Zenith to get into distribution business

Zenith Computers has decided to foray into the distribution business. It is
reported that initially the company will focus on distributing components. It
has already signed up a Taiwan-based motherboard manu­facturer, Elitegroup
Computer Systems (ECS) for distributing its motherboards.

This is the first time that a vendor is getting into distribution. Zenith
claims to have 800 authorized dealers and 350 exclusive retail outlets, and will
be leveraging the same for its distribution endeavors. Sandeep Shah, COO, Zenith
who will head the distribution division was not available to confirm this news,
despite several attempts to reach him.

So how are other distributors viewing the entrance of a vendor into their
domain? Navinder Chauhan, Head-Marketing Manager, Rashi Peripheral welcomed this
move from Zenith and said, “The major challenge for Zenith would be to establish
itself as a brand in distribution. Some extra efforts have to be taken to make
the brand more visible in the market of distribution. The market has become more
competitive. Almost all vendors are present in India and have their own strong
channel network. The channel relationship has to be strengthened.”

Other distributors said that the distribution business is too cutthroat and
Zenith will have to get its logistics and infrastructure well in place if it has
to succeed here. According to a senior official with a national distributor the
key challenge for Zenith would be to beef up its presence across India.
“Zenith's brand presence is strong in the western market. But at the same time
it would be more challenging to establish its brand outside this region,” said
the official on condition of anonymity. This statement is especially true when
the company has to popularize not just its own brand name, but also that of its
principal companies.

Zenith has already signed up Taiwan-based motherboard manufacturer, Elitegroup Computer Systems (ECS) for distributing its motherboards

Secondly, different regions have different taxes like sales, VAT, octroi and
road permit, which vary from region to region. Zenith will have to get well
acquainted with these region- specific issues. With distribution players already
facing dearth of skilled employees, hiring the right professionals who are well
versed with these issues will be a key challenge for Zenith.

Also, distribution is a different ball game, very removed from manufacturing
and retailing. There are several issues that have to be taken care of-including
credit issuance, spread, supply chain management, market development, and
post-sales support, amongst others. Here, Zenith can leverage on its warehouses
at different locations, helping it by making stock readily available for its
channel.

There is speculation in the market as to why Zenith got into distribution.
Some feel it is because their PC and laptop business has seen a slowdown and the
investment into Vu Technologies has taken a toll on its topline and bottomline.
Entering into distribution might change this tide in their favor.

Others feel that since Zenith has OEM tie-ups with some component vendors,
they can easily take up distribution of these products as well. Said the GM of a
well known mother­board company, “Zenith manu­fac­tures 6,000 PCs and laptops
every month. They can easily start distributing components, which they are using
within their systems, through their channel network. This will be easy for them
as they have a ready channel in place and they can bundle the components with
their PCs and laptops.”

Others in the market believe that the distribution business will also help
Zenith procure components at a reasonable pricing for its own manufacturing
unit.

SNIGDHA KARJATKAR