April 8, 2020

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HOME FEATURES › INTERVIEW: Andrzej Przybyło, CEO at AB

INTERVIEW: Andrzej Przybyło, CEO at AB

by Stuart Wilson, Thursday 2 December 2010

With its 20-year history, Poland-based distribution outfit AB has established itself as a premier channel player in the IT and consumer electronics channel. Quoted on the Warsaw Stock Exchange, AB reshaped the regional channel landscape in 2007 with its acquisition of AT Computer Holdings. AB’s CEO Andrzej Przybylo gave www.channelemea.com the lowdown on what the future holds for the company.

Channel EMEA (CE): How many countries does AB now operate in and what are your plans regarding geographic expansion and moving into new product or service areas?

Andrzej Przybyło (AP): Currently, we operate in three countries of Central and Eastern Europe (CEE): in Poland, the Czech Republic and in Slovakia. Taking into consideration our position in the market and our financial results, I can say that we are doing very well in all of the local markets. When it comes to revenues, we are now the largest distributor of IT and consumer electronics in the region. After three quarters of 2010 our consolidated revenues amount to US$683.9m.

As for geographic expansion, we observe the market closely and regularly receive inquiries from entities interested in selling their shares. But we will not take over any new companies just to enlarge our group or to get additional publicity. Our approach is very cautious in this matter. A takeover must bring real business advantages to us and an additional return on investment to our investors.

We followed such criteria in 2007 during the acquisition of AT Computers Holding, a group of companies operating in the IT distribution industry in the Czech Republic and Slovakia, which [also included] the largest PC manufacturer in the Czech Republic and a PC retail store network. It was a perfect fusion and it allowed us to become a strategic regional player that no major manufacturer could ignore in their trade policy for the region.

CE: What are AB’s three top business priorities for the next 12 months?

AP: Many analysts are optimistic about the coming year. But we prefer to remain careful – despite the better economic climate, demand continues to change very dynamically. In our opinion, it is too early to say that the crisis is over. Therefore, we prepare ourselves for every scenario and work hard to achieve good results every day. This is our main goal, since this strategy has brought us the best results. The CEE markets have been shrinking for nine months in a row, while we achieved record improvements in key financial indicators and optimised our cost structure at the same time. Our operational and financial performance can be further confirmed by one of the lowest SGA rates - currently at 2% - in the region.

Secondly, we are developing the sales of advanced business-to-business solutions, which may bring high profit margins. Business solutions have a large potential for growth in 2011, and if companies resume investments, we will be ready to handle the increased demand, both in terms of finance and operations.

Our third priority is to develop new sales channels. In 2010, as the only distributor in Poland, we have signed an agreement with Microsoft to sell and promote their services using the cloud computing model, Business Productivity Online Standard (BPOS) suite. We are dedicated to educating the market and our resellers in this matter.

Regional outlook

CE: Local distributors in the CEE region have done well competing against international players. Why do you think they have been so successful and how do you see the competitive landscape developing moving forward?

AP: In our opinion, regional distributors who operate in several markets obtain the best results at the moment. Such companies benefit from economies of scale and generate additional revenue from product and operational synergies, while effectively operating on the local markets and regularly increasing their market share.

CE: How would you assess the current market conditions in Poland, Slovakia and the Czech Republic and what is your opinion on the future role of distributors as the markets mature and develop?

AP: Poland is doing well in comparison with the Czech Republic and Slovakia. Very few European countries went through the crisis without major bankruptcies or spikes in unemployment rates. But Poland was one of those countries that did. For this reason, consumer sales remained at a decent level, although companies were less eager to invest – they froze IT budgets and waited for better times.

Our Southern neighbors had more serious troubles; both [the Czech Republic and Slovakia] struggled with a highly variable demand pattern. Yet it didn’t prevent us from achieving very good results in the Czech and Slovak markets. In Poland, we are one of the three largest players, in the Czech Republic and Slovakia we are already number two, but more importantly, we are developing faster than our competition. We were the only major player to achieve growth in all of these markets during the last year.

As for the second part of the question, all the three markets are becoming more and more mature. We believe that the role of distributors will become stronger across the entire supply chain. A well-established distributor is like a properly running machine: it holds a large stock, delivers the products on time, follows precise logistical processes and ensures credit control.

Competence centre

CE: How many staff does AB currently have and what major trends are you seeing in terms of revenues and profitability in 2010?

AP: AB Group is growing much faster than the market. Analysts predicted a 3% increase in 2010. After three quarters of 2010, we have achieved 12% revenue growth and gradually, we also achieved net profit increase. The third quarter was the ninth in a row in which we have improved our results. Taking into account our growth in 2009, when the economy plummeted, our company performance is not always an indicator of market conditions.

AB Group now employs 630 people. Each day our team is working hard to achieve strong sales results and is looking for new market niches as well as sales channels offering greater margins. We think that advanced solutions is a promising market segment. With hard work, we were able to achieve high increases in this segment. Last year, we established the enterprise business group division whose task is to explore the market, to search for technology and opportunities, and to support our partners in selling to the enterprise sector.

