Dmitry Vinogradov, CEO of MERLION, will tell us how to successfully transform the existing large distribution business and which development model is the most promising today.
- How do you see the situation on the distribution market today?
- Distributors were predicted death ten years ago. The margin of the business was falling catastrophically. Everything went to the direct interaction of the customer and the manufacturer, and the latter was ready to replace everyone with itself, including integrators and providers of any kind of services. Then a no less noticeable trend began when large customers grew these functions within themselves. Today, successful distributors rely on a completely different business model. For example, Merlion is a service company that provides services in the b2b market. I would say that Merlion is becoming a marketplace for businesses in the broadest sense of the word. Working with us, a partner can completely build and equip an office, from engineering infrastructure to furniture and a set of staples. Most of the products and solutions can be ordered online using our portal. Partners actually participate in our business, they have direct access to inventory and a possibility to carry out pre-orders.
Areas of activity
One of the largest distributors in the Russian market, Merlion, operates in such segments as computer, digital and home appliances, office supplies, office furniture, business gifts. A separate area of the company is the project distribution of equipment and software.
- Merlion is known as the largest distributor of IT equipment and electronics. What exactly is the company engaged in today?
- To date, over 670 brands are represented in our portfolio. More than 400 of them are direct agreements with manufacturers. There are also several of our own brands from different categories, thanks to which we can produce the most customized products for large deliveries.
Recently, we calculated that over the 27 years of the company's existence, the number of product items has exceeded one million. This is a very large volume, which in many ways allowed us to remain the largest company in the Russian IT market. However, at some point, we began to develop our affiliate network according to a different model.
As a distributor, we have many other areas besides IT and electronics. These are household appliances, stationery, office furniture. Six years ago, we acquired Bureaucrat, a Russian manufacturer of office furniture and stationery. And last year they opened an online store for legal entities, buroshop.ru. We offer companies the classic retail model: you order in a few clicks any quantity of goods for office needs in the evening, and in the morning you receive an order.
We have long ceased to be just an IT distributor. In recent years, many new lines of business have appeared in the Merlion structure, providing partners with various IT services. All of them are concentrated within the VAD (value added distribution) division, whose share in total revenue exceeded 28% and will continue to grow, including through new services.
- What products and services bring the highest income to the company?
- If we talk about the structure of our revenue, then, according to the results of last year, about a third of Merlion's turnover came from retail projects - Citilink and the Positronica network. The rest is divided into three divisions: the above-mentioned VAD, wide-profile distribution and distribution of household appliances and electronics. Today we are solving the problem of increasing the "non-distributor" business - related or comprehensive services. We look forward to further growth, including due to the launch of the cloud direction, MerliONCloud, launched in 2018 and due to our 2019 business projects - AnalyticsHub and High Energy, as well as projects implemented jointly with integrators: Tegrus, OTP and PRO IT.
Merlion in numbers
1992 - year of foundation
Over 7,500 partners
12,000 employees
No. 58 in the RBC rating of 500 largest Russian companies 2019
- Why did you need to change the business model?
- The specifics of the current b2b market is related to the speed of its development: you have to buy something that will bring profit only tomorrow. Therefore, we made a timely decision to transform the old business model towards a service company. In continuation of my thesis about b2b-marketplace: we do not strive to become competitors to our partners; on the contrary, we want to become as useful and convenient for them as possible, offering the widest range of both turnkey solutions and a variety of services.
For example, AnalyticsHub is a company that we have created this year together with a team of experts working in Terradata. This is a consultancy agency providing services in the field of big data and artificial intelligence.
MerliONCloud business project is engaged in cloud distribution. Among the cloud distributors in Russia, we have the widest portfolio of cloud products with more than 20 solutions.
Another of our new businesses is High Energy, which Merlion joined in the summer of 2019. This company is a leader in the design and installation of complex energy systems with developed IT infrastructure. Most of the largest and most famous data centers in recent years were built with the participation of High Energy specialists. Thanks to this association, we are ready to offer our partners a full range of solutions and services for the construction of such complex facilities as data centers.
- Does the new development path of the company involve a reduction in distribution contracts? Or will you continue to expand your portfolio and expect new brands to enter the Russian market?
- The Russian market, of course, remains attractive to foreign manufacturers, despite the fact that it has moved from the category of undeveloped to the category of highly competitive ones. This, by the way, is another factor that leads to the exit of a number of brands from the market, in particular those that were created at different times to capture the fastest growing segments - for example, the segment of budget smartphones where many new but short-lived brands appeared. This practically does not affect us as we try not to work with temporary brands. Therefore, we should expect the appearance of new brands. Today we continue to develop our portfolio as we must give partners the maximum choice and the best conditions. But this is not a priority model of our development. The advantage today is given to those who offer the best technology-based solution, not just the best price.
- What technologies, in your opinion, are most in demand today and will have the most noticeable impact in the coming years?
- Over the past two or three years, nothing has changed. Work with big data, development of artificial intelligence and creation of ecosystems of the Internet of things. Today these are the notorious “three pillars” with which everyone associates their strategic development plans. Based on these technologies, ecosystems of services are built - both by business and the state. Users will only benefit from this. They will receive services faster, more accurately meeting their needs and ultimately more profitable, as time is becoming an increasingly more valuable resource than anything.
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