Transcript Alliance Marketing Group, Roadshow

Opportunities and Challenges
of Distribution in Russia
Sergei Manevich, President
Alliance Marketing Group, LLC
October 29, 2003
Agenda
 What is Distribution
 Specifics of Russian Distribution
 Alliance -10 years of business experience
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What is “Distribution” ?
“Distribution” (di-stre-byoo’shen) – The process of marketing
and supplying goods from manufacturers to retailers.
The American Heritage Dictionary
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Filling the gap
MANUFACTURER
CONSUMER
Manufacturers want to manufacture, consumers want to buy.
How to fill the gap?
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Filling the gap
MANUFACTURER
DISTRIBUTOR
CONSUMER
Distributor is the connecting link in the chain.
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Potential of distribution in Russia
 Russia is a “recovering”, not an “emerging” market
 Russia is the second fastest growing market in the world (after
China)
 Highly educated population (96% literacy rate) translates into
sophisticated buyers
 Significant demand for consumer electronics and computer products
 No domestic manufacturing of computer related products
 Large geographical territory (9 time zones) requires local presence
 Lack of developed infrastructure prevents growth of e-commerce
 Opportunity recognized by global companies (Intel, Samsung, HP)
None of the major of Western computer distributors has
a presence in Russia
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Challenges of Distribution in Russia
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Low average income
Price driven market
Large territory to cover
Domination of small resellers and retailers (kiosks)
Lack of global marketing (segmented)
Lack of financial and logistical infrastructure
Complicated multilevel distribution structure
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Delivery and Payment Challenges
 UPS, FedEx, DHL and USPS are not
acceptable for commercial operations in Russia
 Majority of local deliveries are done by
distributor or customer logistics
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Only 4% of Russians use Credit Cards
99% or retail transactions are done in cash
Bank to Bank transactions take up to 48 hours
US$ is a major Foreign currency in Russia
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Central Position in a Supply Chain
Manufacturer
•R&D
•Design
•Marketing
•Tech Support
Distributor
•Purchasing
•Delivering
•Warehousing
Reseller/Retailer
•Advertising
•Selling
•Integrating
•Supporting
Contract Manufacturer
•Design Support
•Mass Production
•QA Testing
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Central Position in a Supply Chain
Manufacturer
•R&D
•Design
•Marketing
•Tech Support
Distributor
•Purchasing
•Delivering
•Warehousing
Reseller/Retailer
•Advertising
•Selling
•Integrating
•Supporting
In Russia
•Marketing
Contract Manufacturer •Promoting
•Design Support
•Packaging
•Mass Production
•Customizing
•QA Testing
•Certifying
•Financing
•RMA
•Tech Support
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Outsourcing vs. own distribution
Strengths
• Existing Infrastructure
• Extended Coverage
• Local Expertise
• Specialization
Weakness
• Limited Control
• Dependency
S
W
T
Threats
• Reliability
• Market Disconnect
• Exclusivity (opt.)
O
Opportunities
• Fast Expansions
• Limited Risk
• Cost Reduction
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Alliance Marketing Group, LLC
Gateway to a Global Technology Connection
Business Overview
October 2003
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Our Business
Alliance Marketing Group provides wholesale and retail distribution,
and marketing and business consulting services in Eastern Europe.
Alliance services a large number of the world’s best known computer
and consumer electronic manufacturers.
