ASBIS moves into new markets in Europe

Europe

In 1995, ASBIS founder and CEO Serhei Kostevitch sought to move his Belarus-based IT distribution company to a location in Western Europe. His company was already taking wholesale IT market share around Eastern Europe, and he was ready for a new challenge.

And he chose Limassol, Cyprus for his new corporate headquarters.

“Cyprus had everything I was looking for,” Kostevitch told the Cyprus Mail in a recent interview. “There was a well-developed infrastructure for logistics; it was in the EU, with a stable legal and business climate, and it had the kind of skilled labour I was looking for,” he insists. “And, don’t forget, it’s a really nice place to live and work.”

Working from Limassol, Kostevitch extended the reach of his IT distribution company across Europe, and even into Africa. Today, ASBIS is one of the largest distributors of Apple products in the world, and works with many other major manufacturers.

“There were never any real problems working in Cyprus. Financing was available when we needed it. And we never had any difficulty in finding the skilled workers we depended on,” Kostevitch says.

The company earned revenue of $666 million in 2019, about the same record amount that it saw in 2018. Its gross profit margin was much improved in the same period, to 5.44 per cent from 4.7 per cent in the previous year.

ASBIS has been able to work across a market that is still fragmented, according to a study by the international consultancy Bain and Company. But the market has shown year-on-year growth for the past five years.

Working in the former Soviet Union nations, and in Eastern Europe, involves dealing with fragmented and still-developing business communities. But Kostevich has been working in this market for a long time: “We have a formula that brings stability to our business dealings in these markets, and it has been working for a long time,” he said.

“Combine that with our important relationships with the most important Original Equipment Manufacturers (OEMs) and we have a lot to offer.”

The company chose to list its stock on Poland’s Warsaw Stock Exchange. One might question choosing a regional bourse, but Kostevitch says it was part of his strategy; “We tried listing on London’s AIM stock market, but it didn’t fit our needs. So we moved our stock listing to Warsaw, which attracts more investors with important experience in Eastern Europe. We have had good liquidity on that exchange as a result.”

Size matters in the European IT distribution market. “If you do not scale in Europe in every country, you will struggle. We have some vendors who are now starting to support distributors with pan-European approaches,” comments Patrick Zammit, European president of IT distributor Tech Data.

“This is the one thing we believe is critical: on every specialty, you need to have critical mass,” he adds.

And, in 2020, ASBIS has stayed profitable right through the novel coronavirus crisis.
“We saw a slowdown at first, for several weeks, but then the need for remote working in the lockdown offered new opportunities,” Kostevitch explains. “And we’re very flexible, very good at reacting promptly and effectively in difficult situations.”

He adds: “And then, people always need IT. Work doesn’t go on without it.” The need of consumers for systems related to creating, sending and sharing information remained very high in the first quarter of this year, according to the company’s first quarter financial report.

Revenue increased 19.9 per cent in the first quarter of 2020 – right through the pandemic. In the first quarter, there was significant demand for products from specific segments, such as laptops, monitors and network products which are essential to work remotely, but also of home entertainment, the company reports.

Through its network of 31 warehouses located in 27 countries, ASBIS supplies products to its customers in approximately 56 countries. Most of its sales are in the countries of the former Soviet Union, but there are substantial markets in Central and Eastern Europe, the Middle East and Africa, and in Western Europe.

“We have begun to work with very large clients, like data centres, and this is developing into an important line of business,” Kostevitch adds.

Looking ahead, Kostavitch sees a recent move into own brands as a means to grow profit – house brands enjoy a substantially larger margin than a distributor may earn with OEM products.

The brands are promoted as separate entities, and in emerging markets like those of Eastern Europe, house brands can offer a significant quality/price ratio, often making innovative technology affordable, as Kostevitch notes.

Offering in-housed brands often means promoting them to a new market, and in building brand recognition, with singleness of purpose for each product brand.

This includes the development of smartphones, tablets and other product lines that are sold under Prestigio and Canyon brands in all regions where ASBIS operates.

There are also two new own brands, Perenio – which includes the sales of smart home and smart security sensors and other products and Atlantech which aims to build an alternative servers’ offering.

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