FALLING MARGINS IN ENTRY-LEVEL NOTEBOOKS

No margins in entry-level notebooks...

Any reseller selling entry-level notebooks knows that it has now become a
mere box-pushing item, with hardly any profit margin. In the sub-Rs 40K laptop,
earlier the margins used to be as high as Rs 3,000. But today it is not more
than Rs 250 to Rs 500 depending on the brand you are selling.

Unbranded machines don't give lower margins...

I don't agree that unbranded laptops give lesser margins than branded
ones. I am selling notebooks for 0.5% margin which goes up to 2%. Given this
scenario, resellers have to push more volumes to earn more. The day is not far
when the laptop market will become as cut-throat as the PC market. In the laptop
business, there is very low scope for after-sales service either, as most of the
parts are not available in the country.

Promotions don't buffer margins...

Every laptop vendor is organizing some promotional campaign to push sales.
Some campaigns are well executed and get more attention from partners. But these
promotional campaigns don't increase margins, even with increased sales,
though they do act as an purchase incentive. But once vendors are forced to
reduce the price, margins dip phenomenally. Vendor support is very essential for
partners and resellers hope that any promotional campaign, which is run today,
should be executed by keeping that particular product's value in the market.

No scope for post-sale support...

There is scope for partners to service laptops, the way they do to PCs. This
service is another revenue stream. But after-sales support for laptops is a
distant dream for partners. Most of the laptop components are not easily
available in India. And if some are available, then they are not highly
reliable. Resellers can't retain customers with service contracts, as we don't
have the resources to do that.

Vendors should train partners for after-sales support...

There is a lot of vendor hand-holding required to equip partner to offer
after-sales support of laptops. Vendors have to understand that unless partners
start servicing the laptops themselves, there is hardly any margin to be made on
the product sale.

Reward partners in different ways, besides margins...

It is true that as the product prices dip, the channels won't get a chance
to make higher margins. But we make sure that partners are rewarded in different
ways, besides offering them margins.

Today if you look at the desktop market, margins have almost come to a
standstill and partners are aware that it is after-sales, which gives them
higher revenues than sales. The laptop market is far more better and there are
fair margins to be gained, even in low-end notebooks.

Branded laptops offer better margins...

We are witnessing constant reduction in laptop prices, which is primarily
due to the availability of better technology. We make sure that our channel is
given the best deal.

For our newly-introduced sub-Rs 40k notebook, we are offering partners Rs
1,500 margin, which is far better than any other company. So selling branded
machines always pays off in the long run. If a partner sells an unbranded
laptop, the margins are lower and there is no guarantee of post-sales support.

Cashing on promotional campaigns...

Vendors are coming up with fresh and innovative promotional campaigns for
partners, to compensate for the lesser margins that they are earning. HP has the
Mobile Moghul Program for its laptop resellers, where they are offered trips to
Switzerland or Australia as well as cash incentives on achieving targets.

Taking this into consideration, we ensure that partners get a good deal out
of selling laptops. We help partners in every possible way to improve their
business.

After-sales expertise must for every reseller...

With the growing base of the reseller community, customers go to those
partners who can assure them of excellent after-sales service. To achieve this,
the channel community needs to invest in training their people and retaining
them. As a vendor, we try our best to give thebest training to our channel. Now
the onus is on them to invest in training and certification if they want to
survive in this business.