Jakarta, the capital of Indonesia, is staging a "mobile phone" war, with the protagonists from China's OPPO and South Korea's Samsung.
In March this year, after the OPPO Find N2 Flip press conference, Samsung urgently adjusted the price of vertical screen small folding products in the Indonesian market, with a price reduction of 700 yuan, in order to snipe OPPO.
Not only that, Samsung's "price adjustment" once covered Southeast Asian markets including Thailand, Malaysia, Indonesia, Vietnam, and Singapore. Prior to this, the two mobile phone manufacturers had many "confrontations" in the Southeast Asian market.
As the country with the largest economy in ASEAN, Indonesia has long become a strategic highland for many brand manufacturers to compete for. In 2022, Indonesia's GDP grew by 5.31%, the highest growth rate in nine years, and accounted for about 40% of ASEAN's total economy. In addition, Indonesia is also the country with the largest population base in Southeast Asia, with nearly 5 million new births every year, and these new consumption power will continue to be released in the future.
This is where the story of Chinese mobile phone manufacturers conquering the Southeast Asian market begins. From the beginning of "riding a green bicycle all over the street to expand popularity" to "knocking on the door of high-end luxury shopping malls". After ten years, OPPO's mobile phone stores have opened opposite Samsung and Apple.
The overall share of Chinese mobile phone brand manufacturers in Indonesia is also increasing year by year. According to the latest statistics from research agency Canalys, in the second quarter of 2023, Chinese manufacturers will have a market share of nearly 70% in Indonesia, and Samsung will be squeezed out of the first place. Among them, OPPO ranked first with a 20% share, Samsung ranked second with a 19% share, and vivo, Xiaomi and Transsion ranked third to fifth, with market shares of 18%, 16% and 13% respectively.
"The pricing and channel strategies of Chinese manufacturers are working in this market, and we are working with core distributors such as Erajaya and logistics companies such as J&T to extend their coverage to a wider market. On November 8, Canalys analyst Zhou Lexuan told the first financial reporter that the Indonesian market has high requirements for localization, and Chinese manufacturers are building their core competitiveness in the local market, opening factories and increasing channel incentives to gain more market share.
However, due to the impact of multiple factors such as the global macroeconomy and the market's entry into the stock game, the challenges facing the smartphone market are still severe. Especially for Chinese mobile phone manufacturers at this stage, after completing the layout of the "basic disk" in the pioneering period, how to build a full range of capabilities from products to the market has become the key to the long-term competition with Samsung and Apple in the high-end market.
Knock on the market door with the "Chinese experience".
On a weekend at the end of September, as dusk approached, a group of businessmen from China gathered in a beautiful white bungalow, including the head of the Internet business, the dean of a private business school, and investors interested in the Indonesian market.
This small western-style building is an in-house restaurant frequented by Chinese entrepreneurs in Indonesia. "From last year to now, I have received a group of investors or people who want to start a business almost every day, and all of them are Chinese this year. Although Jim Zhang, CEO of OPPO Indonesia, does not like to socialize, he never rejects friends who want to "learn some experience and find some opportunities" from OPPO.
During conversations, one name is often mentioned: Li Jie. This name sounds quite common, but it is a figure that cannot be avoided in the Indonesian mobile phone market and even the entire Indonesian business circle, and some people even call it the "godfather" of Chinese businessmen in Indonesia.
From the perspective of entrepreneurial experience, Li Jie is the founder of J&T Express, the largest express delivery company in Indonesia and the second largest in Southeast Asia, which was listed in Hong Kong not long ago, so that there is such a ridicule in the industry: every day, there are 100,000 "Brother Jie" employees active in Indonesia's consumption track.
The starting point of Li Jie's career in Indonesia was at OPPO.
In 2013, Li Jie, as the general manager of OPPO Suwan region, was sent to Indonesia to explore the market and served as the first CEO of the Indonesian market. He said that he was the CEO, but in terms of the ratio of personnel, there were only a few people in the team.
