Business Profile
A Conversation with Sharp Directo’s
President Brian Tedesco
What do you do to set
yourself apart, given the reality of Latin America’s limited purchasing
power and when your products are being commoditized because everybody
has similar features and price? Brian Tedesco, President of Sharp
Directo in Uruguay, discussed how his business is allowing Sharp
Corporation to improve its competitive position by eliminating layers of
distribution so that products can get to the market at a much more
competitive price.
Sharp Directo is
strategically located in the Free Trade Zone in Uruguay, just outside of
city of Montevideo. Founded in October 2006, Sharp Directo’s mission is
to provide Latin American businesses and consumers with an easy and
efficient way to purchase Sharp Technologies and to build brand loyalty
by delivering world class customer service. Through this mission, Sharp
Directo has evolved into an OEM direct sales organization with post
sales customer service and product registration support .
How did you get
started on Sharp Directo?
The idea was presented to
me by Mr. Edward Fuller, Senior Executive Vice President of Sharp Latin
America Group, a few years ago when he and I sat down to discuss some
business strategies. As a result of that conversation, Sharp Directo
was born. Since then, I’ve been focusing 100% on extending contacts,
logistics and operational expertise to make Sharp Directo a reality.
Sharp Directo is based on
an idea that has been successful with US and European companies, such as
Dell, IBM, and Apple. Through Internet technologies, these companies
have become more than manufacturers. They have become sales
organizations as well. That isn’t as easy as it sounds, especially in
Latin America.
How did you decide to
set up an operation in Uruguay? Have you always operated in Uruguay?
Uruguay is in many
respects a Switzerland of South America. It is a small country with a
population of 3.8-4 million people. With Montevideo being the capital of
Uruguay, it is also the central hub for business and commerce.
I’m one of few people who
have an actual residence and a legal right to operate a business in
Uruguay. It’s a very closed country in terms of letting foreigners come
in and form businesses there. I’ve been there over 10 years, and I just
became very familiar with some of the contacts. I was at the right
place at the right time. I moved my family down there and one of my
daughters was born in Uruguay.
Uruguay always had a very
stable government. Its literacy rate is the highest next to Bolivia at
98%. You can have US dollars, so you don’t have to convert to Uruguayan
Pesos. This was a huge benefit for me. I’ve always been a big advocate
of Uruguay. The importance of Uruguay lies in its membership in
Mercosur, a free trade agreement that creates a common market for the
South. The Mercosur trade agreements basically include Barzil,
Argentina, Chile, Paraguay, Uruguay, Bolivia, Colombia, Ecuador and
Peru. It’s basically a free border agreement among these countries.
We picked Uruguay because
of its Free Trade Zone, called Zona Franca of Montevideo. Within this
free zone, companies can bring products in and hold that stock, waiting
run-ready in easy reach from regional countries.
With a high percentage of
bilingual labor and its neutral access, Uruguay offers the most
competitive scenario of the region. It provides the 100% digital
telephone network, GSM coverage of all Uruguayan territories and some of
the highest Internet penetration in South America.
As an American, how
did you become an expert in the Latin American market?
I started in the office
products industry 15 years ago, first in the US, purchasing products
from Latin America, buying, selling and trading to other markets, then
slowly evolved into building distribution business inside Latin
America.
I’m a young guy, 37 years
old. When I got started I was even younger. For me the risk wasn’t
that much. I knew I had to be different in order to do the kind of
business I wanted to do. I cannot be just another Tech Data or Ingram
Micro from Miami. The competition was just too fierce. I needed to be
in the street and needed to get into the market and meet people in the
hope they would allow me, a “gringo,” into their inner circle. It took
me years to get into their inner circle. Once I was in that inner
circle, Tech Data could not do what I can do in these markets.
Then, I started to work
with Sharp Corp in Brazil. I signed a commercial agreement to develop
and coordinate a dealer network distribution channel called MaxVar,
where value-added resellers reported directly to me. This reestablished
connections to businesses Sharp lost due to internal issues the company
experienced during that time. Today, MaxVars is Sharp Brazil’s direct
distribution channel.
How did you develop
your own distribution channel in Latin America?
