Zenith to foray into distribution

Snigdha Karjatkar

Mumbai

July 16th, 2007

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 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 on 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.

Commenting on the idea 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 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.

Secondly different regions have different taxes like sales, VAT, octroi, 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 a key challenge for Zenith.

Also, distribution is a different ball game, very different 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.

Speculation in the market is rife 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. According to 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. The opinions are varied. It is now time for Zenith to prove itself in this
line of business.