"One person should be for ten. An investor familiar with the Southeast Asian market described Li Jie as a "big brother" and has a deep understanding of human nature, knows how to motivate his team, and attaches great importance to sharing benefits. Although the team size was small, Indonesia had a high similarity with China in terms of the mobile phone market environment at the time. After familiarizing himself with the market, Li Jie quickly built a local team and replicated his marketing methods in the Chinese market to the Indonesian market.
"In 2013, the average price of mainstream mobile phones on the market was between 500 yuan and 600 yuan. Jim told reporters that the goal of the Indonesian team at that time was to do a good job in the sinking market.
In April 2013, the OPPO Find 5 was launched in Indonesia and sold 100,000 units in the first six months. "By the second year, we had a place at the table. Jim recalled, "Two years after the start, in 2015, OPPO officially proposed a business strategy, called 'Green Island Country', because the OPPO logo color is green, the goal is to continue to go down, after this strategy down, let OPPO from the original low coverage to high coverage." ”
In the Indonesian market at that time, from Jakarta to the provincial capital, to the county, town, and street, OPPO stores were already everywhere, riding promoters with OPPO's iconic green bicycles, appearing over and over again around the streets of Indonesia, plus the constant advertisements in TV shows and street posters - a combination of punches, OPPO only took two years to double the shipments of the local market.
At present, OPPO has nearly 20,000 employees in the Indonesian market, including 15,000 salespeople, and these promoters cover thousands of stores large and small in Indonesia. The remaining 5,000 people are divided in half among OPPO's self-built factories and after-sales outlets in the local area.
"This is what we call sinking, take after-sales as an example, we may only have 20 after-sales service outlets, and later added to nearly 160 after-sales service outlets, delineate a range, as long as the after-sales service can be completed within a radius of how many kilometers. At that time, in fact, the most important thing for the Indonesian market was after-sales, because they experienced a stage of poor quality. Jim added to reporters that the 20,000 people are directly managed by OPPO and do not use any third-party labor.
At present, Indonesia has nearly 65 million active users of OPPO, and the Asia-Pacific region, where Indonesia is located, is the largest sales area of OPPO outside China. Shi Shuai, CEO of OPPO Asia Pacific, told reporters that a successful business model in China is also likely to succeed in Southeast Asia, but it is necessary to have a deeper understanding of the needs of the local market.
"However, the industry is constantly changing, and there is no one experience that is applicable to any industry. Shi Shuai said that this does not mean that every market can follow China's experience, and a little "translation" will definitely not work. Going deep into each market is a big factor in the success of localization.
From the "sinking market" to the "city's top luxury shopping mall"
GandariaCity, known locally as "GanCit", is one of the largest shopping malls in South Jakarta, Indonesia, and when you enter the atrium, you can look up and see a giant advertisement stretching from the first floor to the fifth floor. The product in the billboard is OPPO's first foldable screen phone launched in Indonesia.
Patrick, CMO of OPPO Indonesia, is a local Chinese in Indonesia, and after joining OPPO, he was responsible for the Indonesian market. He told reporters that mobile phone stores are generally set up in the mobile phone area of the mall for sales. However, compared with the past, OPPO does not have too many sales conversion goals in high-end shopping malls, but it has an effect.
Taking the Find N2 Flip as an example, OPPO Gallery Gandaria City has the third largest single store sales in the Asia-Pacific region, and OPPO Gallery Plaza Indonesia has the largest single store sales in the Asia-Pacific region.
Plaza Indonesia is an ultra-high-end shopping mall in Jakarta that is more high-end than GandariaCity, with LV and Chanel stores near the OPPO storefront, and Apple stores on the roof of the mall. Patrick said the two flagship stores are led by marketing, not sales.
"Most of the time, we avoid hosting events in hotels and non-OPPO sites, and Gallery is part of OPPO's premium brand building. In addition, our criteria for judging the profitability of stores also have multiple dimensions, and the core lies in whether it affects groups including the B-end, not just the retail group, so that more shopping malls can increase their confidence in us and get a better position. Patrick said.
For a long time, whether it is domestic or overseas, there is no shortage of brands in high-end shopping malls that are "willing to spend money and queue up to enter", but even if you give more money, the brand power is not good, and the door cannot be opened.
And this is also the biggest challenge that OPPO faces after completing the basic coverage of the market.
