Offline channels are trapped and shipments have plummeted, how can mobile phone manufacturers alleviate the plight of the epidemic?

Text/Wise Finance Zhang Zijun

Editor/Hai Dongqing

Affected by the epidemic and the economic environment, the mobile phone industry may be experiencing the biggest depression in history.

On April 25, data obtained by Late Finance from a mobile phone manufacturer industry insider showed that this year's sales of China's smartphones have returned to ten years ago.

That's an incredible statistic.

Statistics show that as of the 15th week of this year (April 11-April 18), the weekly sales of smartphones nationwide fell to 4.15 million units, down 14% from the same period last year, and fell for at least three consecutive weeks. Ten years ago, in 2012, China's weekly smartphone sales reached 3.36 million units, in 2013 weekly sales have reached 6.59 million units, and today's 4.15 million units have fallen to the level of sales a decade ago.

In addition to the decline in sales far more than expected, the growth rate has also stagnated. According to CINNO Research data, the Sales of Smartphones in the Chinese market in January was about 30.87 million units, an increase of only 0.4% year-on-year, and sales in February were about 23.48 million units, down 20.5% year-on-year and 24% month-on-month.

In fact, as early as 2017, the penetration rate of mobile phones in China has reached 96%, and it has become an established trend for the industry to continue to grow at a high speed. Subsequently, after several major innovations such as touch, 3G/4G, and full screen, the mainland smartphone market does not seem to have ushered in the opportunity for breakthrough technology to stimulate consumers to change machines, and the replacement cycle has been extended to 25-30 months.

However, although the epidemic and the growth of the mobile phone market have slowed down, each family is not lying flat collectively, and they are looking for a way to break the situation.

First, the long cold winter of dealers

"I'm watching the traffic in the store get less and less every day."

Li Bin is an ordinary employee of the Xiaomi offline direct store in The MixC in Zhengzhou, he told Wise Finance that as Xiaomi's headquarters direct store in Zhengzhou, the offline store of the store has been affected by the epidemic and the impact exceeded expectations, and the number of people entering the store every day in the MixC direct store before the epidemic was as high as 2,000 people, and now it has dropped to 800 people per day, and it has not yet recovered to half of the previous number. The daily sales performance has also changed from the previous 50,000 to just over 10,000 now, and the difference is only a few thousand.

He believes that the recurrence of the epidemic is more or less affecting the residents' desire to consume, he said that the eight employees in the store were busy without touching the ground, and now the employees stand inside the door and look at each other, as long as there are not many people in the mall, directly affecting their number of people, we visit the shopping mall stores of Huawei, Glory, Apple and other mobile phone brands, due to the smaller flow of people, many stores have only a hundred customers entering the store a day.

This year's epidemic has undoubtedly caused a lot of impact on mobile phone manufacturers who have vigorously laid offline channels. For the OV two, offline has always been an important battlefield, and Xiaomi's offline store has also taken the lead. Xiaomi's offline retail stores in 2021 have increased from more than 3,200 at the end of 2020 to 10,200, maintaining a growth rate of more than 200 new stores per month, and the coverage rate of cities and towns exceeds 97% and 85%. The honor brand independent from Huawei is also constantly opening stores, and in comparison, only Huawei and OV have shrunk in the number of offline stores.

"OPPO and Huawei are shrinking offline stores in third- and fourth-tier cities or towns that are more remote, and there are still stores in the more prosperous streets of county towns." Deng Qiang said that oppo and Huawei are both shrinking stores in the sinking market, and as of March, Huawei has reduced its number of stores by 209 to 9,394.

For some channel providers, not opening now means eating the old money. Although many parts of lu ke's goods that open xiaomi offline stores also go online channels, this year's sales still make him feel unoptimistic. "Basically cut my business in half."

But he estimates that the current losses are still within the reach of many store owners, but for some smaller retailers, another month is the limit of life and death - they not only have to bear tens of thousands of yuan of store rent, but also bear hidden losses. Because of the large inventory backlog, once new products are released in the first quarter, the existing old machines will be more difficult to sell.

In the difficult time of the epidemic, the mobile phone dealers of major brands have to reduce their expenditure on stores, and store closures and losses have become a long talk topic for dealers after dinner. Therefore, at this stage, how to boost the motivation of dealers is one of the things that these mobile phone manufacturers should consider, and only by helping each other can we revitalize the industry.

But so far, OV and Glory have not made greater moves in supporting dealers, but have played a "merger" strategy, and higher-level provincial generations have merged with low-level provincial generations, and even further down to merge and drop the market generation, so as to achieve the effect of reducing grading and increasing profits.

