With growth and product movement in these segments, the vendor has made them a priority for this year
At DCC 2011, a key note presentation by Howard Davies, from the channel market research company Context, showed declining quarter-on-quarter notebook volume sales from the corporate segment. By contrast there was climbing demand from the small and medium enterprise (SME) segment.
One of the key drivers for SME growth is the demand for technology that spans both business and personal needs and provides access from a range of devices. “SME decision makers and employees are reaping the benefits of social networking tools in their personal lives and are asking how they can derive same kind of benefits in their businesses. They want to make information easier to find, share and connect with people they need”, says Lenovo’s Middle East and Africa, head Jack Lee.
So how does the SME segment fit into Lenovo’s regional market segmentation? Lenovo segments the market opportunity into three: corporate, small and medium enterprise and home segment. For the corporate segment the distributors are categorized under the CAB business and include IBM stalwarts like GBM, EBM as well as C4 and Jumbo Enterprise. In the CAB business, Lenovo is fully engaged in the development of relationships with potential customers.
For the CAB business, the sales cycles are long and there are deals to be closed. Hence it works closely with its partners for this customer segment. Lenovo customers include Etihad, Etisalat, Du, Abu Dhabi University and others. The company has 14% market share in this segment, second after HP, followed by Dell.
However Lenovo’s current focus is the SME. In the region, more than 90% of the businesses are classified as SME. Lenovo again classifies the overall SME market into low, medium and high end. It’s the high-end SME segment that has got Lenovo excited and where it sees the fastest return. “The focus is to grow fast and build good relationships and loyalty with this segment of SME”, says Djillali Lahiani, Development Manager, Lenovo Middle East.
So high is the channel priority that a partner focussing on the high-end SME segment for Lenovo like Alpha Data or CADD Emirates, is actually a corporate channel partner for HP.
To reach the home customer through super retail outlets, Lenovo uses either a fulfilment or value added partner. In the UAE, Lenovo is using FDC International as a value added partner. It also has a special program for super retail partners such as Carrefour, Sharaf DG and Jumbo, where it owns the relationship end to end. For any promotion in this retail segment it is a joint effort between Lenovo, FDC and the retailer. “We like to be involved in the management of the relationship. We can add value and we can help by presenting an end to end solution for all parties”, says Lahiani.
Lenovo is also optimistic on capitalizing in the upsurge of social networking devices through its partner devices like Windows Phone and its own Ideapad series of notebooks. “Microsoft is taking the small office-home office segment very seriously”, comments Lahiani.
While the market opportunity is segmented into three categories, the channel partners are also segmented based on volume sales. From the highest to lowest by volume are, diamond, platinum and gold partners. The diamond partners are usually the super retailers and sell more than 300 units per quarter. These partners are managed directly by Lenovo. The platinum partners usually sell between 100-300 units per quarter and are jointly managed by Lenovo and the distributor. “The gold partners who are the lowest in the rung only because of the volume and not because of importance”, stresses Lahiani, sell less than 100 units per quarter.
Similar to the priority focus on the high-end SME segment, increasing the number of diamond partners for Lenovo is another priority. Lenovo has created the Core Channel program to acquire specific resellers, roll out specific promotions and offer special incentives for achievement.
For the UAE, Lenovo maintains a distribution centre for rapid and urgent deployment of stocks. While channel partners import regular or run-rate stocks from Shanghai, the UAE office also maintains stocks under its control. This is used to close urgent deals where availability of stock may be used in the final negotiation. It also used during promotions and events or for fast moving products when stock replenishments are required within 1-2 working days. The Dubai based distribution centre can also supply urgent stocks to Lebanon, Qatar, Jordan and Saudi Arabia.
However for all stock ordering, there is only one procurement system. Under normal circumstances distributors receive goods within 21-40 days, which is the usual lead time. In other cases the vendor may use either the Dubai distribution centre for partial fulfilment, or may airlift stocks from Shanghai itself based on the requirement and availability.
“For super retail promotions especially during festival times, replenishment is more challenging”, says Lahiani. A super retail establishment like Carrefour will only buy-in when it sees the value of the complete offer and controls the deal end to end. Since stock replenishments are accepted only twice a week, holding stock at the partner is a critical factor in going ahead with Lenovo’s promotional offer. With the vendor talking responsibility for all key relationships across SME’s and super retailers, the next six months will indicate whether these efforts are paying off or not.
