How Upcountry Market Is Driving Growth of IT Hardware Channel Business
The C and D class cities have emerged as the growth driver of the IT hardware business in India post Covid-19 crisis.
As the demand for Computer and IT hardware business in Metros is shrinking, the upcountry region is rapidly emerging as the new growth destination for IT hardware business in India. With Remote working and Distance learning gaining widespread adoption, the demand for computer hardware in C and D class cities is growing steadily. The conventional channel business, which has been very strong in the upcountry region aims to ride on this growth wave. However, the roadblocks of E-Commerce and product availability etc. is slowing down their pace.
RP tech India reached out to prominent partners across the country to understand the current business sentiments and future of the channel business in the upcountry market.
Growth from Budget Laptops/Printers
The demand for laptops and networking solutions witnessed an exponential rise in 2020 due to virtual engagements. The trend is set to continue in 2021 onwards as WFH and LFH become a mainstream practice. Budget laptops and printers witnessed huge demand from End-users and SOHO segment in C and D class cities. Similarly, printers and storage solutions were sold in large numbers in the education verticals.
Mr. Dixit Gupta, proprietor of Jammu based Source Peripherals said, “Laptops and printers are huge in demand in Jammu since schools have started digital classrooms. The demand for budget laptops below Rs 35,000 is in high demand from home and SOHO segment. We have seen almost 40 per cent growth in the laptop sale on the channel in the last 10 months.”
Though schools turned virtual, the demand for printed notes continued to rise during the lockdown. This triggered the demand for low and mid-range printers. Similarly, the requirement for steady broadband for WFH and LFH pushed the networking and access points business.
Mr. Amit Kotak, proprietor of Concorde Peripherals in Rajkot said, “The penetration of laptops/tablets has increased in Saurashtra and Kutch region post-COVID-19 pandemic. Apart from that Components, Servers and Storage demand have increased in Corporates and Education vertical for online communication.”
The entry-level peripheral segment saw surge due to demand for refurbished compute systems. “As laptop price increased exponentially due to sudden surge in demand, consumers turned to second hand, refurbished and entry-level laptops. This triggered the demand for entry-level peripheral products”, said Mr. Vivek Khanna, proprietor of Bhopal based Blue Ocean Solutions.
The E-Commerce Challenge
Offline channel and E-Commerce giants are seen locking horns over price in metros. However, the scenario is different in the upcountry market. Though E-Commerce is expanding its presence in the upcountry region, consumers prefer to purchase from local retail shops. Installation and service support are the most important aspect of channel business in C & D class cities.
“The beauty of the channel business in the upcountry market is that it is driven by relationship. But at the same time, we cannot underestimate the challenge of E-Commerce. We are very proactive and raise our concerns related to fair business practices in various forums. We take all the necessary measures to protect our business interest”, said Mr. Dixit Gupta of Source Peripherals
However, many partners believe E-Commerce is a major threat to their business. “E-Commerce companies backed by foreign investors are burning millions of rupees in market development, logistics and advertising. They can afford to offer hefty discounts and still earn margins. We are small retailers with limited resources and we are unable to compete with the E-Commerce”, said Sushil Agarwal, Cafe De Net, Silchar, Assam.
Endorsing similar views, Mr. Vikash Jain Proprietor of Jain Computer said, “There are some areas of concern for retailers, most importantly the E-Commerce, which directly sells via E-Media. It gets difficult for retailers to compete with them. A retailer invests a lot in starting up a business, in that situation he can’t sell the product in a lower margin for competing with the E-commerce sector.”
Mr. Vivek Khanna pointed out that the practice of stiff discounting by E-Commerce has made it difficult for retailers to do business as consumers argue on price. “Consumers come with specific product and its price listed on online portals. They demand us to sell at the same price and on top of that ask for installation and service. It becomes very difficult for us to justify our price to them. This has led us to shrink our margins to retain customers.”
Product Availability & Pricing
Product availability has been a critical issue in the upcountry market. Partners lose potential business due to a shortage of products. Hence, there is a rising demand to have a fair and uniform system of stock allocation in small cities/towns. “Considering the demand for IT products in A-class city, the upcountry market will also have demands of IT goods and as the market is less occupied it will create a huge demand”, said Mr. Vikash Jain of Jain Computer.
Sharing similar experience, Mr. Amit Kotak of Concorde Peripherals said, “We were out of stock of laptops when the demand was huge and this led us to lose potential business. Saurashtra and Kutch is the largest region in Gujarat and contributes to almost 30-30 per cent total IT hardware business in the entire State. Hence, we demand seamless availability of products and fair price policy from brands and NDs.”
Support from Brands/ NDs
Being a budding market, the C & D class cities seek additional support from brands and NDs in terms of price, products allocation, credit and training. During COVID-19 crisis, many brands opted for virtual training and channel meets. However, partners say one-on-one training programs are necessary to strengthen the connections in the upcountry market.
“We understand that brands prefer E-meet due to COVID guidelines but now they should restart dealer meets in small cities to provide training on the latest products. Also, incentive/rebate programs are essential to pump up the energy in the channel business. We also expect sale out support to penetrate in the market”, said Mr. Amit Kotak of Concorde Peripherals.
Endorsing similar view, Mr. Vikash Jain of Jain Computer said, “In the process of exposure of new products, the upcountry partner will surely need support from Distributors & Brands. Most importantly they will need support on after-sale service at the nearest point. Also, extension in credit days can help them in keeping stock with them.”
Needless to say that the upcountry channel market has huge growth potentials. However, brands must emphasize channel support and marketing activities to tap potential business in developing cities/towns.