Alliance serves as the essential bridge between Global suppliers and
the rapidly expanding Eastern European markets
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Alliance’s Business Snapshot
Core Businesses:
Distribution of Computer
Components & Peripherals and
Retail Sales
Annual Revenues (mil $)
60
42
25
26
'00
'01
29
18
Marketing
5%
12
Distribution
93%
'98
'99
'02
'03(*) '04(*)
Retail
2%
Business Segments
Value Added Services:
Marketing and Consulting
The value added services complement the core business allowing
Alliance to provide a wide spectrum of integrated solutions to its
vendors and customers
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Distributor’s Effort
Manufacturer’s Effort
Alliance’s Service Profile
Distribution
(Intel, Gigabyte, Logitech)
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Product Launch/
Branding
(Altec, Adaptec, Cobra, USRobotics)
Distributor’s Effort
Manufacturer’s Effort
Alliance’s Service Profile
Distribution
(Intel, Gigabyte, Logitech)
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Retail
(Pilotage,VAT)
Product Launch/
Branding
(Altec, Adaptec, Cobra, USRobotics)
Distributor’s Effort
Manufacturer’s Effort
Alliance’s Service Profile
Distribution
(Intel, Gigabyte, Logitech)
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Alliance’s Service Profile
Business
Retail
(Pilotage,VAT)
Product Launch/
Branding
(Altec, Adaptec, Cobra, USRobotics)
Distributor’s Effort
Manufacturer’s Effort
(Vobis, Vist)
Distribution
(Intel, Gigabyte, Logitech)
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Alliance’s Global Vendors
Alliance is one of the largest Eastern European distributors of
Mitsumi, Gigabyte and Logitech
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Distribution Product Mix (Q2’03)
Cases
3%
Memory
10%
Other
8%
Sound
3%
Speakers
4%
Keyboards
12%
Hard Drives
2%
Monitors
11%
Motherboards
15%
SCSI
4%
Floppy Drives
6%
Modems
4%
Mice
11%
Optical
7%
In many product groups Alliance holds 10-15% of the total
distribution market share in Russia
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Significant Customer Coverage
Moscow companies
58%
Regional companies 42%
Total Customers
Murmansk
500+
St.PetersburgArkhangelsk
Smolensk
Yakutsk
Orel
Voronezh
Rostov
Kazan
Samara
Volgograd
Astrakhan
Perm
Ekaterinburg
Nizhnevartovsk
Ufa
Khabarovk
Orenburg
Irkutsk
Omsk Novosibirsk
Vladivostok
The Company’s customer base spreads over 9 time zones and
consists of over 500+ accounts
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Alliance’s Customer Base
End User
2%
Distributors
9%
Resellers
45%
System
Integrators
7%
OEMs
13%
Retailers
24%
Vertical Sectors include Consumer, Business, Government,
Education, Energy and Medical.
Alliance’s top 100 accounts generate 80% of the total sales revenue
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Infrastructure and Logistics
• Boston, USA Office: 1,500 sq feet, 5 employees
• Moscow, Russia Office: 600 sq meters, 45 employees
• Warehouse in Moscow: 2,000 sq meters, 20 employees, ERP enabled
• Nominated Freight Forwarders in: San Francisco, Boston, New York,
Amsterdam, Dubai, Helsinki, Taipei etc.
• Lead time to Moscow:
- Ground (via Finland): 1-2 weeks
- Air: up to 1 week
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Navision Financials
• Navision Financials ERP system
(implemented in 1997)
• Optimization of sales and distribution
• Real-time stock information
• Accurate financial reporting
• Client Relationship Management
• B2C and B2B scalability
• Part of Microsoft Business Solution
Navision provides a core structure in all operating transactions of
the Company
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Attributes of Alliance’s Success
10 years of profitable operations (since 1993) with $29 mil
revenue in 2002 (projected $42 mil in 2003) are attributable to:
 Experienced US and Russian management team
 Sophisticated international infrastructure suitable for
distribution of a wide variety of products
 Strong, referenceable customer base (500+ customers)
 Excellent long-term vendor relationships
 Combined knowledge of Russian Culture and Western style of
Management
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Top 10 reasons for entering Russia
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World’s sixth largest country (population 145 mil)
Three consecutive years of economic growth
Number one in Eastern Europe
Recognized Market Economy
Stable political atmosphere
Sophisticated buyer base (96% literacy rate)
High demand for quality brand products
Fast growth of local brands
Improving political relationship with Western countries
Recent increase of interest by Western investors
The timing has never been better to enter the growing Russian
economy by leveraging Alliance’s established platform of success
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Thank you
for your attention
Sergei Manevich, President
Alliance Marketing Group, LLC
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