RETAIL POLICIES

Demo machines should be liquidated... 



The guiding principle behind demo machines should be that after its

life-cycle, it should be liquidated at no loss. The discount should be a

function of the life-cycle of the product. So the shorter the life-cycle, the

greater the discount. While the thumb rule of one machine per model per store

works quite well, other factors should also be considered to ensure that

partners remain motivated. And the demo machine support to partners should be

extended on logical grounds rather than one-size-fits-all rule.

Profitability is under threat...



There is no denying the fact that margins are under constant pressure in the

IT industry. And on top of that retail is a business that warrants a lot of

additional investments. Differentiated margin structures exist yet, they are not

as successful. This can also be said because of the high mortality rate, or the

number of retailers getting out of business, is increasing. Vendors should

ensure that a certain amount of geographical protection is provided to partners.

Vendors should also ensure selective engagement with partners.

Regulate credit exposure ...



Credit limits and terms are settled between the partner and the distributor

and works quite well. But there are times when the partner gets credit exposure

way beyond his capability to pay. This has an adverse impact on business as a

whole. There should be some way of regulating the same. The vendor should

ideally do it. But in India the situation is far from ideal as it is very

difficult to check the credit worthiness of any individual as such. Credit

availability should not be the sole parameter to get into retail.

Exorbitant real estate bleeds business...

There are just two simple words that describe the retail

floor space in India ­ ´Very Expensive.´ Any retailer in the business for the

long term bleeds. It may not be practical for the vendor to invest in floor

space, but other measures can be taken to make business worthwhile. It is also

expected that some partners are more equal than others because of their

commitment and level of investment. Vendors should engage these partners

differently because if they are not satisfied they will move out and that can be

detrimental to the brand.

Excessive sales collateral...



The idea of sales collateral is not to confuse the customer walking in.

Danglers and point of sales (PoS) material displayed in any shop must be

relevant to the product that is being demonstrated. Display of other sales

material will only end up confusing the customer. There are instances where we

have to refuse acceptance of PoS material because it is available in excess with

us.

Demo machines are not for incentivizing...



The company has a very decent policy for demo machines in place. The amount

of discount passed out to the channel partner is a function of the margins that

are made on the same. But we ensure that the interest of the reseller is

protected and it should not be a loss-making proposition for us too. And one has

to keep in mind that the machine is for demos and not to incentivize the

partner, so generally either one or two machines are given out. It also depends

on the floor space available with the partner in question.

Differentiated margin structure...



We recognize the fact that the quantum of investment in the retail

environment is definitely larger than that in the reselling environment. We

therefore offer a differentiated margin structure. We firmly believe that a

decent return on Investment (RoI) must be delivered. For instance, we offer a

higher incentive on selling products of high value. So it can be seen as an

added incentive for those who are investing in higher end products. Also it is

our endeavor to push the high-value products through the retail channel.

Further credit extension not required...



If you typically look at the volumes done by a retailer as opposed to a

reseller, they are much larger and here we are referring only to the consumer

PCs. So generally the distributor passes out greater credits for longer periods.

Yes, I would agree that credit is at the sole discretion of the distributor.

However, one must appreciate the fact that sales in a retail environment are

typically cash-and-carry, so the need to further extend credit does not arise

and with proper inventory management, credit will not be an issue at all.

Floor space...



While we typically don´t invest in floor space, there are investments on

other fronts that help the partners in building sales. These investments would

typically include demo machines, merchandising, advertising support and a large

number of local activities. A large amount of the investment goes in activities

that drive customer traffic in. This incidentally is the core of retailing. This

is to ensure that demand is generated is achieved through things like inserts,

banners, advertising on cable television, and setting up temporary canopy shops.

Another aspect is to increase awareness amongst customers through participation

in exhibitions and events. We have been doing this quite aggressively and will

continue to do so.

Proper merchandising support is ensured...



As far as merchandising goes, we ensure everything is in place before the

store is inaugurated. And stores are supplied with sales collateral at regular

intervals. There is a process in place to address the same. But looking at the

spectrum of products that move through retailers, there can be gaps at times.

These could sometimes also be due to a greater than expected sales or customer

walk ins. But we work to see that there is minimal shortage of any sales

collateral material.