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HOME FEATURES › Vyacheslav Simonenko, CEO at Merlion

Vyacheslav Simonenko, CEO at Merlion

by Stuart Wilson, Monday 24 January 2011

Russian distribution giant Merlion is attending DISTREE XXL, EMEA’s premier channel event, which takes place in Monaco from 8-11th February 2011. With delegates from 80-plus countries attending, DISTREE XXL offers an unparalleled opportunity for vendors to assess market conditions across EMEA and build up valuable channel contacts. Vyacheslav Simonenko, CEO at Merlion, gives us his take on recent developments in the Russian channel.

Channel EMEA (CE): What does Merlion hope to achieve from attending DISTREE XXL 2011? What new products and technologies interest Merlion most at the moment and why?

Vyacheslav Simonenko (VS): DISTREE XXL is one of the largest and most significant events in the world of IT, which gives delegates a unique opportunity to meet leaders from vendors, manufacturers and distributors. We hope to use the event to strengthen our existing relationships with vendors, make new acquaintances and create a basis for future cooperation.

In terms of products, we are interested in tablets and iPad-type products as this is definitely a new trend in the PC market. We will be looking for vendors of these devices, listening to their views on this trend and understanding their product roadmaps. We are also looking into 3D technology and related products such as monitors, TVs and cameras.

Another area we are interested in is 3D applications, and in particular, those offered by business application developers. Merlion is interested in value-added technology, software and solutions related to virtualisation and cloud computing. We’re interested in the solutions themselves as well as the rates of enterprise adoption.

In general, it is always interesting to know how others are feeling about the state of the market and the future of different regions. It is the exchange of opinions at events such as DISTREE XXL that is always useful.

CE: What are the market conditions like in Russia at the moment and how do you see it developing throughout 2011?

VS: The crisis of 2008 and 2009 visibly impacted the IT distribution market in Russia. The drop in demand was sharp and deep – between 40% and 60% for different product groups. These figures are significant considering the fact that the continual market growth for the pre-crisis decade had been at least 20% annually. Such abrupt change in the economic conditions had to impact the IT market and not all the players survived.

The gradual recovery of the market began in 2010 with growth of between 20% and 25%, which is considered normal. In addition to the market recovery we see pent-up demand and believe the trend will remain in place for 2011 driven by modernisation of the economy and increase in consumer demand. We expect that the market will show growth of between 25% and 35% in 2011.

In the rouble zone

CE: What would you say are the three biggest issues impacting Merlion’s distribution business at present?

VS: The development of the Russian distribution channel is influenced by several key factors. First, it is a fast-changing economic situation in terms of public and commercial products post-crisis. This refers to areas such as e-government, modernisation and business innovation. Secondly, there are several changes in the vendor supply chain with many now adopting a model of direct shipments to Russia as well as doing business in the rouble zone. Finally, we always have to take into account the increasing channel competition and, consequently, lower margins for distribution.

CE: How would you define Merlion’s current portfolio and customer base?

VS: Merlion is a full range distributor of computer and digital equipment, components, peripherals, networking and office equipment as well as VAD solutions such as servers, data storage systems, telecom products and software. Since December 2009, we have been developing a new business direction in terms of the distribution of large and small household appliances, audio and video equipment and mobile phones.

In addition to its distribution activities, Merlion has developed a number of additional products including PC and server assembly, systems integration and service support. We also have two retail projects – Citilink and Positronica – plus an educational consulting business for the channel and sales staff. Today, Merlion’s portfolio consists of more than 170 vendors and we sell through 3,100 resellers – 40% of these are from the Moscow area and 60% are from other regions in Russia.

CE: What are Merlion’s strategic business objectives for the next 12 months?

VS: The strategic direction is to ‘be’ and ‘remain’ the leading Russian IT distributor. For the coming year we face the task of expanding the portfolio of home appliance and consumer electronics products. We are also looking to increase the turnover derived from VAD solutions, which has become more important to us during the last five years. The number of regular customers and dealers now buying VAD products from us [Merlion] exceeds 700. We are also planning to expand our Citilink retail project to new location in four cities with populations in excess of 1m.

CE: What changes are you expecting to see in the EMEA distribution channel in 2011?

VS: I think the market will continue along a path of recovery and growth. Competition will increase among the market players – both at a vendor and distributor level – and there will be some business consolidation. The market will have to focus on distribution development in this new business environment. That means maintaining a sufficient level of profitability in fast-changing economic conditions, enhancing loyalty and training the channel, developing service offerings, providing new financial options and responding quickly to new technologies that evolve.

CE: Are distributors well treated by vendors in your opinion? Do they appreciate the role that distribution plays and how do you see this relationship developing?

VS: We’re constantly expanding our vendor portfolio and consider all of them as good partners. Our relationship with vendor partners actually strengthened during the crisis. Yes, the situation is changing with many vendors moving to trade ‘with roubles’, opening warehouses and manufacturing in the Russian Federation. This means complexities in terms of changing the way we do business with them but also advantages in terms of reduced transport and customs costs plus speedy delivery for both sides. Some vendors have also started to develop partnership programmes adapted for the Russian market and we plan to work with them to use this to strengthen channel loyalty in 2011.

CE: How do you see web-based sales channels and the impact of global trade patterns influencing the Russian market?

VS: The Russian IT business community has started to actively use the internet as a trading platform in recent years. This is now widespread across the world and has impacted all markets. In Russia, even though web-based sales channels are being actively developed, it has not yet become a major route-to-market in the regions – especially in cities with less than 1m people. This is due to underdeveloped payment systems and the insufficient spread of high-speed internet.

We are still some way from the full integration of internet trading in Russia. The few vendors that are attempting to run this business process in Russia use the web to advertise and promote their products, but do not expect this to be the major source of sales.

At the same time, Merlion – seeing the prospects of web trading – has made this a foundation for one of our retail projects: Citilink e-tailer. This is a network of stores focused on the end-user and SMB market where customers can visit a store and then order the products online. It is also worth mentioning that our resellers use a business-to-business web-based module for purchasing. Today, sales via this medium account for up to 60% of Merlion’s turnover.


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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