This month’s globetrotting global feature takes us to India, host of the 2010 Commonwealth Games which are held next month. Mumbai-based entrepreneur, Mukesh Manik, has been the local distributor of shredder manufacturer HSM for over 15 years, and he gives us his take on the market
Mukesh Manik’s family first got into the shredding business in the early 1970s, setting up a manufacturing company which eventually folded in 1988 due to a lack of demand. A few years later that the relationship with HSM began after the young Mukesh had set up his own company, Manik Business Machines (later Manik Business Solutions). In 1993, Manik secured the sole exclusive distribution rights for the German manufacturer in India, Sri Lanka, Nepal and Bangladesh after meeting Herman Schwelling at the CEBIT show.
"I was attracted to HSM because, at the time, it was a small, growing family company and I was sure that we would be able to have a stable relationship, and that is what has happened," says Manik.
Manik says that once the business had really developed in India, other larger competitors tried to lure HSM away with promises of larger sales, but HSM always refused. "No matter how big the other company was, HSM stuck with us, and I’d like to think they feel something similar towards us after our support when the market was not so good."
The closeness of that relationship – and the success of Manik’s efforts in developing a positive brand image for HSM in India – is typified in the new name that his business has taken on, HSM Shredding Company, a recent switch from Manik Business Solutions.
Manik admits that his own name suffered somewhat when distributing other brands in the laminating and binding segment: "We had some quality and service issues and this affected our reputation in the market. With permission from HSM we changed our name this year. It made more sense after promoting the brand for more than a decade and the fact that we are now working exclusively with HSM products."
Looking back on the early days of the HSM business, Manik says things took a while to take off.
Firstly, the very concept of shredding paper was alien to the Indian market as disposing of waste paper and documents was more often than not a case of simply burning it. "It was a tough sale initially," he states. "People would ask my why they should spend money on a shredder when they could just burn their paper for free."
India’s import restrictions were also a hindrance. "At that time we could not import assembled machines into the country," he explains. "So what we had to do was bring in machines disassembled in different shipments and then put them back together ourselves. It was all a bit complicated."
Things changed in the mid-1990s when India’s import laws were eased, allowing Manik to bring in ready-assembled machines. It was also a period of economic reform in India and large, multinational corporations began moving in over the next few years, giving Manik a market for HSM’s higher-end shredders. There has also been the explosion in business process outsourcing and call centres over the last few years.
"These companies came in with their own data security guidelines and some were already familiar with the HSM brand name. The business grew really fast," he states.
Manik says that his client list now reads like a ‘who’s who’ of global corporations, including consumer goods manufacturers Proctor & Gamble and Colgate-Palmolive, banks such as HSBC and Barclays, and a host of embassies and consulates.
A few years ago, Manik says that business was also quite strong in the SMB market for entry level shredders, but that he was unable to stem the tide of cheaper imports from the Far East (Manik does not offer HSM’s own Shredstar discount range because he does not want to jeopardise his unique Made in Germany selling point).
"We got hit by these cheaper models a few years ago, but now we’re actually able to benefit from them when customers want to upgrade to a higher-end machine that the Chinese can’t supply," states Manik.
24-hour customer service
Manik has a couple of successful methods for holding on to his customers. The first is to sign them up on rate contracts for a period of, say, three years, where prices are fixed and the clients are required to purchase only HSM machines.
The second is a top-notch customer service offering. For the equivalent of approximately $15 per year for a standard machine, customers receive quarterly visits from a technician who checks the machines and replaces any parts for free, if necessary.
"We offer a 24-hour service if your shredder breaks down – if a customer calls at 3am, my technician will be there at 5am. And that’s included in the price," notes Manik.
"This really helps to develop customer loyalty," he adds. "We don’t make any money in the short-term doing this, but it pays off in the end. The client is extremely happy, knows that we are giving value for money, and sees we are efficient in our after sales and service. It has also allowed my technicians to have continuous access to the clients’ premises – I don’t have to pay any marketing costs for that access. My technician has, in fact, become a salesman."
The level of service that Manik offers even took visiting HSM executives by surprise and has led to him winning several HSM distributor awards over the years.
"It’s a winning combination of the best quality machines backed by our service levels," he enthuses.
The vastness of India itself is not a great problem as business is focussed in six metropolitan areas: Delhi, Mumbai, Kolkata, Bangalore, Chennai and Hyderabad.
"We used to have dealers in other states, but when we realised that 97 percent of business was coming from these six metro areas we decided that it was not worth investing in other parts of the country," says Manik.
Premature power channel
Manik is not convinced that power channel players Office Depot and Staples are ready to make a bit impact on the office supplies market in India.
"I believe that their entry into India came about 10-15 years too early," he says.
"The Indian stationery market is still extremely disorganised. Because labour is so cheap, office boys are sent out to pick up stationery items, or you call a local stationery shop and they send the items round and you pay on account. I don’t see the sense in trying to battle heavy traffic to visit an office supplies superstore and I’m not sure that the market is ready for this concept."
On the delivery side, Manik thinks Depot and Staples will have a hard time competing with established local players. "The international groups have invested in field sales people to win business, but I think that they will face price issues. I’m not sure that they can operate on the kind of low margins that the small resellers have.
"That’s just the way I see it," he adds. We’re not a do-it-yourself, self-help country; you just pay someone to go and get your office supplies."
Manik is certainly not counting on the catalogue business to drive sales of HSM shredders in India.
"We’ve never won orders from clients seeing our products in a catalogue," he states. "Our sales person has to go there and actually give a demonstration and then wait for the sale to convert. India is a very ‘touch and feel’ country; people want to try things out, especially for something like a high-end shredder."
So far this year, Manik says that he is happy with the business rebound after seeing sales slide quite dramatically during the global economic crisis, although he points out that the majority of business is done in the second half of the financial year between October and the end of March.
"One positive factor is that companies like Accenture and HSBC have continued to expand, even during the recession. Their purchases stopped, admittedly, but now there is a pent up demand which is driving sales this year."
He also feels there is potential for digital shredding, especially in the photocopier market where most new machines have a built-in hard drive that keeps a copy of all scanned and copied documents.
"I’m looking into this," he says. "Many companies and government departments could be at risk when they sell off their old machines and this could present some interesting opportunities for us."