The 45 year old distribution stalwart is venturing into fresh waters. Niranjan Gidwani, the Eros Group’s deputy CEO tells us what lessons the company deems essential for this journey.
What would you say are the key strengths of the Eros Group?
Over the 45 years of operations, Eros Group has focused on understanding and establishing connections right through various channels including the organised trade, hypermarkets, speciality electronics stores in addition to independent retail or the local souqs and the re-export channels.
In addition to the width of our brand portfolio, the depth of our operations serve as an added advantage for customers and partners. For instance, we are the only company with branch operations across all the Emirates with a senior level manager and a service and support team.
And finally, I believe, that our ability to negotiate and collaborate with principles to establish scenarios that open up significant market opportunities for all parties involved is an added advantage. Whether this be in terms of negotiating the right retail prices or branding options.
How do you go about brand selection?
Essentially, we try not to create internal competition and work with brands that enable synergies. For instance, we look for brands available at optimum price points or choose a brand whose product range complements that of another brand. So far we have been fairly successful in distributing Japanese and Korean brands, about four years ago we decided to take on a few European brands and are also looking to take on known Chinese brands base on customer demand.
As volume players, another element that we are careful about when selecting a brand is its ability to scale operations. Therefore, any brand that we believe isn’t likely to hit a sizeable market share or volume within 18 to 24 months of operations we wouldn’t be too keen on.
Over the last one year, we have consciously decided to insist on taking on new brands that offer a Pan Gulf or Pan Gulf and East Africa footprint. Objective being in the next 24 months to 36 months time we would like to enter these markets albeit in small steps, we would like to groom these brands and products in much the same way we have our existing portfolio.
As a group, we also try and take on brands that can positively impact the group’s operations and those that don’t need us to help build brand recognition. For instance, the reason we chose Samsung is that the company itself dictates an aggressive sales policy and exhibits market leading innovation that rubs off on us.
We do business in as transparent a manner as is possible, within legal boundaries and often taking considerably longer than others to make a decision. This is because we follow a consensus building approach to decision making, which also means once we are decided on a course of action, the implementation and execution of strategy is fairly rapid.
Could you list out your in-country operations?
Different brands have different agency and distribution agreements. For instance, the agreement with Samsung is solely focused on the UAE, whereas the one with Hitachi is for operations across nine countries, TCL across seven countries and Kandy across five countries.
Our core business is focused on the UAE, with 60% of our revenues generated here and about 80% of our staff based here. In addition, we work with sub distributors across Oman, Bahrain, Qatar, Afghanistan, Iraq, Kenya, Tanzania and Uganda.
A year ago, we opened a small office in Qatar and have set up a registered company in Tanzania. We have also opened the first showroom outside of the UAE in a mall in Dar-Al-Salaam, Tanzania.
These are all examples of small exercises we have invested in to test the waters and see the rate of growth in these markets in the next two to three years. As I mentioned earlier, we are in no hurry to expand, we take our time to carefully make a decision and perhaps this is why we have been fortunate enough not to have suffered any significant losses throughout our 45 years of operations.
Over the last two to three years we have witnessed revenue growth of approximately 60%-70% in the GCC. East Africa too has grown at the rate of 70%-80% a year, but it is important to note that the base we started with was comparatively small.
Therefore, although we have so far been an in-country distributor we are now moving towards adopting a regional model.
Unlike many of our prominent competitors the Eros Group never had a strong IT division, our primary focus was in the areas of mobile, electronic appliances and digital conversion products. In the year since we have created a new business group to fill this gap, bringing in Samsung laptops and notebooks, we have generated approximately Dhs125 million in turnover.
Describe your generic channel activities in terms of logistics, operations and support.
We handle all the essential end to end requirements for a distributor. Right from placing orders with the principle, that often requires order forms up to a few weeks or months in advance, to transportation and warehousing.
We have warehousing facilities spread across the emirates including one in Al Quoz, Jebel Ali and Abu Dhabi. This means that at any given point in time, we can stock approximately 600 40feet containers of material, we turnaround anywhere between 700-800 containers a month. I would call this a sizeable operation for a market that is only eight million strong in terms of people.
In addition we are in the process of building a warehouse in Dubai Industrial Park and are looking to build one in Sharjah.
How do you then select partners?
We consider a number of aspects when selecting partners including credit worthiness, capability of the partner to push the product at our price point, the location of the store and the branding space available. Depending on these parameters we then decide on the scale and volume of business we want to do with a respective partner.
Within the UAE 60% of our revenue comes from organised retail, 25% through independent retailers and balance comes either from re-export parties or those that ship to other regions with the principles’ permission. More businesses are beginning to prefer dealing with the organised retail channel and category by category the souq or independent retail business is slowing down, this dynamic is definitely considered during partner selection.
What are some of challenges that you think vendors tend to ignore?
Vendors need to realise that the channel or retailer are prone to playing the gaps between a distributor and vendors relationship to the hilt. For instance, if vendors blindly agree to pay an amount the retailer demands when a distributor could negotiate the same at one-fifth the price, the net result is that retailers begin acting like leasing agents. They tend to focus on making money from branding where they should be focusing on making revenues from actual product sales. The amount of money spent is sadly crazy.
Another challenge that we face has more to do with the inherent culture of this market than to do with the vendors. The nature of business in this region is that customers are looking for premium products with quality, service and support at the lowest prices. Customers must realise that from the time the product is manufactured our margins our fixed, while our costs are constantly increasing, they should more willing to pay a premium for a product that meets the highest standards and delivers a superior experience.
How would you describe your growth strategy?
We at the Eros Group are looking to adopt a regional distribution model while simultaneously expanding the depth of our operations by introducing our existing brand portfolio into newer markets. We intend to replicate the distribution models we adopted in the UAE to grow operations in other countries one step at a time.
For Africa in particular, we are on the lookout for business partners with prior experience of the market as well a keen understanding of the systems and legalities needed to import and stock goods.
As a group, we are also looking to invest outside of the consumer electronics business and are in talks to either venture into the food franchise business or health and wellness industry.
With so many plans ahead of us, we are sticking to our model and taking our time to decide on the right course of action, in the meantime we are looking to include new brands within our existing portfolio that enhance our offerings and contribute to our growth and expansion plans. //
Eros Group Product Portfolio
- • Samsung, electronics side (not appliances)
- • Full range of Hitachi Products
- • BenQ TVs
- • TCL TVs and a small range of appliances
- • Cisco- Linksys routers
- • Sonos- Internet based music systems
- • Ravo- Internet Radio
- • Lenox- ACs
- • Aiphone- Indoor video security systems
- • Thermobrake- Global insulation • material company for AC business
- • Kandy- Washing machines
- • Du
- • Eros Digital Home
