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The Crisis of Mobile Phone Trading

Posted: 03.05.2017


The Crisis of Mobile Phone Trading

The Dominoes have started to fall.

Some predictions aren't good to come true but unfortunately, what I had predicted a couple of years ago regarding mobile phone trading business has been realized. The big, rather the biggest players have started to crumble and large organizations dependent on this very trade have started to falter.

QUICK REVIEW: The regional mobile markets in the Middle East and Africa are now experiencing an influx of indigenous brands. With the advent of Android operating system, markets aren't depending anymore on established brands and the same options can easily be quired by paying much less for a locally branded product. General Mobile from Turkey already has a presence in 22 countries and Tecno shines brightly in Africa. The local brands take up to 50% of their respective markets leaving the rest to the likes of Apple, Samsung, and Huawei. DAFZA (Dubai Airport Freezone) used to control the regional business and now the local traders are fighting over just the three mentioned brands. Expenses are increasing and the margins have diminished below 1% making it very difficult for trading operations to continue.

THE RUNAWAYS: The past 18 months have seen a regular exit and abscondment of major players from the Middle East market. Regional banks have been extremely vigilant and are avoiding lending to the mobile and electronics sector as a whole. Same is true for the Credit Insurance firms, having borne a brunt of claims due to the runaway traders. This trend is also seen in the IT sector but still, the market is not ready to embrace the fact that there has been a disruption in the overall business model. There are signs and dark clouds over the horizon regarding the fate of the biggest players in the market.

Traders fall head over heels at the introduction of a new model from one of the 3 established trading brands. The recent example being the launch of RED Iphone 7. The number of Mobile Traders are almost the same and brands and new models are long gone, the advent of a new model brings in a windfall for less than 10 days and then again it's a matter of a 1 or less than 1% margin game.

THE SURGE OF USED MOBILE PHONE BUSINESS: This Vertical has now gone a bit out of control, the same prediction I had a few years ago regarding this channel. Everyone in the trade is now bringing in all sorts of products from Used, Refurbished, Counterfeit and outright stolen goods. There are several markets accepting these goods but the travesty of this business is the re-boxing of used mobiles using counterfeit accessories. Fake boxes are available openly in the market and unsuspecting consumers are tricked into buying these products. Although there are some good companies dealing with these products in DAFZA and only bring in original pre-owned devices, there are many others praying on unsuspecting consumers.

The recent unprecedented offtake of this business simply means that the traders are now desperate to hold on to this vertical and would go to any length to survive. The problem at hand is that these traders aren't sure of the next big thing and would not like to venture into a business with a long cycle. Little that they know the trading is coming to its finale.

New companies are popping up regularly in DAFZA doing ONLY used mobile business but the opportunity exists for ones that are investing in their own labs plus a good return policy. The game is short but profitable, I would give it 18 months to come to the same margin levels as new mobiles.

MOBILE PHONE SALES PERSONNEL: There aren't many jobs left in this vertical and the ones losing their current positions are finding it extremely hard to get employed. Go and look for something new quickly before its too late. I am regularly finding people who aren't willing to even venture in the used mobile business as this requires a new skill set to be acquired, what a pity. They are sitting in the middle of the street and cannot see the incoming truck heading right towards them.

LOGISTIC COMPANIES: This is the place you see a lot of action being unraveled, other than a couple of known names these Mobile Phone Business Logistics companies are either on the last leg of survival themselves or have gotten into some shady businesses such as refurbishment of used devices. Moving into the trade of General Cargo is the only possible alternative to them but the competition in this sector is already overwhelming, it's a cluttered space. This Industry also woke up late to the realities of the current situation.

MOBILE PHONE MANUFACTURERS: At this critical junction of market change, it is truly advisable for the brand manufacturers to offer an overall value to the end user rather than try to dump stock that the distributors and ultimately the dealers cannot sell. The relaunch of Nokia raised a lot of expectations and reminded the traders of the past glory in anticipation of buying stock in Dubai and dumping it somewhere in South East Asia, well those days are long gone. Please understand its the end user who is driving the market.

THIS IS THE TIME TO CHANGE: I do not think that this is time to contemplate anymore. Providing credit to the market is already suicidal, Saudi and Iran markets that have been the engines of the local trade have their own challenges so wake up and smell the coffee. The new technologies of AR, VR and AI are already around the corner and these would drive the future. Product business is becoming commoditized with diminishing margins; there's just no fun in it anymore.

Kazi Najib Ashraf is a Technology and Management Blogger and can be contacted at kazi.najib@playtorium.com and also a contributor at www.handelot.com