Russia: Who Dares Wins

Andrey Kostevich, ASBIS’ VP for Russia and Belarus, answers IT Europa’s questions for the Survey of the Russian IT channel 2007

— ASBIS focuses on regional development; which regions are showing the most growth, outside of Moscow and St Petersburg?

The situation is quite clear in that the further from Moscow, the less business opportunities there are in the market. The highest potential is demonstrated by Kaliningrad, followed by the Central Federal Region, and, more specifically, the Mid-Russian Region topped by Nizhny Novgorod. The next promising market is the East Urals with Yekaterinburg and its region.

— What will the new, lower, export taxes mean for ASBIS? And has there been any development in simplifying import taxes and regulations?
 
Lower customs duties would open up new opportunities for ASBIS, as well as its whole partner channel and, ultimately, for the consumer. Products would become cheaper and therefore more affordable for wider strata of society. That means rising demand and growing sales.

The possible reduction of VAT which is now being discussed, as well as an overall easing of tax burden would give an additional impetus to Russia’s aspiration to become one of the most attractive destinations for international investments. That would bring more investments into the country contributing to GDP and business growth which would result in higher demand for computer hardware and software offered by ASBIS.

For us this is a wonderful time of sustainable corporate and channel development when we set annual growth targets of no less than 30 percent which exceeds the market growth rate.

— I see you are distributing Dell's products in Russia; but the trend in Russia seems to be for vendors to move towards a direct model. Why is Dell using the channel?
 
Indeed, we signed the contract with Dell and began the business in Q2. Why Dell decided to sign a disti contract with us? Looks like a question which they can answer in the best way.

However, I believe that that was a logical step on their part. Dell has signed contracts with strong partners – with us, and then with M-Video retail chain, thus securing the direct route to consumers. This is quite understandable – Dell needed an upsurge in activity and achievement of quick results in the growing market, and that could be reached only with the help of strong players with solid positions on the market.

The building of Dell’s own purely direct structure in the Russian market would have taken much more time and resources, and therefore the company would have run the risk of lagging behind market growth and struggling among other vendors. Having chosen the right strategy, Dell has now taken the 6th place in the Top 10 of notebook suppliers in Russia demonstrating healthy sales growth as compared to the previous period.

 
— What kind of future does the channel have? Do you still think life will get harder for distributors? Will the trend towards direct selling continue?

A distributor’s life is not going to be rosy, of course. You have to grow, change, evolve, enhance product offering, and keep up the momentum. In order to succeed, you need a team of like-minded managers, sufficient resources, purposefulness, and a clear strategy. ASBIS has it all.

Some companies chose to develop direct sales. As for us, we clearly adhere to working with strong and decent partners and will never go direct to the end user. This attitude ensures that the channel always remains healthy, since the partners feel their economic benefit and add up their efforts to the business. That gives us a wide scope and market penetration… One of the best examples is the business built by Seagate which enjoys a large market share (more than 50 percent), as well as high channel and consumer loyalty.

— Do you think that big global distributors like Ingram Micro, Tech Data and Actebis will enter the Russian market? Why (not)?
 
I tend to think that they will probably try to enter the market, and there have been such attempts in the past. The only remaining questions are when, how, and with whom. We are not afraid of this development, since we have been able to co-exist in other markets where this has not prevented us from business growth, and in some cases we’ve been able to work more efficiently thanks to our mobility, ERP system and savvy team.

— What is your competition like? Are R&K and Millennium Distribution big competitors for you, for example? What makes ASBIS better than the local players?
 
Neither R&K, nor Millennium Distribution is present in the market any longer, so I am not in a position to comment on them. However, ASBIS has overtaken warranty service for some of the products previously sold by Millennium Distribution. This fact reaffirms our stability and loyalty towards the partner base.

I can just add to this that strict cost control, as well as the development of product portfolio in line with market trends coupled with a professional team are the main ingredients making up the success of a distribution company and its partners.

Interviewed by Tom Bowker, IT Europa