Although the accumulation of product technology has reached a new stage, overseas, consumers have not yet fully established trust in Chinese brands, especially in the high-end market. According to the latest data released by the research agency counterpoint, Samsung and OPPO are the top two in the Indonesian market in the high-end phone market of $400 to $599, while in the ultra-high-end market, Samsung and Apple still occupy the vast majority of the market share.
"Over the years, we have seen Chinese smartphone brands become more and more favored and recognized by consumers, but the brand image of Samsung and Apple remains strong. Glen Cardoza, a senior analyst at counterpoint, told CBN reporters that Indonesian and Vietnamese consumers generally consider Samsung and Apple to be high-end brands. Similarly, affluent consumers in countries such as Thailand and Singapore prefer iPhones and Samsung flagship phones to high-end smartphones in China.
OPPO's market share of less than $800 in Indonesia has reached a critical point, with 20% or even 30% of the market performance in each price segment. In other words, a breakthrough at any price segment requires greater cost and effort.
"But it's not without chance. Jim told reporters that Indonesia has the largest population base in the whole of Southeast Asia, and its current number is about 270 million to 280 million, and the number of new babies is about 5 million every year, and China is about 8 million. So it's a market with a promising future.
In addition, due to the migration and urbanization of the population, the scale of the mobile phone market in many small places has declined sharply, focusing on the migration of small cities, medium-sized cities, and large cities, and more and more consumers have entered Indonesia's "Taikoo Li" and "Vientiane World", which is a common change in the Southeast Asian market. "So our future strategy is from the brand strategy to the product strategy, and then to the channel strategy, which is to move closer to the center in the opposite direction, and our strategy must be to go to the city, and for this strategy, the channel must also go to the city. Jim told reporters that in the past year or so, OPPO has spent a lot of energy and time building a new experience for retail terminals.
However, in the face of the biggest competitor in the high-end market, more accurate product positioning is also needed.
"In terms of products, we focus on folding screens in the Indonesian market, hoping to change consumers' perception through differentiated products. If there are too many models, consumers can't digest them, and there are a lot of resources involved, it is not cost-effective commercially. In terms of channels, the exploration of local retail terminals in Indonesia has moved towards the high-end, including activities in top luxury shopping malls, which is not an easy task. Now we want to do high-end, which means that a lot of consciousness also has to change, in the past, it was more for the purpose of converting consumers, and now it is more about retail experience, and the traction of employee ability is also a big focus. Shi Shuai said that at present, whether it is absolute volume or number of people, the team has an advantage over Samsung, but there is still a gap in high-end contacts, which is the core lesson to be made up in the next three years.
"There will be a battle in the end" with Samsung
With the launch of the first horizontal folding product, Find N3, in Southeast Asia, and the foundation laid by the small folding, the head-on collision between OPPO and Samsung in the high-end market will become more and more intensive.
"Next, we will definitely wrestle with Samsung on products around the world. Liu Zuohu, senior vice president of OPPO, mentioned in a media interview in late October that in going overseas, he will definitely compete with Samsung in the world. At present, after three generations of iteration, the product has become more competitive overseas. This is also the reason why Samsung will reduce prices overseas after the launch of the small fold. It is believed that the big fold products will also greatly shake the status of friends overseas, but I hope to have a healthy competition.
Canalys data shows that in the overall market of Southeast Asia in the second quarter, OPPO ranked second with a 16% share, second only to Samsung with a 20% share, and Cambodia was 31% in the market segment, accounting for the first place in the market, Thailand was 15%, the second in the market, and Singapore, Vietnam, the Philippines, Malaysia, New Zealand and other markets ranked in the top three. If you only look at the Indonesian market, OPPO ranks first with a 20% share, slightly higher than Samsung by 1 point.
Among them, the contribution of "small fold" products occupies a high proportion, and OPPOFindN2 Flip accounts for more than 50% in Indonesia, Singapore, Thailand and Malaysia, and some countries even have a share of more than 80%. Judging from the layout of Samsung's folding screen products, the price difference between the two is not big.
"OPPO has improved its local manufacturing and expanded its business into high-end devices, which has given it more pricing room to launch its foldable segment and expand its Reno range. Canalys analyst Zhou Lexuan told reporters.
