| | By Akanksha Prasad @ Thursday, March 12, 2009 1:02 PM
| |
| | Two more channel players - Pooja Impex and System Solution in Bangalore - have defaulted on distribution agreements.
This rubs salt in the wounds of channel partners, who are already bearing injuries from the slowdown and now fear that it may affect the distributor-reseller relationship.
Defaults and scams are not new problems for the channel - such cases were heard of once in four to five years. But the worry is that in last six months about five have come up, where partners have absconded with payments amounting to more than $10 million.
Apart from Pooja Impex and System Solutions, the list of default partners includes Jupiter IT Solutions, KS Info Systems and a Chennai based company.
While IT Solutions and another Chennai based company have been in the PC business for around four to five years, the others had not even completed a year. Mahendra Baid, director of Mega Compuworld, said that every start-up plans to double its business as soon as possible and start bulk purchases for this. He said, 'The problem starts when the money is trapped with the stocks and they keep on amassing month over month and in order to get rid of the lender’s ire resellers flee from the city.'
Because of this, resellers fear that distributors will reduce the credit period from 30-45 days to 21-30 days or even less, resulting in reduced business. Anant Krishna of Deccan Infosystems said, 'Reduced credit period will force the partners to reduce their targets, which means lesser discounts, lesser rebates and even lesser earnings.'
He added, 'Not only this, every distributor would question the creditworthiness the partner and would be cautious and think twice before lending to him and for new entrants, business will be tougher than ever.'
Another change that would appear in the distributor-reseller relationship is zero credit or limited credit policy. Distributors may also offer discounts to partners giving upfront payment against purchases. Baid explained, 'There will be lesser trust factor and therefore if a reseller fails to pay on time, he might not get additional time and hence his billing for the pending month would be stopped. Re-distributors will also cross-check with the banks and other firms about the financial status of the company.'
This would make things really difficult for sub-distributors.With increasing pressure from the vendors, they will have to increase their business, add resellers, but with care. Praveen Kumar of Astric Computers said, 'We have to keep on expanding our business. Every day we meet reseller, become partners, but before finalizing the deal we go through his background and relationship with other members of the channel community.'
However, despite all these instances, channel players feel that it will filter out the weaker partners and bring in a consolidation in the market, which could ultimately be to the good of the channel community. X
Check out the World news at our sister site The News
| |
| |  Add Comment | |
| | | |