Channel Chief
“We are contemplating acquisitions”
By Ramdas S
 Over the past one year, APC has made several changes to its channel engagement. Gaurav Burman, Director, Transactional Business, spoke to Ramdas S about the objectives behind these changes and shared future plans
How has the APC business fared over the past 12 months?
Year 2009 was terrible for the UPS market as several product categories witnessed negative growth. But the current fiscal has been extremely good for us. So far, we have managed an impressive volume growth of 60 percent as compared to 2009.
We estimate our addressable market for UPS and related solutions to be around $800 million in India.
We continue to maintain market leadership in both volume and value terms.
With the proliferation of notebooks, the under-1KVA UPS market has come under serious threat. What is APC doing to counter this?
For sure notebook volumes have shown exponential growth over the past 3-4 years. However, it’s wrong to assume that the desktop market is dying as a result. In locations other than the top 10-15 cities, desktops continue to be in demand and the attach ratio between PCs and UPS is showing significant improvement.
Also, we see growing notebook volumes as an opportunity and not a threat. In most cities in India, the quality of power supply remains erratic. So, owning a UPS makes sense even for notebook users. It acts as a surge protector and stabilizer, and prevents notebooks from getting damaged while charging.
During slowdown, APC made several changes to its channel policies. Could you elaborate on them?
We made several changes to our channel policies during FY2009-10. The reason for incorporating these changes was that during the slowdown, many of our partners were faced with overstocking. They had amassed inventory for three months and had panicked. This severely impacted the market operating prices (MOP) of our products, and posed serious threat to the financial health of our channels.
As a result, we took several tough decisions on the policy front. First and foremost, we took back the excess inventory from partners to help them cut their losses. Post that we introduced stringent norms for credit, billing and stocking, and set rules for MOP. Our goal was to protect the MoP, which is crucial in distribution. Once we achieved that, everything fell into place.
Overall, we made 16 changes in our policies to ensure that partners make money at every level of distribution.
What channel initiatives has APC launched over the past six months?
One of the prime initiatives launched recently is a partner loyalty program called Inner Circle Club. We have enlisted 30 certified partners from 14 cities. The member list includes partners from across segments. For example, one of the enlisted partners, Hyderabad-based Choice Solutions, is an enterprise partner focused on data center solutions, while Bengaluru-based Matrix Technologies is a sub-distributor.
Through the program, we will offer partners loyalty privileges that include lead sharing, deal registration, advanced sales and technical training, extensive marketing support, co-funded promotional activities, and a platform to interact with team leaders.
We will also encourage partners to move up the value chain by giving them access to the wider Schneider portfolio. We recently organized the first Inner Circle meet in Bengaluru, which included a two-day conference program and a visit to our manufacturing facility.
In addition, we recently appointed an external agency to manage some of our programs—especially those targeted at the small resellers in upcountry locations.
Despite the increase in prices of copper and iron, the average selling price of UPS has seen a drop.
Metal prices have reached historical highs. Hence, we have been looking at technology and product innovations to reduce the cost of UPS.
We have also streamlined our supply logistics by importing certain components from Vietnam and Indonesia, as it is more cost effective than importing from China.
But this is not true with our competitors, many of whom are compromising on quality to keep prices low.
We recently performed strip-down tests of a few competing UPS models and found that in order to cut costs, other companies have done away with parts that affect the functioning of the UPS and pose safety risks to consumers. For example, while APC 600VA models come with four heat sinks, few of the competing UPS models have only one.
How do you plan to continue the growth?
The premium positioning of APC brand limits us from having a play in several low-cost products and this can be a hindrance to future growth. Hence, we are contemplating introducing an alternate value brand. For this we are looking at acquisitions in India and globally.
There are talks about APC appointing telecom distributors.
HP has recently taken the bold step of appointing telco partners, but there has been resistance from the traditional IT partners. We are closely watching how they fare with the new distribution model.
We too have been approached by Bharti Airtel’s distribution arm, but we have put that proposal on hold. It is clear that the next wave of growth will come from D and E class cities, and to be honest the telco channel seems to have a better coverage in these locations.
At APC, however we believe that traditional IT partners can also provide the right market coverage if we work closely with them.
We have been working with our distributors and sub-distributors to increase the base of active partners and have been successful at it.
Every quarter, our tier-1 distributors engage with 2,500 partners; while our 70 sub-distributors engage with another 5,000 resellers.
We are also increasing the channel support infrastructure. The plan is to have channel support available in 250 cities by March 2011.
What about your retail plans?
Last year we exited the mobile and IT accessories business. The decision was taken by Schneider globally, as most of these products were not manufactured and designed by us but were outsourced and branded. As a policy, Schneider has decided to focus only on categories where it has its own technology knowhow and R&D.
But that doesn’t mean we may not review the policy as we see the retail power accessories market booming.
How have you fared in the home inverter market?
Although we were a late entrant in this market, we have done well. Home inverters contribute close to 15 percent of our transactional business volume. This, despite having only two models compared to 8-10 models from established competitors. The plan is to expand the portfolio and increase the distribution footprint.
We recently appointed Grainger Industrial Supply as the second distributor along with Rashi Peripherals. |