It is a known fact that in the second half of 2008, IT biz in India is passing through a more topsy-turvy way, wherein the problems are spread over all the segments. Importers are unsure about the final bills of the cost-plus consignments, because of fluctuating dollar value. Thus, product pricing is a matter of great concern for them. Distributors are also under economic pressure from all the angles, especially when economic slow down is restricting flow of money.
It is quite obvious that under such circumstances, all distributors will adopt the play-safe policy, wherein leverage will come down, also period of credit may be cut down in many cases.
Then, are we going to see even worse time for the Indian IT channel, which is already facing several threats? How to act at this moment?
Those who were connected during the Spotlight Chat last Wednesday, might have seen that Rupesh Ashar, DGM – Biz. Finance Neoteric Infomatique, clearly brought out the following points.
He opined, “At such times it is critical that one sticks to the fundamentals of business, and maintain business hygiene. Derisking oneself is the need of the hour – be it in terms of spread, both in customers and products. It would also be prudent to maintain low levels of leverage; which can be achieved by maintaining optimum inventory levels.”
While answering the question – Are the distributors thinking of stopping credit business? He said, “Credit is one of the fundamentals of distribution business, it will never be stopped, at best rationalization would happen, meaning – credit-worthy customers would never be deprived of credit but all those who are highly leveraged would be affected.”
His reply is quite indicative to a situation – which I indicated in the second paragraph. However, I stress on understanding business fundamental. Once in a certain area, if any reseller understands the business dynamics – the pace of consumption for peripherals or short-term durables, and the source of money that drives the spree of purchase of capital goods long-lasting or complete products, there is little chance to lose. In any case, the consumer has to buy and the reseller has to sell the products.
Every reseller has to be meticulously watchful to ensure that the product-out and money-in cycle is completed within the specified period. Like Rupesh, I too feel that collecting post-dated cheque on the spot of dealing is a fail-safe way of dealing, even with the credit-worthy customers.
Economic slow down is a cyclic phenomenon. And our community has to bear with this very patiently and cautiously. As Rupesh nicely pointed out, we should always remember, “There is an economic slowdown, but India would still grow at 6-7% against 9% earlier. Thus, India would not be highly impacted since we have our own local consumption. Economic slow down will not destroy any biz. It will only help build prudence, checks and measures, which will lead to improvement in hygiene of biz.” I add, may be for sustenance, the situation will make some of us think of diversifying reselling business with inclusion of a few new products – where product-out and money-in cycle is of smaller duration. But our community will definitely get over it.