Feet in India, Eyes on the Middle East and Africa
Feet in India, Eyes on the Middle East and Africa
On the dirt roads of India, it’s hard to get around in dress shoes. In Taiwan, Synnex’s swift delivery fleet is its pride and joy, but in India they’re doing logistics the Indian way.
Feet in India, Eyes on the Middle East and AfricaBy Hsiao-Wen Wang
From CommonWealth Magazine (vol. 391 )
The brilliant skies of India glow with iridescent bands of color like the feathers on a pigeon’s neck. Under clouds shimmering in the shades of opal and peridot, 26-year-old V. Kumar, clad in a checkered beige shirt and brown pants, bumps along the small alleys on the outskirts of Chennai on his Honda motorbike. Driving past rice fields, clanging oxcarts, barefoot children on their way home from school and women carrying tin trays on their heads, Kumar’s motorbike throws up a cloud of yellow dirt.
Kumar’s mission is to deliver the Hewlett Packard printer cartridges in his backpack within less than an hour to a retail shop in downtown Chennai. This means quickly passing through the quiet rural villages and deftly maneuvering through the barely moving sea of honking cars in the city to make it to his destination on time.
Perched on his dashing Honda, Kumar makes his delivery runs from 9 a.m. to 6 p.m. every day. Usually he makes 16 roundtrips a day between the warehouse of Redington (India) Limited on the outskirts of Chennai to electronics shops downtown.
A Fleet of Auto Rickshaws and Motorbikes
Kumar, who goes by the nickname of “Pizza Boy,” is just one of Redington’s army of delivery personnel. In addition to its fleet of brightly colored trucks, Redington uses auto rickshaws and motorcycles to achieve daily deliveries from its warehouses to towns and villages in remote and mountainous areas across the vast expanse of the Indian subcontinent.
Across a territory that is about 90 times the size of Taiwan, Redington distributes electronics parts, computers and game consoles worth 250 million rupees every day from its 50 warehouses to some 12,000 retailers across the country. “Sometimes we even have 1 billion rupees during peak season,” says P.S. Neogi, Redington president for IT Products, with undisguised pride.
Redington is virtually unknown in Taiwan. But with a turnover of 47.1 billion rupees last year, Redington is India’s second largest IT distributor and has helped Synnex penetrate the Indian market for more than four years.
“This is a market of dirt roads. Outsiders wearing leather shoes won’t make it! But for people with straw sandals, the going is easy,” Synnex president Evans Tu says with a laugh. Tu decided he would rather remain a happy investor than wasting time, money and energy to transplant Synnex’s advanced information system and delivery fleet to India’s fledgling market.
Consequently, Synnex four years ago invested NT$790 million in Redington in return for a 36.3 percent stake and two seats on the company’s board of directors.
Since Redington’s value skyrocketed after the company went public, Synnex was able to earn 10 times its initial investment. Tu is very satisfied with his investment in Redington, a match facilitated by U.S. chip giant Intel. So satisfactory has the relationship been that Tu last year even attended the wedding of the son of Redington’s CEO, eating rice Indian-style with his fingers and presenting gifts to the bride and the groom.
Don’t Be Fooled by the Myth
Once you have set foot in India, you will understand that even a powerful, battle-tested company like Synnex loses its prowess here, like a boxer swinging at thin air. “When looking at India, don’t be fooled by the myth. She’s only in the early stages of development,” Tu says frankly, warning investors against ignoring India’s size and unevenly developed infrastructure.
On Indian streets Synnex’s impressively fast delivery fleet would not be able to flex its muscle. Indian road traffic moves at an average speed of just 20 km per hour. And just 48 percent of roads nationwide are asphalted.
Transplanting Synnex’s highly efficient information system to India is also out of the question, since qualified workers are not easy to find. Despite India’s huge labor force, about half of Indians over the age of 25 are illiterate. Just 25 percent of Indians have completed elementary school education, and only 8 percent have graduated from junior high school. Even university graduates are not necessarily computer literate. Therefore, when interviewing job applicants the first question Taiwanese employers often ask is, “Can you use a computer?”
On top of a deficient road infrastructure and low education levels comes a cumbersome Indian tax system that stands in the way of efficient business.
Before the Indian tax system was reformed, every investor had to deal with the complex tax systems of India’s 28 states and 7 union territories.
“Just looking at those convoluted tax charts made your head spin,” Tu recalls. “If you didn’t have retail points and warehouses in 35 locations, you would make very little headway.”
Using Indian Flutists to Charm the Indian Snake
A key to success in foreign markets is localization, if the distribution network is to penetrate to the grassroots level of society.
Tu knew that he could not follow the tested pattern of doing business in China, where Taiwanese investors enjoy the advantage of a shared culture and language. So he opened up a new path when investing in Redington, deciding to use Indian snake charmers to make the Indian snake dance.
Logistics is “a people business,” according to Raj Shankar, director of Redington Distribution Pte. Ltd. “We know the local market best,” he adds in fluent, crisp English, words shooting rapidly from his mouth like metal pellets landing in a brass bowl.
As a happy investor Tu looks beyond the Indian subcontinent, setting his sights as far as the Middle East and even Africa.
Redington, which entered the Middle East seven years ago and began to operate in Africa three years ago, is presently the No. 1 IT distributor in Dubai and Nigeria.
Meanwhile, Redington’s overseas revenues account for 45 percent of total revenues, with sales steadily increasing from US$1.46 billion three years ago to US$2.5 billion last year. With the company’s long-term development in mind, Tu decided to use Redington to expand Synnex’s distribution network to the two large emerging markets in the Middle East and Africa.
“My Indian dream will not be limited to India,” says Shankar, beaming with self-confidence. Tomorrow he is scheduled to fly to Libya to open up his company’s next IT distribution market.
Translated from the Chinese by Susanne Ganz
Chinese Version: 腳踏印度 放眼中東、非洲