nobody had predicted such fluctuations in the market. We have to be in the business, use the opportunities, and try and make better margins elsewhere.
Have you reduced margins for your channel partners as well?
Sudhir S: Our margins are definitely slashed due to the forex fluctuation. People who buy products in rupees, like the channel partners, might not feel the real pain. Rather, they are at an advantage.
If they stock and sell, they have an advantage as the prices increase. Prices have increased for all products. The landing price has also increased because of local currency depreciation. If the channel has something in hand, they can probably sell at a higher rate and make more margins. For the channels, who are stocking and selling, it is a big opportunity.
Upasana Rajpal, EFYTIMES News Network