Have you noticed that the newest PCs arrive quite late in Saudi Arabia compared to other geographies? Did you ever wonder why there is so little variety in the IT products sold in local shops? Are tech devices marketed as “premium products” really worth the extra price? If you think you’re alone in these musings, think again. Arab News sat down with Jamal Al-Jassim, CEO of Jamal Al-Jassim Electronics, better known in the Kingdom under the PC-Net brand, to discuss the consumer IT business in Saudi Arabia.
PC-Net was established in the Kingdom more than two decades ago and Al-Jassim has been trying to cope with shifting market forces and super-sticky red tape since that time. When he talks about what it takes to sell PCs in the Saudi market, it seems less like a simple trading activity and more like minefield navigation.
Al-Jassim pointed out that IT products are similar to other perishable goods, such as foodstuffs or the latest designer dresses. They are very time sensitive, and in general will never be priced higher than the first moment they arrive in the market. Price drops are inevitable and the faster technology evolves, the faster the price will fall. Ideally, every IT retailer wants to be able to sell a technology the moment it is announced by the manufacturer and a quite optimal situation in regards to bringing technology to the consumer market is found in North America.
“The US is a huge market and big corporations are anxious to serve it,” said Al-Jassim. “Sometimes the large tech vendors make products available there first and they don’t release these products to the Middle East until the first wave of demand is met in the US. That can certainly cause delays. Just look at what happened with PlayStation 3.”
In the case of PS3, there was a shortage of consoles available from the manufacturer. However, even when there is enough product for all markets, the US will be served first.
“Vendors send the products to the main distributors even before the products are announced. Often the US distributors will have these products first and the products will be in the warehouses in the US even before the marketing for the products begins,” explained Al-Jassim.
“This reduces the time for the products to reach US consumers after they first hear of them. In the Middle East, it is only after the announcement that the products will reach us.”
Getting goods into the US market is a very fast process as well.
Al-Jassim pointed out that unfortunately there are numerous regulations involved in importing technology to the Kingdom and the processing of shipments is far from quick or straightforward.
“Even if we can get the electronic goods to the region, the Saudi Arabian Standards Organization (SASO) and other governmental organizations become involved in clearing the shipments into the country,” he remarked. “Today I have a shipment that has been waiting for one month in Dubai for the SASO documents. And in regards to product variety, let’s say I want to bring ten units, just ten units of a notebook, I have to spend SR10,000 just for checking them and getting them approved. For what are they approved? Nothing. They will just look at it and say it’s a nice notebook. Then for those ten notebooks I would have to pass the cost of the SASO license along at a cost of SR1,000 extra per notebook.”
So, if the major distributors had the notebooks in the Kingdom when the vendors made the announcements of new products and if there wasn’t so much government paperwork and cost involved, consumers would see a wider variety of IT products in the Kingdom faster and at lower prices.
“It’s a big risk too for retailers to buy cutting edge products and then due to delays they see that soon the price falls dramatically,” Al-Jassim added. “What happens then? Many companies don’t want to take the risk on a SR10,000 notebook that will soon sell for just SR5,000. They’d rather wait and buy it for SR5,000 like everybody else.”
Some people are interested in the latest technologies and can afford them. To serve these individuals, Al-Jassim believes that a solution might be to set up a company whose structure is tailored to fit the needs of those who are interested in high-end tech products. This would not be an organization that focused on the mass market. They would move the products by air from the US distributors and then they could have the goods on display within days of the vendors’ first announcements.
Not all vendors would cooperate with such a company due to local distribution agreements and not all tech products would be suitable to be handled by such an operation.
“For example, if high-end keyboards would be brought in, they would still have to get SASO clearance which would cost SR5,000 — a cost that would have to be passed along to the consumer,” said Al-Jassim. “If there are just a few keyboards involved who would be willing to pay that additional amount?”
The current situation in regards to the importation of tech goods in the Kingdom leads many consumers to purchase these items abroad during holidays. That means local distributors lose business. It also has created a thriving gray market for these goods in Saudi Arabia.
“The fact is that we don’t need SASO to be involved in the import of IT products,” said Al-Jassim. “They have nothing to do with setting the specifications of tech products. Their services may be important for other goods but not for IT products. SASO checks only to make sure that the power of IT products is correct. When I am bringing products from the US that are UL (Underwriters Laboratories) approved and all the specifications are from the manufacturer, then what do I need approved again? And note that the UAE, which is part of the GCC, doesn’t face a similar situation to the one that has been created here by SASO.”
Cumbersome regulations aside, the tech market is beset by other issues.
One is what consumers see as inexplicable but sudden significant drops in the prices of tech goods. This leads some consumers to hesitate before buying any tech product. In recent years vendors have attempted to unify prices for their IT products across the GCC and this has helped to inspire some confidence in local consumers. Consumers in the Kingdom need to keep in mind though when planning major IT purchases, that the market is most likely to show the biggest price drops to coincide with the region’s largest IT trade show — GITEX in Dubai. Last year, many parents were furious when notebooks that they had purchased for their children at the time schools and universities started in September, suddenly fell in price by half when GITEX kicked off in November. For 2007, the GITEX dates have been switched back to September.
“GITEX is the time that LG, HP, Acer, BenQ, Dell, Toshiba, all the major vendors will have a price war. Every day there will be a new drop in price. And whatever the price is at the GITEX Shopper Exhibition in Dubai, that will become the price for the same goods in the Kingdom,” said Al-Jassim. “It can even cause a problem for us because we will have some of those products in our shops and then we will try to receive compensation from the vendors when the price falls. Normally we receive a little compensation and more often the loss is shared between us and the vendor. This is the way the IT business works.”
Now that you know when to buy, what to by is the next question. Is the most expensive brand always the best?
“I always advise my friends, buy the cheapest possible products,” said Al-Jassim. “Especially if you are new to technology, buy the cheapest product that seems to do what you need and work with it and play with it for a while. Once you are familiar with the products then decide what specifications are best and go with the product that meets those specifications for the least price. I know this goes completely against the concept of brands and market strategy. As you can see, my marketing manager is sitting here beside me getting very upset, but I always ask people why they are spending a lot of money for something that they will use just once or twice a day. It doesn’t make sense to me.”
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