In Latin America, 80% of
businesses are done by less than 5% of distributors. It’s always been
that way. That’s why Mr. Ed Fuller took a risk in Sharp Directo in
Latin America. When he looked at his business market, we have basically
7 major markets outside of Brazil and Mexico, and basically 7 clients-
one national distributor for each country. Therefore, all of our sales
and product market information have come from that one client.
Obviously, this one client has 600-800 dealers, small mom & pop dealers
who buy from them, but we don’t have any connection with them.
Mr. Fuller believed that
we needed to be closer to those small dealers. We’re losing our ability
to spread our sales out because we’re counting on only one guy. If we
open up Sharp Directo to offer products cheaper, more efficiently, and
more competitively, we’re alienating that one guy who needs to pay for
his showrooms, dinner and entertainment, etc., all the things he needs
to do locally. However, if I don’t see Sharp business growing, I need
to do something different.
How did you get it
done?
This is two years of full
throttle after 10 years of education. I’m still learning. 150 phone
calls a day for one year. Our call center qualified dealers and asked
questions. Our system is run by ERP provider NetSuite. Through
NetSuite, we’re able to develop a database of information that is unlike
anything that 7 distributors provided to Sharp. For example, we found
that in Argentina, Brother has been taking over 30% of market share year
after year from 2006 up to this date. The national distributors had no
idea. We found out generic companies were increasing sales over 60%
year after year because national distributors lack inventory in that
country. We got this information from dealers, not from national
distributors. We found that in some countries, the national
distributors were doing a great job supporting the dealers, and that
there was no additional value that Sharp Directo could bring in to that
market. Then, we backed off from that market and focused on the
products the distributors were not focusing on.
What kind of products
are you moving better by segment level?
85% of sales in South
America is still segment 1 and below business – AL series, MFC printers,
commodity type of businesses. National distributors need to employ
service and technical division, and they need technical skills to sell
and support, so they need to demand higher margins. You cannot ask 30%
of margin in segment 1 business, so their focuses are on higher segment
and higher margin products. In the meantime, Sharp was losing market
shares to others because Samsung, Brother and HP focus on lower segment
products. In many cases, the national distributors were not aware of
losing market share because they’re not set up to handle the low margin
and high volume commodity businesses. So, Sharp Directo came in as a
complement.
We go after the market
the national distributors were not going after. “Hey, how would you
feel if we import 5,000 small copiers and sell to the customers who used
to buy from you and now who are buying Samsung today?” The national
distributor said, ”As long as I get the credit for the total quota, I’m
willing to back you.” In some countries, it’s a good partnership while
other countries took offense to Sharp Directo being involved.
At the Sharp National
dealer meeting in Orlando, Fl, Mr. Fuller made it clear that Sharp
Directo is here to stay. If distributors or dealers are not doing what
the factory expects of them in their territory, then they will have to
move out of the way and Sharp Directo will come in to take their place.
We can sell to any place except Mexico and Brazil. We have logistical
operations and distribution centers strategically located in most
important markets in South America, such as in Columbia, Peru,
Argentina, Chile, and we’re in the process of opening up a place in
Caracas, Venezuela, and Miami, Florida for Central America
distribution. We can reach specific countries within 4-5 days and in
country 48 hours, just about any major city or market in Central and
South America.
How is Sharp Directo’s
business so far?
Every month has been the
best month ever. We have yet to have a month where the key performance
indicators have indicated anything but upward trend, and we’re very
active on the phone. Our average transactions are $200, so dealers are
using us not only for machines, but for parts and supplies. And
dealers are using us frequently. We have an Internet site- they go
on-line and buy. It’s starting to become a part of dealers’ purchasing
department to support competitive price and fast delivery.
Word on the street is
that Sharp has made a very aggressive move. I’m sure other OEMs are
under a lot of pressure because dealers will say, “I can get parts from
Sharp Directo in one day; it takes 40 days get it from you.”
Tell me about your
Call Center.
Our Uruguay call center
is unique. There is not a single manufacturer in Latin America today.
Everyone is located in Miami, Texas, NY or CA. We’re the first
manufacturers with bilingual speaking local accent call center in South
America, with a 1-800 number from anywhere in South America to call.
