ASBIS Delves Deeper into CIS Markets

Interview for Channel Middle East magazine

Answers provided by Andrey Kostevich, VP Sales for Russia and Belarus region, ASBIS

1)  What investments is ASBIS making in the CIS region?

ASBIS distributes a wide range of computer components in the CIS from leading global vendors such as  Adaptec, Foxconn, Hitachi GST, Intel, Kingston, LiteOn, NEC, Microsoft, Pioneer, Seagate, SuperMicro, Toshiba and others. It acts as a one-stop-shop for our customers in the server, mobile and desktop PC market segments. One of the most important advantages of ASBIS in the CIS is its extensive presence across this vast region through ASBIS’ own offices and a network of dealers and partners, as well as extensive use of round-the-clock online trading.

Our priority this year and beyond is the ongoing development of the regions and expansion of our product offering, so that we are able to effectively meet the requirements of the growing computer market. To this end, our main investment will focus on developing regional sales and knowledge building through partner seminars, trainings and face-to-face meetings.

In 2006 ASBIS implemented the use of factoring in Russia as an additional financial tool in dealings with its customers, which has become our yet another significant competitive advantage in this largest CIS market.

2) What are the key issues to bear in mind when serving the CIS?

Complexity and frequent changes in local regulations, especially in Russia, are not making any distributor’s life easier. The changes are not over yet, and we need to follow them carefully. Until now we have been quite successful in adjusting our business to new regulations. Once all the new rules become final and are applied properly, the CIS market is going to become more predictable.

Another important factor is the huge interest towards the lucrative Russian market, which lures a lot of foreign companies, resulting in fierce competition. This has created a situation of increased price pressure and shrinking profitability for Russian IT market players.

3) What are the main challenges you face in serving the CIS region?

The major challenge we are facing in Russia and other countries is their huge market territory with different time zones, which leads to more complicated logistics and remote work with partners mainly in online mode with rather rare face-to-face business meetings.

4) Which products are the most popular and why?

One of our biggest growing market segments is lifestyle products, and this is why our own brands Prestigio and Canyon have definitely found their customer base in Russia and are continuing their expansion into the regions and federal retail chains. These brands keep offering cutting-edge CE and IT products to this changing market, such as Prestigio’s digital media centres, LCD PCs, portable media players, portable storage and Canyon’s MP3 players and VoIP devices , and I am certain that these brands are set to win a significant share of the Russian market.

Among other products I would single out Seagate HDDs which for many years retain the largest market share across the CIS due to industry leading quality and highly professional regional sales team. We have also been observing growth in Microsoft product sales, which can partly be explained by stricter government policies on copyright protection.

5) What is the size of the CIS market and what kind of growth are you seeing in this region?

Some of our fastest growth is coming from Ukraine and Kazakhstan, which are slowly becoming bigger markets, and of course Russia, by far our largest market, where we have sales partners in all key regional centres.

If we consider Russia, its market size for 2007 is estimated at 7.25 mln desktop PCs, 175,000 servers and up to 100,000 mobile PCs. The growth forecast for components distribution this year stands at 5-10 per cent. In the long run, however, due to global commoditisation trend, this market is going to become more constricted, and will eventually be filled up with A-brands.

In view of this trend, last year we signed a distribution agreement for Toshiba notebooks, and this year for the whole range of Dell products. We will carry on analyzing the market and our partners’ needs in order to carefully select new vendors with the most interesting products and the most efficient cooperation terms.

In my opinion, the role and the number of distributors in Russia are to decrease . Only the strongest will be able to survive, while the rest will have to merge or shift to other business areas. The reason for this is that more and more vendors set up their representative offices in Russia, and some of them begin working with the channel on their own.

6) How easy is it to get products into the CIS markets?

It may be very difficult if you are new to the market, but if you are an established and reputable distributor with a positive track record of serious and responsible market behaviour, you are fully capable of tackling any issues. ASBIS works in the CIS through its local subsidiaries and an extensive network of dealers. This approach ensures business stability and reliability. It’s impossible to deal with this huge market on your own. You need to have a network of reliable channel partners which is being constantly improved through natural selection process.

7) What characteristics define the various CIS markets?

Despite the common Soviet legacy, there are considerable differences between various CIS markets. These differences are mostly due to national mentality and traditions. Some markets in Central Asia are extremely conservative and isolated, like those of Kyrgyzstan and Tajikistan. On the other hand, there are booming economies in Kazakhstan and Azerbaijan which thrive on natural energy resources.

The Ukrainian IT market is also fairly big and promising, despite the ongoing political volatility. The IT market of Belarus has seen some positive transformations over the past few years, driven by formidable GDP growth. We are also observing some attempts to improve Belarus’ attractiveness for foreign investments, including the considerable reduction of tax burden, which is expected to take effect next year.