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Salem, Tamil Nadu
Salem is the fifth largest city of the state. It has a beautiful hilly terrain that makes it a trekking destination. Located in the mineral belt, the region is rich in minerals such as bauxite, granite, limestone, quartz and iron ore that feed many industries.
SAIL is planning a steel SEZ, while the TN government and Elcot are planning an IT park in Salem. There is already an exclusive electrical and electronics industrial park in the city.
Channel scenario
Salem has about 200 partners who largely serve the home segment and then the corporate and government segments. In 2002, about 15 partners formed the Salem IT Association (SITA); it is currently about 45 members strong. This association is now part of the Confederation of IT Associations (Confed-ITA). Partners feel that being a part of a state-level association helps in quicker escalation of problems. Says Prakash Sethuratnam of Vashini Systems, who is also secretary of Confed-ITA and a sub-distributor, “As partners got exposure to a bigger platform, even smaller issues were heard and resolved in less time.”
Opportunities
Though Salem shelters a number of industries, it lags behind when it comes to IT demand, and hence the home segment is the dominant player. It accounts for about half the total demand for IT products and services.
According to S N Satyanarayan of Sun Silicon World, “The home segment comprising students and professionals are more inclined toward laptops. But people are price-conscious, so they buy entry-level products.” On an average he sells about 10 laptops every month.
Next are the corporate and education segments which account for about 30 percent of the IT demand. Co-operatives and private banks, financial firms and BPO centers, are the major contributors in the corporate segment. There are 14 colleges in the city. Though a lot of buying for the students happens directly through vendors or distributors, local channels provide services to these institutes.
Of late, the growing number of tourists and hospitality firms have led to the penetration of broadband connectivity. Coupled with the demand from education institutes, Internet connectivity is growing by 30 percent every year. Wireless connectivity is also seeing demand from education segment. Notes Sethuratnam, who sells Netgear and D-link, “Over the last year, wireless has seen about 50 percent growth in sales.”
Challenges
There is insecurity among channel partners about their future profitability because many large format retail players are buying plots here. The online buying trend has already started. Comments Sethuratnam, “Many people have started buying anti-virus software from vendor sites. All vendors should adopt the Microsoft way, which will keep partners in business.”
Partner Profile
Prakash Sethuratnam
CEO,
Vashini Systems
The manager who turned entrepreneur
Prakash Sethuratnam started his hardware shop in 1996, bringing in years of experience as a service manager at HCL and HP. In the 12 years since then, his turnover has grown from Rs 30 lakh to Rs 3 crore.
Company Snapshot | | Company | Vashini Systems | | CEO | Prakash Sethuratnam | | Year of Inception | 1996 | | Brands | HP, HCL, Numeric,
D-link, Neoteric, Creative, Samsung, Sony, Intel | Products | Desktops, routers, switches, servers, laptops, printers, HDDs | Primary Business | Retail and re-distribution | Turnover | Rs. 3 Crore |
When he opened Vashini Systems in 2000, it was the only multi-brand IT retail store in the city. Within one year of commencement of operations, the company saw huge growth in its business as it also entered distribution. Around this time, Tvse offered to partner them as regional distributor. For Vashini, this was a period of mutual benefit and growth. “We sold 40 printers for Tvse every month. We gave huge profits to the company which was reflected in their market share,” states Sethuratnam. He immediately adds, “Of course, this partnership was equally beneficial for us because we got recognition in the market, and the hand-holding provided by vendor helped us to strengthen our business. We became a volume player.”
Sethuratnam describes his business as a roller-coaster ride. When he started his business was purely end-user sales; however, within one year, the business had diversified toward re-distribution. 2004-06 was the phase when re-distribution contributed about 60 percent of the revenues while the rest came from retail—but now it has become vice-versa. “We don’t see a future in re-distribution,” states Sethuratnam. “Crashing margins and an increasing number of distributors even in tier-two regions have brought down our profitability.”
In 2004 Vashini joined hands with Samsung as its volume partner. “Tvse had changed its strategy and was roping in more national distributors, replacing its regional distributors in the process. We therefore parted ways with Tvse and tied up with Samsung,” says he.
Since then Vashini has adopted a different strategy. It now has exclusive tie-ups for different brands of one product at its multi-brand store. It partners HCL to re-distribute and also display the vendor’s range of desktops and servers. The tie-up with Samsung is for printers. “We now have better margins,” says Sethuratnam. “We get incentives and special funding for conducting brand awareness programs like road shows.”
Not surprisingly, Sethuratnam aims to continue his focus on retail. |