MERLION: give all the best to the partners

It is a known fact that Merlion company apart from three distributor divisions (full-range, appliances and electronics and Value Added), possesses projects manufacturing produce under inherent trademarks (e.g., iRU), retail chains (indigenous electronic discounter “Citilink” and franchising federal chain “Positronica”), there also exists a nationwide “Chain of service centers” for the end users. Merlion does not forget about system integration as well, however, the integration project Tegrus is a comprehensive independent structure. Generally, such supplier’s business diversification raises concerns with the second-level partners: it may suddenly happen that a distributor becomes a competitor, but not an assistant. However, all indications are that no concerns like this get raised with Merlion partners. Not for the first year they recognize the company as one of the best domestic IТ-distributors: so, in 2017 the Company was included into a shortlist of all (except “Specialized distributors”) nominations of CRN/RE rating “The best Russian IТ-distributors”, while it took the first place in the category “The best distributor for assemblers”.

Dmitry Vinogradov, Director General of Merlion, told our readers of how they succeed to secure loyalty of their partners combining, as it would seem, the incompatible, as well as of what is MERLION company today and in what direction it plans to develop in the nearest future.

CRN/RE: Merlion Company has for long been associated with distribution business only. What is Merlion today?

D.V.: The present-day Merlion is a fairly diversified group of companies, in which the distribution remains, as before, the key line of business. The success of this diversification is the result of that we deliberately enter every market segment, where we begin to operate. We actively study the situation inside of this market seeking the ways and opportunities for taking the leading positions (or, at least, become prominent players). All this is done for carrying on development as an omni-channel partner for our vendors and the most convenient and dependable supplier for the partners.

Following the results of 2017 the lion's share of all company’s proceeds falls to the share of distribution (while our retail projects and inherent production (iRU, Byurokrat, etc.) and accounts for about 30 %. We distinguish three lines of activity within this division: broadband access (share in proceeds – 39 %), VAD (33 %) and household appliances and electronics (28 %). The distribution is as before our key competence, the main focus of our activity.

Let me remind you that the history of Merlion has begun from distribution of Taiwan-made computer components, which gradually added contracts from the other market segments. All of them are successfully developing until now inside of our distributor’s portfolio. However, we are not going to be satisfied with what has already been achieved, and we aspire to the leadership in the new lines of activity. We aspire to the reasonable leadership, not through competition with our partners, but through offering a better range of products and working conditions to them. In order to make a really the best proposal to our partners, we shall experience ourselves how this or that segment lives, what rules exist therein, and what will be really “the best proposal” for its players. In due course, understanding the specific features of this or the other segment, we do change as a distributor in order to better comply with the demands of the companies operating on this market. But besides, the suchlike business diversification will help us bring the best practices of the other markets to where they are not used yet. Thus, we not only develop ourselves, but develop the surrounding business environment.

So, for instance, it was very interesting for us to enter the market of household appliances distribution (in 2012). It until now strongly differs from the market of IT distribution. During these years we managed not only to get the feel of handling these groups of goods ourselves, but transfer such experience to the partners. I recollect that we learned together how to sell flat TV sets, then – cellular telephones and smartphones (some time ago it was impossible to buy particularly these devices in IТ shops, dedicated companies only dealt with these groups).

For the same reasons we also develop production of items under our own trademarks. The computers and servers of iRU are already well known to the market. Now we have transferred the practice of product establishment to the market of household appliances too. Thus, we offer products to the partners (both retail and corporate) that will help them expand the range of products and make the best proposal on the market to the clients.

Though, our proposals work in the reverse direction too. For instance, if a vendor needs a strong retail partner, we can offer our retail projects (“Positronica” and “Citilink”) to them. By the way, while developing the retail sector, we continue to accumulate the base of knowledge on operation in different market segments and transfer it to the partners. The channels of sales get intermixed: small corporate clients most frequently buy in the retail sector; the companies that have rendered services begin to supply equipment, IТ products occupy the same shelf with the household appliances or smartphones. Besides, the federal players, which “have developed a shelf” before, recently launch their own Internet projects actively. It means that we being the distributors seeking to suggest a high service level and all possible variants of cooperation both to vendors and to dealers, shall be inside of all these trends, possess broad knowledge about the entire market, in order to be able to share it with our partners.

