By Dhaval Valia
 Over the last one month, especially in tier-2 and tier-3 cities, resellers have witnessed a glut of parallel imports across all product categories including servers, PCs and components. Earlier in December, Intel partners reported receiving an email that hints at possible increase in parallel imports.
These products are being sold in the market at prices that are at least 25 percent less than the ones sold through the authorized channel. This would invariably put further inventory and price pressures on the authorized channel.
Following the poor Christmas season in US and Europe, one could see further increase in parallel imports over the next quarter.
While parallel imports are not new to the Indian market, the inflows this year are likely to be much higher than those seen over the past years. Diversion of piled-up inventories from recession-hit countries to emerging markets like India, where GDP growth rates are expected to be much higher compared to the rest of the world, has already started in a big way.
For those distributors and dealers who are already sitting on high inventory, this definitely spells bad news. They will have to take deeper price-cuts to match their prices with that of parallel products and that may also mean booking loses unless of course the vendors are willing to provide substantial price protection.
The glut in parallel imports also threatens to prolong the inventory cycle of distributors, many of whom are still sitting on 30 to 40 day inventory.
The advice for the channel in this scenario is to have zero inventory. Buy as you sell must be the key mantra. Those dealers who are stuck with inventory, it is a good idea to liquidate stocks as soon as possible, even if that means selling at a loss.
Before I sign off, I would like to wish all the readers of CRN a happy and prosperous new year. |