Xiaomi, on the other hand, has provided offline dealers with epidemic subsidies for a total of 5 times since last year, with a cumulative amount of 120 million yuan, helping offline dealers to tide over the epidemic together. It is reported that Xiaomi will issue epidemic subsidies to all Xiaomi Home stores and authorized stores according to the proportion of store sales, and issue epidemic subsidies according to the proportion of rent corresponding to the closing time or the number of days of closure.

All along, Xiaomi has a certain assessment standard for stores, and Xiaomi dealer Zeng Fan is also worried that stores are difficult to meet the standards under the haze of the epidemic. Fortunately, in view of the impact of the epidemic, Xiaomi has made certain changes to the assessment standards of specialty stores, and has made certain epidemic subsidies to merchants with real money and silver, which is helping dealers to alleviate the pressure on stores to a certain extent.

At present, Xiaomi has made moves in helping dealers, but looking back at Glory and OV, they have not been slow to act, and their dependence on offline sales is greater, so the negative impact of the epidemic will be greater, but so far, its three have not come up with any substantive plan for how to help dealers, which is what Glory and OV dealers do not want to see, especially in the current situation of the epidemic, the situation of dealers will be more difficult.

Second, save yourself and save him

"The biggest lesson I learned from this epidemic is that I can no longer sit in the store and wait for customers to come to the door."

Zeng Fan said that he and his peers are beginning to build a personal customer database and are preparing to do relationship maintenance on WeChat from time to time. At the same time, the store further increased the publicity on the short video platform, and the store manager planned and filmed the content himself, and also accumulated hundreds of fans.

He told us that as early as before the epidemic, he and many peer dealers believed that xiaomi's new retail model solved the problem of layers of dealers driving up the price of products for profits, but also faced the problem of insufficient profitability in many stores. But when the epidemic came, we found the advantages of Xiaomi Home's new retail.

At present, Xiaomi Home has launched a "takeaway" service in cooperation with Meituan, and more than 3,000 stores around the country have expressed their participation in the service, and the stores promise free delivery within three kilometers. These stores cover 276 cities including Beijing, Shanghai, Guangzhou, Shenzhen, etc., and users only need to place orders through Meituan's search for "Xiaomi Home", and deliver them home as soon as 30 minutes after placing an order.

In addition, Xiaomi also put forward a very innovative "4A level shopping experience" program, while taking the private domain shopping guide as the core capability, the new retail business should also come into being such as Xiaomi cloud store, shopping guide treasure and other online staff marketing tools, to attract intended users to buy products online or to the store, when and where, can experience and purchase any of Xiaomi's products and services through any channel.

Channel provider Zeng Fan said that under the impact of the black swan event, Xiaomi's new retail channel model is obviously more resistant to pressure and has shown stronger resilience, and many peers and partners, many from the previous ridicule, to identify or learn. At present, Xiaomi has completed the strategic upgrade from "mobile phone + AIoT" to "mobile phone × AIoT", which is enough to see Xiaomi's ambition in IoT, and Xiaomi can calmly cope with more risks and challenges, rather than focusing on the mobile phone business like Glory and OV.

At present, because of various factors, glory can hardly change the direction of agility, still eating the dividend of "being acquired", xiaomi took the lead in setting an example, OV secretly adjusted, only glory is still adhering to the old model of backgammon, and the entire industry is once again at the crossroads of change.

In addition to channel advantages, brands such as Xiaomi have also opened up real subsidies and relief policies.

Lu Weibing, partner of Xiaomi Group and president of China and International Department, said: "In the face of repeated epidemics, Xiaomi Group has chosen to tide over difficulties with partners, with one hand holding the store effect and the other hand issuing subsidies, which will play a positive exemplary role in the recovery of the industry and escort the development of the real economy."

Zheng Weijia is the person in charge of the Xiaomi Specialty Store in Shenzhen Xiaomi Longhua District, has been engaged in the Shenzhen communications industry for 13 years, in March this year, in order to cooperate with the epidemic prevention and control, March 14th to 20th between 7 days of suspension of business, and like him, Longhua Fangtiandi other non-life necessities of the merchants, also suspended business as required.

Previously, Zheng Weijia's Xiaomi store had sales of about 40,000 per day, and after the suspension, the store rent and basic salary of employees were paid as usual. In addition to the venue rent reduction, Zheng Weijia also received a subsidy of 20,000 yuan from the Xiaomi brand side, while the entire Shenzhen Xiaomi store received a total of more than 4 million yuan in subsidies to help dealers tide over the difficulties.