Thus, Merlion comes forward now as a conductor (notably to both directions) not of the produce alone, but of information and knowledge between a vendor and an end user. We set heart on that this information goes through us in a maximum correct way, gives the manufacturers the best understanding of what is happening in Russia, and, as a result, helps to get from the vendors particularly those items that are really demanded by the market at the present moment.

By the way, in conjunction with all the foregoing we would like to say about one of our franchising projects. In 2016 “Positronica” turned 10 years, but we permanently work towards keeping it relevant for the partners. After the project once again changes in accordance with the current situation (a platform of online sales was launched), it literally gave a second wind to it. The first peak of popularity of “Positronica” with different partners has fallen within those times, when the federal chains started to actively enter the market of the regions: an opportunity to begin work under high-quality brand, which did not required big investments, has appeared with local companies. Again now, after receiving a new “make up” in the form of Internet sales, “Positronica” once again became interesting to the partners, the geography of franchising chain expands, the number of companies wishing to join this project grows.

CRN/RE: How do your retail projects get along together with your retail projects?

D.V.: Definitely, speaking about final sales, a competition exists between these actors. But this market and sound competition: we do not give any preferences to our projects for the partners, otherwise we risk to lose confidence of the main sales channel. The best proof for this proceeding from the results of 2017 is the fact that on the background of active advances of the big federal players to the regions, our sales in the wide regional channel have demonstrated a significant incremental growth not in proceeds only (about 10 %), but in the number of partners too. This is a very interesting fact. On the one hand, the business of electronic discounter “Citilink” grows ahead of schedule, which corresponds to the world trends: this format of retail sales is interesting to the end users. On the other hand, regional sales channel also increases: the new partners appear, efficiency increases and the business of existing partners develops. Besides, and it is very important, our regional channel implies sound companies (from the point of view of business) with good financial discipline, with a thoughtful approach. Probably, they can not boast high dynamics, but they are financially stable. I can not agree with the fact that local retail players “become extinct”, according to some of our colleagues. Some years ago during crisis period we really witnessed a decrease in the number of partners. The market was left by those who had conducted high-risk financial policy, but had been severely leveraged. New companies came to replace them, which organize work in accordance with new day-to-day realities.

The result is that our strategy to “give the best offer to each segment” proves itself. After all, despite the fact that “Citilink” in due course succeeded to grow into big federal player, the number of regional retailers in our channels of sales did not decrease, but even vise versa grew as compared with what it looked like at the beginning of project. I think that the partners, which do their work properly with no fear of competition. Our market is very multi-faceted. There is not a single country in the world, where only one player operates on the market. There are dozens or even hundreds of other distributors even in the distributor segment of Europe apart from Ingram Micro and Tech Data with every one of them successfully operating in its niche. I say nothing about the quantity of retail partners: not a single company is able to encompass the whole market. Therefore, Amazon too will never be the only player on the market. This company, having suggested a breakthrough technology of sales, succeeded to seriously pry itself away from the competitors so far. However, time will pass, and new people will appear, who, inventing something more progressive, will regain the market share from it. The situation is identical in the domestic retail sector: the big federal players only will never operate in our country. The market will always feel demand for local regional retail.

CRN/RE: What was the year 2017 like for Merlion?

D.V.: It was successful for us. Even though we still sum up the results, we can see that we have demonstrated very good results in the segments having key importance for us. So, as compared with 2016 the sales of smartphones, which remain to be the most significant commodity group in broadband access division (the share thereof exceeds 20 % in the division proceeds), have grown in roubles by 8 %, the sales of laptops have increased by 23 %, and computer components – by 49 %.

