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NEW DELHI
FEBRUARY 22, 2007
Distressed by the practice of forming 'cartel by distributors' for specific
products, the channel community of Chandigarh has decided to boycott a set of
distributors engaged in cartel activity in order to put a brave front.
"It is been a long time that the market here was plagued by cartel
formation from distributors. As a result, out of a sudden there is big price
fluctuation for products of companies like Compaq or Lenovo. Now we are
boycotting this practice and not buying products from distributors who are
engaged in this dubious practice," informed, a big reseller from Chandigarh
on conditions of anonymity.
The idea of cartel formation is long being opposed at various levels within
the channel community and is regarded as a big issue, which needs national
intervention of this community. As the channel community of India is not an
organized lot by any means, not much has been done so far.
"It is not an isolated issue for us. Most of the IT channel community
spread all across the region is with. It is high time for them to show support
for us in this cause," he added.
On the other hand, when contacted both Redington and Ingram have refused to
comment on this issue so far.
How cartel disrupts channel business?
According to various industry experts working within the channel community,
it is important to note that such abrupt decisions to form cartels of this kind
create the problems to the channel. Such cartels create chaos in the market when
rates for a notebook model have been quoted to the end-users and suddenly, when
the order matures, the dealer community finds that the cost price has increased
by X amount.
During cartel formation, if a sub-distributor picks up 50 notebooks at DTP
without discounts, it would mean a loss of Rs 1000 to Rs 1500 per notebook as
and when the cartel is reversed and discounting starts again. (Considering a
discount average of two to three percent on each notebook at an average price of
Rs 50000). This amounts to Rs 50000 to Rs 75000 as and when the cartel is
reversed. The sub-disti who picks up the newer stocks (after the reversal of
cartel) will be at an advantage.
Incidentally, this practice of cartel formation is not limited only to a
particular place. "We experience this every year and actually this is
happening in Allahabad for the past four months. This has gone to the extent
that we decline to take orders from our customers. We have completely stopped
buying from Ingram, Redington and Savex now. Ideally vendors should sit with
these distributors and see why is this happening," informs a big reseller
from Allahabad. Similar voices are being heard from places like Raipur,
Hyderabad, Udaipur or Kolkata.
The distressed channel community also feels that distributors announce
cartels according to their own whims and fancies and to suit their convenience
without thinking of the chaos created by them in the process.
"If a cartel does come up, the discounting should ideally be slowly
tapered off and should be announced with a prior notice. The distributors come
down from four to zero percent in one day, creating so much of confusion in the
market," adds a source close the channel business from Chandigarh.
Chandigarh Channel power!
In order to counter this regular practice of cartel formation by
distributors, the Chandigarh and Ludhiana sub-distributors have joined hands and
have also made a cartel to fight it out and have devised the following process
to counter such arbitrary moves:
1. Zero pickup: No purchase of products under cartel (Presario notebooks and
desktops) from any distributor.
2. 'Stock Rot' at one distributor (chosen arbitrarily): The efforts will be to
make the stocks pile up and rot at one of the distributors (For this quarter,
Ingram has been chosen for stock rot).
3. Keeping in mind the interest of HP, Chandigarh-Ludhiana sub- distis cartel
has urged the principal company HP to bill the material directly to the sub-distis
on Demand Draft basis with relevant disti discounts and cash discounts. Page(s) 1
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