From this point of view, the epidemic is both a test and a catalyst for all mobile phone brands, and Xiaomi's actions have played a positive role model for the recovery of the industry and the development of the real economy.

Third, what do mobile phone manufacturers fight next?

At the macro level, the epidemic has brought an unprecedented impact on the global economy, specifically, the epidemic that has lasted for three years has also caused the mobile phone industry to suffer a huge impact, such as the extension of the user replacement cycle and the lack of strong desire to change the machine, and the serious homogenization between mobile phone brands has led to a further decrease in sales.

However, it is not realistic for mobile phone manufacturers to quickly change the impact of the epidemic, and how to let users feel the novelty and unique brand differentiation is the top priority. Next, what should mobile phone manufacturers fight?

The first is continuous innovation. Innovation is still the consensus of all mobile phone manufacturers, especially after Huawei was sanctioned by chips, including Xiaomi, Glory, OV and other mobile phone manufacturers have taken high-end as a strategic goal, such as Glory and Xiaomi have proposed to align with Apple, and OV is also on the high-end road.

But the basis of the high-end road is technology, who masters the core technology is the winner, so Xiaomi, OPPO have proposed to take out 100 billion yuan and 50 billion yuan for research and development in the next 5 years and the next 3 years. Only by investing heavily in research and development is a necessary condition to be able to stand in the high-end market, and to create products that make users shine through research and development innovation, can we shorten the user replacement cycle.

At present, the idea of improving the user experience from the parts is still feasible in the high-end market, such as Xiaomi's previous commercial P1 charging chip, surging C1 chip image chip, vivoX series of commercial V1, V1+ image chips.

However, unlike vivo, Xiaomi pursues the principle of "walking with two feet" in the chip field, on the one hand, Xiaomi has increased its investment efforts, and its Xiaomi Yangtze River Industry Fund is known as the "semiconductor CVC three giants" in the industry. The data shows that more than 20% of the chip semiconductor investment of the Xiaomi Yangtze River Industry Fund is invested in enterprises that design and produce semiconductor components.

The research and development of core technology can not only create a selling point that makes users shine, but also the key to breaking the sluggish mobile phone industry under the current epidemic, no matter how small the innovative technology, as long as it can bring users a better user experience and differentiated feelings, it is possible to take the lead in achieving a breakthrough.

Digging into the field outside of smart phones is also a must for the next mobile phone manufacturers. For example, Huawei, Xiaomi, etc. have announced their entry into the new energy automobile industry, and before that, Samsung, Apple and Huawei have also laid out layouts for the IoT field.

The second is to expand the new way of retailing. At present, affected by the epidemic, more mobile phone manufacturers have opened up online paths to ensure that even when the epidemic strikes, whether they can smoothly deliver products to consumers, and in the new retail game, Xiaomi has created its own ecological chain and provided sufficient products for online and offline sales channels.

As mentioned above, Xiaomi is also cooperating with takeaway platforms and e-commerce platforms to play more tricks in new retail, in addition to the veteran e-commerce Jingdong, Tmall, Suning, it has also settled in Pinduoduo, Kuaishou, Douyin and other platforms. It can be said that the epidemic has forced out a new revolution in efficiency in the mobile phone industry. But at present, Honor and OV have not yet sold goods on the takeaway platform, not to mention Kuaishou and Douyin.

The third is to retain the "skilled craftsmen". Talent is the top priority for technology companies, only by fully respecting talents and enabling them to exert their professionalism can we effectively help enterprises to move to a higher level and implement high-end plans.

With the intensification of the internal volume of the mobile phone industry, some mobile phone manufacturers have also begun to play tricks, like Glory has tried to use bound equity to retain talents, but after the news was reported, instead of being recognized, it was complained by everyone. Some time ago, Glory had rumors of forcing employees to buy shares, OPPO had rumors of reforming the compensation system and introducing stock incentives, although the official quickly denied the news, but it still caused a lot of controversy.

IV. Conclusion

In the current epidemic environment, mobile phone manufacturers looking for groundbreaking space, tapping growth potential is not easy, although the days of dealers are not very good, but we can also see some good news about the mobile phone industry, such as through Xiaomi to issue 120 million subsidies for stores to ensure the living space of partners, glory and millet to empower the upstream and downstream industrial chains for intelligent manufacturing upgrades and other measures.

The impact of the epidemic may continue to exist for a long time, so whether it is the mobile phone industry or other industries, someone needs to warm the industry together, and only in this way can it recover faster.

Note: At the request of the interviewee, Li Bin, Deng Qiang, Lu Ke, Zeng Fan and Zheng Weijia are pseudonyms.