In India, which accounts for 44% of Redington’s revenue, weightage of smartphones has risen from 18% to 36% between 3Q last year and this year. Smartphone shipments are rising at nearly 100% per annum.
Flipkart, SnapDeal Online Retailers BUY from Redington
Redington does not see any threat from online retailers such as Flipkart and SnapDeal, which are its customers. Distribution is a low margin business (4-6%) even for a specialised player such as Redington, and online retailers prefer using logistics and distribution services from a specialist. Even in the US, 70% of the IT product distribution for online retailers happens through specialised distributors.
Distribution Network A retailer places an order with a distributor only a few hours before the actual sale is made to a customer. Redington delivers SKUs to a retailer typically four times a day. The retailer calls various distributors in that area requesting for SKUs and the distributor that can offer timely, sufficient delivery of SKUs at the most favourable terms wins the order. This brings to the fore the importance of a large distribution network. Redington typically generates 140k invoices in a month and annually extends over US$2bn credit to its channel partners and the delinquency rate is low at 0.08%.
Redington and Ingram Micro have similar market shares in the IT segment and have reached a point where incremental market share gains are difficult unless returns are sacrificed. Hence, they moved into non-IT, with Redington taking the lead. Redington convinced BlackBerry about the benefits of having a distributor and BlackBerry
witnessed robust growth in the ensuing period. Samsung/Apple have 42%/2% market share in smartphones in India
(by volume respectively). Finally, FDI in retail, and hence online retail, is not allowed, but Redington has no plans to enter the segment either.