Smart­phone mak­ers turn to off­line re­tail

China Daily (USA) - - CHINA - By MASI masi@chi­nadai­ly­com.cn.

E-com­merce-savvy Chi­nese smart­phone ven­dors are seek­ing to ex­pand their off­line re­tail­ing pres­ence, as on­line sales of smart­phones has plateaued, sig­nal­ing an im­por­tant change in their ef­forts to wres­tle with the slow­ing de­mand in the coun­try.

Xiaomi Corp, which once led a me­te­oric rise in web-only sales, has be­come one of the first lo­cal play­ers to di­ver­sify its re­tail­ing chan­nels af­ter on­line sales slowed.

Lei Jun, CEO and founder of Xiaomi, said the com­pany will open more than 1,000 off­line ex­pe­ri­ence stores over the next three to four years, as it works to re­duce its over­re­liance on on­line shop­ping plat­forms, which ac­count for more than two-thirds of its sales vol­ume.

“The pro­por­tion of on­line sales is too big,” Lei said. “Ex­pand­ing off­line re­tail is key to main­tain­ing the stel­lar growth we have seen in the past four years.”

Xiaomi ri­val Len­ovo Group is also in­creas­ing its fo­cus on brick-and­mor­tar stores, with Chen Xudong, its se­nior vice-pres­i­dent, say­ing: “It will be im­pos­si­ble to sur­vive the com­pe­ti­tion if we can’t get a strong foothold in the off­line re­tail­ing mar­ket.”

Honor, the sub-brand cre­ated by Huawei Tech­nolo­gies to com­pete with Xiaomi, has made sim­i­lar moves, part­ner­ing with more re­tail­ers, so that con­sumers can have a hands-on ex­pe­ri­ence with their lat­est prod­ucts.

Zhao Ming, head of Honor op­er­a­tions, said: “Con­sumers are be­com­ing more qual­ity-con­scious. Of­fer­ing low-price smart­phones on­line is not enough to mo­ti­vate them to make pur­chases. They want to touch the phones.”

The trend emerged af­ter lit­tle­known firms Oppo Elec­tron­ics Corp and Vivo Mo­bile Com­mu­ni­ca­tion Tech­nol­ogy be­came two of the top­five ven­dors in China by form­ing brick-and-mor­tar part­ners hips in small cities.

Tay Xiao­han, an an­a­lyst at In­ter­na­tional Data Corp, said that “in the past, Xiaomi started the trend of sell­ing cell­phones on­line, and other ven­dors soon fol­lowed suit”.

How­ever, with China’s smart­phone mar­ket reach­ing the sat­u­ra­tion point, com­pa­nies are now pour­ing more re­sources into off­line re­tail, Tay said.

Data from re­search firm Coun­ter­point Tech­nol­ogy Mar­ket Re­search show that e-com­merce ac­counts for 30 per­cent of China’s to­tal smart­phone sales, and tele­com car­ri­ers’ re­tail chan­nels ac­count for an­other 30 per­cent. Off­line re­tail stores ac­count for the re­main­ing 40 per­cent.

“It will be dif­fi­cult for firms such as Xiaomi to es­tab­lish a suc­cess­ful off­line re­tail net­work in the short term, as they lack both ex­pe­ri­ence and tal­ent,” said C.K. Lu, prin­ci­pal an­a­lyst at con­sult­ing firm Gart­ner Inc.

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