In Jim's opinion, after understanding the needs of local users, local manufacturing capabilities can directly optimize products and quickly improve product delivery speed.
In contact with the first-tier market, Jim found that Indonesian consumers have several special needs for folding screens, such as buying a mobile phone must use a protective case, and large folding products must have a stylus. When users look at charts on the folding screen, they like to use a stylus instead of their hands to operate and take notes, otherwise they will feel informal.
In addition, because Indonesia is in the tropics, the rainy season is frequent, and the repair rate of mobile phones with water is very high, but the "waterproof bag" has a strong interference with the mobile phone call. In order to solve these problems, Jim specially sent people to communicate directly with the factory. "In the past, many product details had to be solved in China, but now problems like waterproofing can be solved in local factories. ”
OPPO's self-built factory, which covers an area of 130,000 square meters and employs 2,000 people, is located next to Jakarta Airport, and began official operations in April last year, with an annual production capacity of up to 12.5 million units.
"The Indonesian factory is OPPO's second largest overseas factory, which was built in 2020 and is about 500 million. But in the early days, we also rented factories. Xu Yuchu, director of mobile phone manufacturing in Indonesia, told reporters that after 2015, the Indonesian government put forward localized production requirements, gradually restricting the import of overseas complete machines, and the company is thinking about the problem of self-built factories, in addition to local policy requirements, the biggest consideration is that the OEM model has not been able to apply to the requirements of automated production lines.
The reporter saw on the production line of the above-mentioned factory that a folding screen mobile phone assembly line mainly involves more than ten important steps, although some raw materials are still provided by China, but the requirements for production line workers are not low. According to the person in charge of the workers, more than 90% of the employees in the self-built factory are local Indonesian women, and after learning the relevant skills, they can get started quickly. The number of Chinese employees in the factory has been reduced from hundreds to six, mainly engaged in management work.
OPPO's localized production has also driven Chinese supply chain manufacturers to set up factories in Indonesia, and manufacturers including TWS Battery and Amber Electronics have also increased their investment in the Indonesian market.
"We have 7 first-tier suppliers in Indonesia, and there may be more second- or third-level suppliers, such as batteries, adapters, data cables, color boxes, and some are on the sales side, which are basically near us, and the battery factory is 2 kilometers away from the factory, and it will be shipped directly after it is done. Xu Yuchu said that when he first entered the Indonesian market, the local industrialization level was not high, and Chinese employees needed to fly over to teach them by hand. But now, the production and manufacturing are all led by locals, and the construction of the folding screen mobile phone production line has not even sent Chinese personnel, and the yield rate of high-end models has reached 98.5%, and the A series and Reno series have reached 99.2%.
Febriman Abdillah, a senior analyst at Counterpoint, told reporters that domestic manufacturing is one of the prerequisites for entering the Indonesian market. The managing entity is referred to as TKDN (Local Content Capacity). This in itself has prompted Chinese manufacturers to look for local partners to meet TKDN's requirements. Samsung and OPPO have their own factories, which gives them more flexibility in determining production volumes and models.
"In recent years, Chinese mobile phone manufacturers have been very active in Southeast Asian markets, including Indonesia, not only working with local business system players, but also becoming part of the local social and economic structure. For example, OPPO has partnered with Qlola, a fintech company owned by BRI, one of Indonesia's largest banks, to manage dealer transactions, realme has been working with gaming tournaments in the Philippines, Infinix is positioning e-sports and actively working with game developers and esports teams, while Huawei is also playing an important role in 5G infrastructure and development in countries such as Thailand.
Although Southeast Asian consumers are mainly price-sensitive consumers, in the view of analysts, Chinese manufacturers have evolved from "expansion" to "competition for the top" stage in the operation of globalization, especially in the core strategic value markets such as the Asia-Pacific region, and dare to compete head-on with the leading players in the high-end market.
"It's important how you think of yourself as a local business. Febriman Abdillah said.
Column Editor-in-Chief: Qin Hong Text Editor: Cheng Pei Title Image Source: Xinhua News Agency Photo Editor: Cao Liyuan
Source: Author: Yicai