All sales and call
activities are tracked in real time. Sales performances are tracked by
country, products, clients, sales associates or any number of criteria
with instantly generated reports. All aspects of procuring new Sharp
clients and managing current clients can be facilitated by one team in
one location. Once orders are placed, they’re instantly processed right
from the Sharp Directo’s bulk distribution warehouse and delivered
within 48 hours.
What is it like
running a business in a foreign country?
There is no education and
no business school. It’s relationships and it’s going out to dinner at
11 o’clock at night. It’s continually being in front of your larger
customers and making sure that they understand that you’re there for
them. It’s not being out of Miami, and it’s being local. It’s a lot of
dinner conversations over food, a very social type of environment with a
tremendous amount of risk if you’re not careful who you’re dealing with.
What are the biggest
frustrations that you encountered over the years?
Three things:
1. Logistics - there
are 11 borders in South America. The languages, customs, laws, taxes are
completely different across every border and have no consistency
whatsoever.
2. Collecting the
money locally - because you cannot keep a US dollar account. Uruguay is
the only country you can keep a US dollar account.
3. Determining credit
worthiness - how do you check the credit worthiness of company in So.
America? There is no D&B, no Equifax, there is no way to check the
credit worthiness of the distributor.
These are the challenges
along with the constant change. The only thing that is constant is
change. One day, customs may decide to change the law - a new
classification, for example. “It’s a multi-function now, and we’re
going to look at it differently. “ So you’re dealing with those types of
changes.
So, how do you
determine the credit worthiness of a company?
You go there and see him.
Your gut has to tell you if you’re dealing with someone credible and
make sure that you don’t overextend yourself. It’s a gut feeling. I’m
not that smart. You can quote me on that. But what I do very well is
pick the right people to surround me. Those are the people I know I can
depend on. It’s a very small team because the decisions that need to
made need to be made fast and correctly by two or three key people,
meaning CFO or Operations manager, and I listen. I try to expand
horizontally, rather than vertically in growing our business. Instead
of having one account that buys $30,000 a month, I’d rather have 100
accounts that buy $300 a month. Because I know there will be a
percentage of accounts that would burn me. When you try to go after big
fish and if they burn you, then you’re sitting with nothing.
What are you hearing
from your dealers regarding Sharp’s product lines?
The new Frontier series
will do very well. It is very compact and it is A4 copy. That was
never the case. It was always A3, the format that doesn’t exist in
Latin America. When the Frontier Series was announced, I felt like it
was almost built for Latin America. In my opinion, this is the first
true fit for Latin America.
What would you say
about the office equipment industry in Latin America?
It’s growing double
digits and it will continue to grow. US or Japanese, I don’t care
what manufacturer you are. They haven’t even scratched the surface of
the potential of Latin America. There are so many opportunities, you
don’t even know where to start.
When you talk to
dealers, are there certain types of issues and questions that keep
coming up again and again? What are some of the things you’ve heard
from dealers over the years that you’re acting on?
Warranty, local service
and repair. Their biggest issue is post-sales or post-purchase support
because they are buying from distributors and then they’re left to
cannibalize their own machines trying to come up with parts. They’re
left with technicians who don’t have the capacity to understand the new
technology, and 9 times out of 10, the local dealers in South America
become reliant on themselves, not on the manufacturer. In the United
States, the dealer will lose its dealership if they don’t have the right
technical support and proper technician training because it’s closely
monitored. This is not the case with South America. “You’ve got a
screw driver? You’re fine. Go.” That’s the biggest complaint from
dealers. They do not feel that they get the same kind of technical
support, warranty repair, parts & service, and guarantees that they can
pass off to their clients.
Do you have a message
or advice for Latin American dealers?
DO NOT settle for the
current distribution model if it’s NOT working! Manufacturers not only
have the obligation to provide technology, but like the first world
markets, they also have the obligation to provide SERVICE and SUPPORT.
Sharp Corp. took a HUGE leap into that arena for their dealers -- Other
OEMs should as well, but this will only happen at the request of their
dealers.
What would you say was
your biggest accomplishment at Sharp Directo?
It’s making the purchase
of Sharp products easy. It’s a very simple mission. But in South
America, nothing is easy. I think today we have accomplished what we
have set out to accomplish.