ELKO is looking to minimise losses from its Huawei business through growing its partnership with smartphone rival Xiaomi.
CEO Svens Dinsdorfs said the firm has been negatively impacted by the troubles of one of its largest vendor partners, Huawei, after Google and several EMEA governments have shunned the tech vendor over espinonage and security concerns.
"We are seeing more of effects with US-China trade war. It had been happening in the background before but we can see some victims as well. What we see is Huawei sales are going down…That is impacting our partners and customers."
That was Dinsdorfs' response when CPI asked him to name the biggest challenge to his business.
"Obviously with Google not being able to supply Huawei with software, this is a problem… They are a big partner for us so we have felt it as well. So we have lost volume and there is ongoing uncertainty... Sales are currently not down significantly, but they are definitely lower."
Dinsdorfs revealed that ELKO has lost market share in two of its 30 EMEA markets: Russia and Ukraine, as a direct result.
"More notably in Ukraine. Huawei had made significant traction in these markets over past years," he added.
"More broadly, with the trade war we will see that it will impact macro-economics. You look at Germany right now, they are experiencing a downturn... But overall, for us, it is still sunny weather. We are in many markets in Europe and we are still doing well."
ELKO logged revenues of $1.5bn for its FY2018. Dinsdorf expressed optimism that ELKO will be able to weather the US-China trade war, but did reveal that this year's H1 sales figures are flat year on year.
He added that this may inhibit ELKO's goal of smashing its $2bn sales target by the end of the year.
Yet the distributor is trying to mitigate the impact of ongoing sanctions against Huawei by redirecting partners and customers to Chinese rival Xiaomi.
"Our Xiaomi business is picking up but not replacing Huawei," he said.
In Dinsdorf's view, what is holding back the smaller vendor is that it is not as aware of what European customers want.
"Xiaomi needs to do its homework," he said.
Dinsdorf's also pointed to ELKO' strategy to diversify into white goods and boost sales via an acquisition of $300-revenue Russian firm Absolut.
"This decision to diversify our portfolio is definitely helping us."
Riga-headquartered ELKO snapped up Absolut Trading last July. Dinsdorf's said that much of the back-office and support integration is now complete.
"This year, ELKO Russia and Absolut have moved into a joint warehouse and office premises," he said.
ELKO claim that this is pushing Absolut to log double digit turnover year on year.
"Currently we are working on further integration of both companies, to be complete by 2020."
Some say performance, others say money but it may be systems and processes that carry the day
Microsoft and Accenture entity buys up €12m firm
This week is the deadline for the Channel Innovation Awards. So, why is it worth celebrating innovation in the market today?
NTT Security CEO on the rise of 'bad-guys-as-a-service', Orange's security M&A spree and NTT's integration roadmap
In part one of CPI's Security Summit series, editor Josh Budd sits down with NTT Security's CEO Matt Gyde