Give us margins, not alms, demand Mangalore partners

Mangalore: Will dealers be able to sustain their business on the wafer thin margins that they end-up making while selling to end-customers? The channel community in Mangalore did not seem to think so. This is what came our clearly at the The DQ Week IT Panchayat held in the city on March 14.

The event saw participation from over 30 channel partners and the distributor community was represented by S Dinakar of Rashi Peripherals, Santosh Kumar of Redington India, Santosh Savalekar of Neoteric Infomatique and Madhvesh K of Ingram Micro, while Vinita Bhatia, Executive Editor, DQ Channels moderated the event.

Raising the issue of thin margins, Melwyn of Phelix Systems said, “While fixing the MRP of products, neither vendors nor distributors keep in mind the dealer who is selling to the end customer and has to make do with just one or 1.5 percent margin. That is not margin, but is charity. Why can't they keep higher MRPs, and ensure that the entire channel has a margin of at least 30 percent to trade in?”

To this, Dinakar explained that MRP is decided at the time of import. Before determining the MRP, the vendors figure out the customs duty they will have to pay on the MRP, then decide the market operating price and then finalize the MRP. “The role of a distributor is limited in this aspect,” he noted.

What also compounded the problem was that distributors impose freight charges on delivery of products. Earlier, all deliveries were freight paid, but over the past few months distributors who do not have a warehouse within Mangalore have started charging delivery charges. “The price is Rs 100 minimum and then Rs 5 per kg,” said Gopinath Pai of GS Distributors and President of the Mangalore IT Dealers Association (MITDA).

Warren Fernandes of Belwil Softchip Computers pointed out that the freight charges on heavy products like printers and CRT monitors is so high that is can further erode the margins. “When we are already burdened with thin margins, then how can distributors add freight to the entire problem?” he questioned.

Santosh Kumar noted that in some cases distributors did waive off delivery charges. Pai quipped that this was usually in the case where other distributors with warehouses in Mangalore were distributing the same brand.

Another issue that was raised was about the step motherly treatment meted out to partners in Mangalore as compared to their peers in Bengaluru. Pai explained, “The prices offered to partners in Bengaluru is much better than those offered to us and they are also given better discounts,” he said.

To this Savalekar of Neoteric said, “Partners in Bengaluru buy more quantity and therefore they get better prices and discounts from distributors due to economies of scale. But partners in Mangalore buy smaller quantities so they end up getting lesser discounts.”

Madhvesh of Ingram Micro also mentioned that in some cases the prices are decided by vendors and then the same price is offered to all partners, irrespective of the city. “It is a vendor driven market. Some vendors decide the price that will be given to partners and we have to adhere to it. But usually the discounting takes place when there are more than one distributors selling one brand. In such a situation, one distributor will try to offer better discounts to a partner in order to achieve their targets,” he explained.

Pai noted that MITDA would also take steps to create better business discipline amongst its dealers so that they have a market operating price and no dealer sells below this. This would ensure that there was enough margin and business for everyone in the game.