Why Did Zenith Return To Distribution?

Some partners surmised this was because Zenith's PC and laptop business

was not doing well. Others felt that it was procuring components for its PC

business and was therefore looking at selling off this surplus in the channel

community. Zenith refuted these rumors and outlined its game plan for the

distribution business

Not many may recall, but Zenith Technologies, when it had started business

around 25 years ago, began by distributing products. It was over time that the

company realized that growth would come from selling computers, which led to the

creation of Zenith Computers. Soon, this entity entirely overshadowed the

initial company and the Raj Saraf led company came to be known for its PCs and

laptops, while distribution was put on the back burner.

Now, the distribution arm has been revived and Zenith Technologies will exist

as an entity distinct from Zenith Computers. When this news spread in the market

place, partners started wondering why Zenith got into distribution. Some

surmised that their PC and laptop business was not doing well. Others felt that

Zenith probably was procuring components for its PC business and was looking at

selling off this surplus in the channel community.

For three months since the news about the revival of Zenith Technologies,

several more rumors did the rounds. Now, the company has decided to break its

self-imposed silence about this strategy and talk about why it has gone back to

its roots.

Sandeep Shah has been appointed as the COO of Zenith Technologies and will be

spearheading the company, under guidance from Raj Saraf who continues to be the

CMD. And the first message that Shah wants to pass on to the channel is that

Zenith Technologies has not been created to sell any surplus components used in

the manufacture of Zenith Computers.

“For weeks now, we have been inundated with queries from the channel about

whether we are looking at dumping any leftover components from our PC business.

This is not true and I want to put an end to this speculation once and for all,”

he said.

To back this claim, he stated that currently, Zenith Technologies has tied up

with Elitegroup Computer Systems (ECS) for motherboards, Adata for memory and

Liteon for optical disk drives. None of these brands are used in Zenith PC or

laptops. Similarly, though MSI and Foxconn motherboards are used in the

machines, Zenith Technologies will not distribute the same brands, yet.

“We want to send out a clear signal to our partners that we have no intention

of mixing our PC and the distribution business. The two will operate

distinctly,” Shah reiterated.

Why distribution



According to an MAIT-IMRB survey, PC sales are expected to touch 7.5 million

units in 2007-08 and the assembled PCs or the lesser known regional brands and

unbranded PCs accounted for 40 percent of PC sales in Q1 of 2007-08. It is this

market that Zenith Technologies is trying to tap. It wants to have at least 80

percent of the component brands, which go into an assembled PC and work with the

assemblers and the dealers who sell to the systems integrators (SI).

It does not hurt that Zenith has got a good brand recall and also has an

existing channel base, which constitutes of 450 retail partners and 1,500

dealers. It can tap the latter set of partners to push its components to the SI

customers. Besides the three brands it has in its kitty, the company is talking

to a hard disk drive vendor and processor company to complement its suite of

offerings. “We are offering Vu monitors as well,” Shah informed.

Currently, Zenith Computers is present in 30 cities in the country and each

of these double as service centers, with another 97 cities being catered

directly to by services engineers. But the distribution arm will have a

different set of people working for it and while it will leverage on its

presence in these 30 cities, it will have to create a warehousing network so

cater to partners effectively. This is the top activity in its itinerary.

Challenges ahead



Getting back into distribution is not going to be easy for Zenith

Technologies, especially with the presence of big names like Ingram Micro,

Redington, eSys Technologies, Cyberstar Infocom, etc. Even the homegrown

national distributors like Rashi Peripherals and Neoteric Infomatique, are well

entrenched in the market.

But Zenith is not worried. It has set targets for itself, but is trying not

to spread itself thin to achieve it. “We are hungry for growth, but not

desperate yet,” said Shah. Despite this, there is no denying that the

distribution business is a tough one where toplines can be high, but bottomlines

are always under threat. To add to this, logistics, warehousing and manpower can

be huge resource drainers.

This is why Zenith is ensuring that even if its topline growth is slow, its

bottomline is healthy. It is also working on ensuring it has a good inventory

forecasting policy in place as well as credit policies. “Credit and logistics

have always been Zenith's strengths and we are trying to replicate the same in

our distribution business,” Shah commented.

With the revival of the distribution arm, Zenith Technologies will exist as an entity distinct from Zenith Computers

It already has 20 sales people dedicated to distribution and hopes to add

another 25 to this number within the first year of operations. Most of these

people have been recruited from distribution companies themselves and have

therefore given Zenith access to 3,000-odd partners. Of these 400 partners are

actively doing business with the company currently.

This aside, the company is also trying to get its services and support

infrastructure in place. It will offer first level support and issues can be

escalated to the vendors directly for further resolution.

Some distributors have suffered in the past because of an incorrect brand

selection or because they could not decide whether they should focus on value

business or on volume sales. And since Zenith is working with lesser-known

brands will it not fall into this trap as well? Shah does not think so.

“The brands we are working with are not known in India, but are globally

strong. If we can make them successful in India, then it will reflect positively

on us,” he stated. At the same time, he is clear that he would not like to work

with those brands, which are already over-distributed in the country.

This is not surprising because it will mean taking on the bigger distributors

head on, which Zenith can avoid at this nascent stage of its distribution

operations. Zenith is also trying to appoint exclusive regional dealers who will

further push its products to smaller partners in that geography.

But the company has stated that it will not resort to dumping its component

products on Zenith Computers' existing channel partners. “If we insist that a

partner buy certain quantities of components simply because he is buying our PCs

and laptops, it will be self defeating, because that partner will reduce

business with us over time,” Shah clarified.

From the looks of it, Zenith has got its act together to make a success of

its distribution venture. What it now needs is a few heavyweight brands,

well-placed channel partners and nimbleness to move with the market demands and

counter competition from other distributors.

Vinita Bhatia



vinitavs@cybermedia.co.in