Our channel industry’s new and most resellers in the country belong to the first generation enterprise. Therefore, not only do they lack the strong financial backing, but also they fail to inherit the essential business wisdom from elders.
This gives rise to the likelihood of miscalculations, blunders, etc often leading to significant losses due to fly-by-night operators, which is possibly, not as serious a bane in other businesses.
On the face value, the IT trade is billed as a gentleman’s business. Therefore, the general tendency is to go by word of mouth. On the one hand, while it’s harmless and promotes mutual trust – so essential for partners – and on the other, it also lays the roots of the ailment as it leaves a lot of space for breach by the imposters.
A typical default case begins with cheque dishonor, but instead of sounding the alarm, partners tend to sleep over it and rarely inform their peers. A mistrust of the legal system, fear and herd mentality why should I when others have not continue to be dogmatic characteristics of channels and contribute heavily towards this bane.
The shady deals continue to leave the channels in tizzy despite occasional arrests of the guilty and the occasional precautionary step taken by various IT traders’ bodies. A few cases have been reported from Bhavnagar, Mumbai, Delhi, Ahmedabad, Kolhapur besides those in other places that have probably gone unreported.
The assessment I could make from the regular feedback received by us at ChannelTimes from partners on the menace of vanishing companies points to certain aspects of such incidents. In effect, there’s a pattern to it.
The cons float a company by submitting false documents like forged PAN cards and non-existing addresses. They do initial business offering lucrative margins and selling branded products at throw away prices. Gradually after building the confidence, they borrow a substantial amount and then gradually liquidate the company and simply vanish.
There’s another twist in the tale. Defaults are committed owing to the over enthusiasm of the distributors, too. Partners say the distributors often offer goods on credit to undeserving companies. The feedback we get also suggests that all claims of sound credit allocation norms are actually only on paper. In reality, regional sales representatives of large distributors and small-time regional and sub-distributors often ignore the laid down policies and norms mindlessly and offer credit to those who do not deserve and are likely to dupe the market.
But if distributors can’t dodge responsibility, it will be equally unwise and out of place to consider channels the innocent lot a kind that is easy to fool.
People who know the market generally commit the fraud. Therefore, a few diagnostic efforts point towards key causes for the malady like the greed of the players, forced high target set by vendors that put dealers in haste to reach unrealistic sales targets and the lack of ample initiatives to bell the cat from the channel associations.
Having said this, I ought to place on record my appreciation for associations like Mumbai-based Trade Association for Information Technology (TAIT) and Ludhiana-based Association of Computer Entrepreneurs (ACE). TAIT has been taking a number of initiatives the results are yet to be seen; that’s a different chapter. For instance, in 2003 TAIT roped in a senior cop of the rank of assistant commissioner of police from economic offences wing of Mumbai police to assure that fraudsters will be brought to book if TAIT members filed police cases in time. Sadly, only a few complaints actually reached TAIT and the police department.
In another case of non-starter, the TAIT initiative turned into a damp squib with partners refusing to cooperate with the verification agency. The resellers’ body had appointed a credit verification agency to verify the business and personal details of the genuine channel companies operating in Mumbai. The hurdle came in the form of partners’ refusal against sharing their bank statements and utility bills, VAT and PAN details, IT returns, balance sheet etc. But credit should be given to ACE for successfully thwarting the aborted attempts of two fraudsters, who had allegedly successfully duped channel members in Chandigarh and Noida.
But much more needs to be done. A pragmatic approach would be to give up the characteristic indifference to such issues. Indulging in blame game and crying over split milk will not help either. It’s high time the industry stopped treating the malady symptomatically. The bane can be tackled by multiple ways but the onus is naturally more on resellers and their associations. The trade bodies can periodically assess each member’s financial health by hiring a professional agency and keeping tab on the neo-players who offer abnormal discounts and do huge procurement in exchange of post dated cheques.
For years, the trade bodies have known how to grumble against vendors and distributors and how their profit margins are shrinking. But when you gaze in your own heart – partners, both as individuals and members of the association – should appreciate few facts. If trade bodies can educate channel partners in business basics like professional inventory management, risk-return analysis and maintaining good product mix, many defaults can be avoided.