We also established the competence centre (CC). Its mission is to educate our sales partners about enterprise-class products. Vendors were very enthusiastic about this initiative. During the first months of operation, the CC - together with the vendors - trained more than 160 dealers. In the last quarter of this year, we will conduct about 18 trainings, and more than 150 companies will take part.

CE: How do you see the rise of cloud computing impacting the role of distributors? How do you make sure that AB stays relevant and competitive in the market?

AP: This technology has a great future. I believe that many companies will benefit from advanced business-to-business services using this cost-effective model. Right now cloud computing is not a threat to the traditional hardware and software sales model. In the future it will probably be as widespread as the traditional models, and it will be gaining popularity among customers who have other business needs. For sure, distributors need to be prepared for this. We have already made some steps in this direction: in the third quarter of 2010, AB started selling and promoting services in the Microsoft cloud with BPOS.

CE: Why should vendors look to work with AB in the CEE region? What are the unique selling points and value-adds that set the company apart from rivals?

AP: We have sound business fundamentals, including the lowest SGA rate of 2% in the CEE region, a base of more than 13,000 clients, a diversified and broad product portfolio and efficient logistics. We are continuously working on expanding the channel and we are very effective in what we do. We observe regular improvements in key financial indicators and we develop faster than our main competitors. These are the main factors which make us an important player in the region: vendors cannot ignore us in their trade policy for the region.

It is worth noting that our model is based on ‘run rate’ business. We are not dependent on large public tenders, but we are selling with the help of a large group of loyal partners. Thanks to our diversified portfolio, we provide our resellers with a rich product offering and the opportunity to purchase more products in one contract. At the same time, vendors can be sure of fast rotation of products.

With this model, we have developed a close relationship with our resellers. We know them very well and we know who has developed a strong market position, and who has been struggling with problems. This is one the reasons why our loss ratio is very low, nearly zero. Over the past few years, we have received partial returns of our insurance premiums, since no claims were made. This is due to our excellent credit control.

Variable demand

CE: What are the biggest issues facing the vendor-distributor-reseller channel in the CEE region at the moment? What issues do you think will impact the market most?

AP: In 2010, highly variable demand patterns were definitely a problematic issue for all. There were months in which sales increased, and then it decreased again for some time. Due to this variability, all players - and particularly distributors - had to thoroughly analyse the market and have excellent logistics and financial instruments at their disposal, including the fast rotation of goods, strict internal procedures and thorough credit checks. Companies which used those tools have successfully passed the crisis, and some of them even managed to increase their revenues.

Another negative issue was that some vendors were too slow in adjusting to the current demand. This causes destabilisation of the sales channel. Such situations were used by sub-distributors, who offered products at lower prices than authorised distributors.

As for positive developments, we observe that more and more resellers want to develop, focusing on new technologies and education - hence our initiative to create the CC for smaller resellers, where they can learn the knowhow and can enter the enterprise market. It is our investment in the future.

CE: How diversified is AB’s business now in terms of split between consumer and business channels and other activities?

AP: With 250 brands and 30,000 products in our portfolio, this type of split would be misleading. And many products can qualify for both groups. Both consumer products and business solutions are selling very well. As for the next months, we think that business solutions look more promising, so we invested in a separate division called the enterprise business group (EBG). The EBG cooperates with integrators and the CC, which trains partners intending to enter a new market and to implement advanced solutions.

CE: We’ve seen other major national distributors in Europe attempt to become fully fledged IT holding companies with multiple business interests. What’s the long-term plan for AB?

AP: AB was created in order to work with resellers. While others are looking for market niches, we focus on our core business, which is the distribution and continuous improvement of all areas of business management – and in particular, on our cooperation with trading partners. They have always been our top priority.


DISTREE XXL 2011

Top distributors, retailers and e-tailers from across the EMEA region are invited to attend DISTREE XXL 2011, the premier event for the regional ICT and CE channel, from February 8-11th in Monaco.

DISTREE XXL gathers 400-plus senior executives from EMEA’s Information Communications Technologies (ICT) & Consumer Electronics (CE) volume distribution channel.

During the course of the three-day event, delegates take part in thousands of pre-scheduled one-on-one meetings with hundreds of vendors. Each year, hundreds of new distribution agreements are struck across EMEA as a result of business relationships initiated at DISTREE XXL.

DISTREE XXL 2011 will also build on successful initiatives launched at last year’s sold out event including a regional awards ceremony. The ‘EMEA Channel Academy: 2011 Awards’ will include more than a dozen awards handed out to vendors and distributors from across the region. www.distree.com/xxl

Follow the build-up to DISTREE XXL 2011 www.twitter.com/distreexxl

For more information on attending DISTREE XXL 2011 please contact fhemraj@distree.com

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