Channel to play key role in Euro market
Analysis Report highlights opportunities in developing countries.
The channel has been highlighted as crucial to the success of the emerging IT and telecoms market in central Europe.
As the region begins to shake off the economic frailties imposed by state socialism, IT research specialists Romtec has earmarked the area as having considerable potential in its relatively small IT and telecoms markets.
This, says Romtec, offers a potential bonanza to companies ready to take advantage of a market which is growing at twice the rate of western Europe's.
According to a report by the market research company, central and eastern Europe is not a dumping ground for old technologies - it wants the latest available products. There is a demand for products tailored for local needs and with acquisition proving more effective than starting up a company from scratch, Romtec believes partnerships with distributors are even more important in eastern rather than western Europe.
But as the channel begins to establish in the region, problems familiar to western European distributors and Vars are emerging, in particular channel conflict and claims of unfair competition. As in the UK, this affects the relationship between reseller and supplier.
On average, 60 per cent of respondents (comprising distributors, retailers and Vars) said channel conflict had caused them to source more than one supplier. This rises to 70 per cent for distributors. Overall, 40 per cent change suppliers as a result of conflict and more than 50 per cent say it makes relationships more difficult with their suppliers. Unfair competition would cause 60 per cent of distributors in the region to stop selling in that particular product area.
A third of retailers in the Czech Republic and Hungary would stop selling a product if faced with conflict and 70 per cent in Poland say they would switch suppliers.
The key message from the report to distributors thinking of expanding into central Europe is 'local is preferred'. The main reseller source for third-party IT products is the locally based distributor. In the Czech Republic, Hungary and Poland, this accounts for 54 per cent of all sourcing, with imports from non-locally based distributors representing five per cent. Importing direct from a foreign manufacturer is the second largest source at 26 per cent.
The report warns that the region should not be treated as a single unified area and urges those considering expansion into the region to be aware of the disparate stages of economic and political development each nation is undergoing. The Czech Republic, Hungary and Poland have the strongest economies and have a realistic chance of EU membership early next century.
Slovenia has a flourishing economy and the highest GDP in the region, while Latvia and Lithuania are only just starting to show signs of stability.
In addition, glaring cultural differences between nations can make the area a commercial minefield for those not prepared to treat each country individually.
Some of these differences are apparent when looking in detail at reseller sources. In the Czech Republic, for example, Vars are more likely to import from non-local distributors and less likely to import from foreign manufacturers. And retailers in Poland source 80 per cent of their product locally, whereas dealers are more likely to import direct from a foreign manufacturer.
The report polled 240 resellers in central Europe over a four-month period and comes just a week after UK resellers and distributors were told to avoid Germany and France because they had overcrowded markets.
Speaking at Comdef 98, Simon Wallis, sales manager at research firm CompuBase, claimed that because UK resellers and distributors had turned their attentions to opportunities in Germany and France, the market had become saturated.
(PC Dealer, 24 June)
Wallis said resellers would be better off looking to Turkey, Poland and Romania because they were underdeveloped but had a similar channel set-up to the UK.