It is necessary to note that speaking about the results of this year for the market it calmed down a little in 2017. There were no significant fluctuations, and the traditional seasonal peaks of sales became less prominent: BTS was practically absent in 2017; Christmas, though it was appreciable, but appeared to be not bright as before.

As well we have not noticed any global situation change in some categories of commodities. The sales of some products have continued to drop, the other ones have already begun to grow. Our dynamics in the foregoing commodity groups keeps ahead of the average market level. It was especially pleasant to see the growth of sales of computer components. In some degree it has been inspired by the commotion associated with bitcoin and mining – sales of video cards through our channel have grown by 280 %. But besides, the volumes of sales of SSD (+57 %) and random-access memory (+58 %) have grown significantly. The number of partners procuring these categories of commodities has increased too. In some measure it can be explained by the ageing stock of devices. For instance, the market of laptops has just left the minus side. An identical situation exists in PC market. It means that the illustrated base of devices is not renovated, but requires repair and upgrading. All these factors became the reason for revival of the market of computer components.

The situation is different in the market of household appliances distribution. A number of segments can not reel until now from the boom conditions of 2014, when the people bought up during crisis three refrigerators and five TV sets each. It happened not so long ago (as compared with the average service life of these goods) that it hampers sales in the market of household appliances and electronics until now. But despite this fact in general the past year 2017 was successful for the company: positive dynamics was demonstrated by the retail projects too (“Citilink” and “Positronica”), and Value Added Distribution, which we develop actively recently and which already occupies a significant share in the market of corporate sales. By the way, an outstanding result was demonstrated in the framework of VAD division by the commodity group SCS (structured cable systems) – the sales in 2017 in roubles are several-fold higher than a year before. The year 2017 was quite calm for the Enterprise segment: there were no disturbance, no sales distortion towards big integrators or vise versa towards medium and small companies. Probably, the growing interest to cloud technologies became the most striking trend in this segment. We keep a very sharp lookout for this trend and make an effort to transfer all the information available with us to the partners. In particular, the development of cloud technologies became one of the main topics of Merlion IT Solutions Summit held in 2017.

One more trend that we noticed last year: a demand for maintenance services were growing on the part of the end customers and partners. A we are already active in this “field”: we master the competences that are new for us, we offer the services of development agencies to the partners and promote the competences of other integrators possessing interesting know-how (regional, technological, etc.) to the sales channels.

CRN/RE: What are your plans for the nearest future? What can you offer to your partners to pay attention to?

D.V.: We will certainly continue to develop competences in the issues of Value Added Distribution and will consolidate positions in the segment of cloud solutions. Having implemented a number of deals in 2017 (we acquired a share in the capital of the leading system integrator of OTR and development agency of PRO IT, absorbed niche distributor DScon, integrated the experts of Rentsoft company into our team and acquired a dedicated technological platform Velvicа), MERLION is now in the position, when all possible variants are being considered in the market on acquiring the new competences, including through M&A deals.

Besides, sure enough, the retail projects will continue developing, it is also planned to launch the new products under our trademarks, both in IТ segment (including iRU), and in the segment of household appliances.

I would like to focus the attention of partners once again on the fact that new technologies give so many interesting capabilities in the traditional channels of sales. And this is a gross mistake not to notice it, thinking that the time has not come yet for application thereof. We, as the distributor, incorporate the most different new technologies into all spheres of its activity. It is high time for the partners to think how to inscribe these technologies into their life. It is possible, for instance, to begin from a back office, incorporate electronic document management. This is what we use already at the natural level: state services, “my documents”, etc. By no means, everybody in the business environment understands the convenience and even the necessity of these systems. It happens with the assumption that the incorporation of electronic document management saves time as one of the most valuable resources of the modern age.

There is no need of locking in what has been done properly in the past. It is necessary to look for all that new, which can help improve business. If one does not look into the future, the past will very quickly kill everything that is good in the company. Therefore, the main thing that we wanted to wish to our partners: pay attention to the new technologies and we will help find the most interesting ones and owing to these make the business of partners even more successful.