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Sanjiv Krishen, CMD, Iris Global, talks about the hardware business situation in India today and how it is growing.
What happens when the partners are unable to sell their stocks?
Sanjiv Krishen - The material is transferred to the distributors, who stock them. But by and large, whenever any material gets stuck, the OEMs will compensate to the distributor for any losses which they incur. If the stock is for 30 days or less, they will formally give you a credit note, which is called price protection. If it is more than that, they’ll give a sell-out rebate. And that is the objective in not to kill any distributor.
All distributors are doing well. The model per se is working.
But there are exceptional cases. There are unscrupulous people in the market, who resign or quit. In that case you’ll get stuck. So you have to take the good with the bad.
We have always managed our inventory very carefully from that angle and we’ve never got into a situation where we have had a disaster the way this is sounding.
Distributors like you are doing very well. But the dealers, retailers and other resellers say they are losing their business. What is the reason for these opposite trends?
Sanjiv Krishen - It’s not a black and white situation. Every reseller will not say that there is no business. There are many resellers who are saying that this is the best time for their business.
But there are some resellers who will get hurt, because there are some customers who have stopped buying, e.g., the hotel and the travel sectors. So there are pockets where the demand is going up, such as work from home was a big opportunity. So the resellers who were catering to MNCs for WFH, have had a good time.
Overall the business has gone up. The demand is so high that there’s a shortage of components and of products. There are orders worth approximately Rs 100 Crores which are still not fulfilled.
The resellers are saying that the customers are not buying from them. They are either buying online, or they are buying directly from large suppliers
Sanjiv Krishen - Today there’s a shortage of material. All the undercutting and discounting which the distributors had to do, has all stopped. The demand is far more than the supply. There are resellers who have got hurt, but there are others who say that they have never had it so good. The manufacturers are all installing new factories to increase the capacity of their products. But it takes 1-2 years to build a factory.
What about the hardware vendors reaching the end customers directly, bypassing the channels and selling to large buyers?
Sanjiv Krishen - Yes, that is correct. But, we need to look at the percentage. If 70% of the hardware business is offline and 30% is online, according to me that model is going to remain in the country. It is a good business for those who fall in the 70% category. Those who are in the 30% are the ones who are complaining.
Our 90% of the business is through the resellers. I can tell you that we and other distributors like us are doing very well. So, we have to look at the overall situation.
They should go after the large buyers, rather than wait for the customers to reach their stores.
We were the first distributors to hold a meet in J&K. we took vendors there and double the expected number of channel partners turned up. We got large orders there. It was very successful event.
Overall, there’s shortage in the market, some have lost, but there are many who have gained.