UP Channel Pushed To The Brink As Profitability Becomes A Challenge

–Samrita B

With dwindling sales and higher than ever expectations of IT vendors post pandemic, partners from the state of UP believe that the market situation has changed drastically and shows very slower signs of revival –

As the fourth largest states in the country, Uttar Pradesh boasts of having emerged as an important hub of IT & ITeS sector in recent years. Right after the pandemic, the government has decided to come up with medical colleges in every district of the state, owing to which the healthcare is fast emerging as a sector that is investing heavily into IT. Also, with every panchayat in the state getting connected with PC, routers, and CCTV cameras, the government has also become one of the highest buyers of IT.

But despite this, profitability is one challenge that continues to hit the channel partners of this market badly. While many other markets had complained of a tough business scenario during the pandemic, the UP channel traders in contrast had seen a thriving market. But the situation changes right after that.

Peeyush Jain, Owner of Well Known Computers who has been into this industry for the last 32 years says that the market scenario has changed all of a sudden after the pandemic. During the pandemic, when the availability of the product was an issue, the cost of the product was automatically going up. But after the pandemic, the prices are drastically going down. “This means that partners with old inventory are bearing a heavy loss since they are required to sell these older stock at a lower price. With sales declining, companies are left with little option but reducing the prices of their products. The market operating price therefore keeps on changing, much to the disadvantage of the partners.”

The expectations of vendors have also changed after the pandemic. Because of the limited product supply and the subsequent price rise, they were selling their products at a huge margin, without the need to introduce any new schemes or offers. Even after the market came back to the pre-pandemic level, the expectations from the vendors still remains the same. “The market which had gone up to 170% came down to the previous 90-100% again. Along with decrease in business volume, the prices have also come down. The profitability of the IT market has remained stagnant at 65-70%. But vendors expect the same volume of business to take place that happened during the pandemic,” says Peeyush.

When asked if the market situation will change for a little better with the advent of the festive season, Peeyush says that the idea that customers buy more during festivals is nothing but a myth. “This trend used to be there three years back, but not anymore. With their buying capacity expanding, a customer can buy a laptop or a printer anytime and not wait for the festive season.”

He however points out that vendors should change their attitude if they really think about partners and RDs. “Whenever they release any new product in market, they should understand that their promotion and advertising becomes equally important. Their job does not just end by placing their products on the shelves and leaving the rest of the work for a partner or retailer to do.”

Pankaj Agarwal, Owner – Docket Care Systems, who also happens to be the President of the Uttar Pradesh Computer Dealers Welfare Association, says that commercial buying has come down after the pandemic but retail/consumer buying is still there. “Every day the market faces some or the other challenge. It is in our best of interests to address such challenges on time along with the help of the vendors,” he states.

Though the challenge from online buying does not persist anymore, it can sometimes be felt when the big e-commerce brands come up with any mega sale offers or schemes on IT products or when they place any promotional content on print or electronic media to attract customers. “Vendors also happen to place some of their unsold SKUs with these e-tailers and only then customers can be seen buying from them. But at other times, customers usually prefer buying from traditional retailers,” explains Pankaj.

According to Devesh Rastogi, Owner – Devlok Distributors, who is also the present president of FAIITA (Federation of All India IT Associations), the retail market has gone back to pre-pandemic level. Citing a few market numbers, he says, “From 4.5 million, the laptop market had gone up to a 7 million market size. As per our perception, the market is back to stabilizing around 5 million. While the retail business is still better, there has been a huge drop in online sales. The market which went up to 36-38% has now come down to 25%. The printer market, on the other hand is still in shortage. The security & surveillance market is growing 20% every year. Gaming is another market that is seeing a big surge and will evolve in the coming few quarters.”

Saurabh Gupta, President – Compunet System, who also presides over Allahabad Computer Dealers Welfare Association, is of the similar view that the market post pandemic has gone down considerably. “Customers already bought during the pandemic since they were in dire need of these products because of the sudden imposing of the lockdown. But now they choose to buy only they get something at a better price point or find lucrative offers. For instance, e-commerce offers them good pricing and schemes during festivals and customers wait for such opportune moments to purchase. We are just so helpless.”

He also pointed out that there is also a huge shortage of products in the market, which is further adding to their woes. “If there is a demand for entry-level product, you will find the availability of only high-end products everywhere. Customers then go searching for that product online when they don’t find it in the retail stores. Why would they buy a high-end projector when they require a simple entry-level projector,” he concludes.

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