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(Part 3) – The Traders – A User Guide to the Mega Wholesale Mobile Phone Business in the UAE

26 Feb

Hello there, I am sorry to keep you waiting this time as I had to undergo a cataract surgery. I am back with a bionic vision and would now take you to meet the traders and suppliers awaiting us in Dubai. Come along……….

For Traders, a Supplier and a Customer is required for a successful and profitable transaction. You can have all the goods in the world but without a steady supply with good prices the business wouldn’t make sense. On the flip side one must have a steady and faithful flow of customers to keep taking in these goods and make the payment in a timely manner so the sales cycle is completed. I know that my readers would hate me for repeating this again and again but there are just 3 brands surviving in the Mobile Phone Jungle, all the dinosaurs are long gone. And by the way did you hear about the “Freedom 251 Project”. (http://www.bbc.com/news/world-asia-india-35595500), the cheapest mobile phones powered by Android Lollipop with front and back cameras and an 8gb storage, the cost $3.67; £2.56; Now this is a killer, some people just have to wake up and smell the smoke. Anyway I took a long diversion and lets get right back to our journey.

Lack of Industry Rating System: There is no Industry Rating in this part of the world and the regional customers and the suppliers have to work on reputation, interaction and gut feel while conducting business. With the dwindling brands as well as the economy its getting tougher by the day to analyse if your money is safe with the customer as the sales is carried out mostly on credit. So lets define a few categories on our own and walk you through:

Whales: These are the big guys! These companies have direct distribution contracts with one or multiple manufacturers of category A Brands (Apple, Samsung, Huawei, Sony, HTC). Their contracts are usually for more than one country and have distribution (including van sales), service and channel structures in their markets; I mentioned USUALLY as a lot of these Whales sign on a distribution contract for a specific market but the intention is always to re export the goods to another destination. These companies have deep facilities from the manufacturers as well as from the local and International Banks, unfortunately the Banks have also been monitoring the reverse spikes in the trade and are clamping down and shaving the limits extended to the Mobile Trade. There are about 15 whales operating in DAFZA with warehousing facilities and a team of professional staff across all functions. Business and Brand Development are the least of their concern as the overall cycle and appetite of the whales is so large that indulging in distractions of brand building takes up a lot of their time. The average Turnover of these companies is in the vicinity of 1.5-2 Billion $. Other than direct distribution the Whales have a great network for the procurement of goods from all over the world, they are active participants in the local exhibitions like GITEX and have representatives attending the likes of CES, CeBIT, GSM Congress and similar fares across the globe. These companies deal with Mobile Phones and related accessories and in case you want to approach them for Trading or introducing your products then it is imperative that you have deep pockets to support them. As they are focused on the brands that are established and are globally acceptable in the global trade, B category and white label brands have no space in their eco system. They are all very well known in the local and regional markets and their references are easily available from the freight forwarders. Its is quite safe to deal with them as they thrive on their reputation and longevity but you must be ready for a hard negotiation and concessions as suppliers from all over the world line up at their doors to dispose of their merchandise. Some of these companies have started to move in the digital space opening B2C consumer sites to make up for the shrinking margins.

Wolves: These traders live in packs and have a strong bonding that goes on forever. They also have a voracious appetite and a keen sense of attacking their own kind as soon as they feel a sense of weakness. These companies usually have a single country distribution for an A Category Brand and that too a small one. Otherwise they try to hang on to a B Brand Distribution such as Lenovo and Alcatel. Many a times these companies are the front for the Whales who are careful not to openly expose themselves in too many ventures. They have DAFZA and in country set ups with an aggressive sale and procurement teams. Please note that the owner / owners of the trading companies are always involved in the business. They purchase the goods from the Whales as well as from the International suppliers and have a lean organization to ensure cost controls. The Wolves thrive locally through van sales distribution networks as well as regional re exports. Their risk appetite is quite robust and provide credit to their customers even in unstable markets. Dealing with the Wolves is easier than that of the Whales but their vision is quite limited to the areas of their operation and they tend to stay local.

Sharks: They can smell blood from miles away. These traders have no interest in taking over any distribution and their prime target is to revolve their stock in the shortest possible time. Their forte is to search and drain other traders who are in distress. The situation of ‘crunch’ or ‘distress’ comes in whenever there is a slump in the market and the payments get due to be paid to the suppliers. The sharks with a knack of negotiation skills send out scouts sniffing the wounded traders and literally pull them out of their burrows and rip them apart. I have seen traders losing 20-40% of their stock values to these sharks who are usually liquid with cash and have a capacity to hold stock until the normal trading cycle is revived and they are able to make a hefty margin out of this transaction. The Sharks would only be satisfied if they are assured that their seller has indeed lost money on the sale regardless of the profit they are making. The Mobile Market can be ruthless and not for the weak of hearts. You can despise, hate and feel repulsed by the sharks but they do play an active role in the market; they have a task of continuously cleaning the novices and the day traders. So the next time you are stuck with stock, do look out for them and it won’t take long as they are looking for you as well.

Enter the Sleaze Pit

Vultures: This is where it all starts to get a bit dirty. Refurbished, repacked, fake accessories, counterfeit batteries and the list o goes on and on. All is fair for this trader and the bottom line is maximization of profits no matter what. There are specific markets that are a sponge for these products and the unassuming customers fell pray to the scheming of these people. Used devices are procured from all over the world, cleaned up or have the cosmetics changed, local boxes manufactured on site and fake accessories are inserted and you have a newly looking product at hand. These are also the absconders and dodgers when it comes to payments so one has to be really aware of these people and their intentions. Always check their credibility through fellow traders and freight forwarding companies before extending any credit to these traders. You will be at a serious risk as at times these vultures come in with the intention of cleaning up the market and disappear without a trace raking in millions of dollars. The phenomenon gets repeated every year especially during the down cycle of the market. For consumers its a must for them to go through the devices they purchase from the kiosks as a lot of these used and counterfeit items find a slot among the new phones.

Foxes: These are freelance vagabonds with no offices or station. They are basically snooping around for stock availability and would offer your stock as theirs to the whole market. This is the most dangerous lot especially during down times and also in case you are stuck with a large quantity. These traders have a habit of collaborating with the sharks or the vultures to get a cut and provide them up to date information. You would always find them with the freight forwarders or at the street corners of Nasir Square sweet talking the sales guys of the big companies. Beware of these characters as they can literally bring your company in a serious soup.

I have avoided naming the companies in this article as it would just be unethical and wrong on my part to do so. Its up to the market to know and understand these pitfalls. So in summary you can easily do business with the Whales and the Wolves. Be a bit careful with the Sharks and totally avoid the Vultures and the Foxes.

Reputation plays a vital role in the market, you can judge yourself which slot do you fit in. As an owner or an employee its best to avoid being a vulture or a fox as this market would be unforgiving in the long run.

In the end I would leave you with 2 quotes for you to ponder, both of these clearly define the shape of things to come not in the near future but literally tomorrow:

1. The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, e-commerce, advertising, search, social applications, location-based services, unified communications and many other things. (The Burning Platform Memo by the ex CEO of Nokia) How many big brands are going to be lost this year for the lack of innovation?

2. The future of mobile is being redefined. Smartphone and tablet markets are nearing saturation, and now media, advertising, software, and services are where the next stage of transformation is taking place. Keeping pace with this change requires an understanding of the technologies and platforms that underpin the mobile ecosystem, including the applications that enable device functionality. (Business Intelligence BI Report Feb 2016)

See you soon and happy trading.

The author can be contacted at masomo@eim.ae

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