Gold Diggers In African Mobile Phone Market

In addition to the core markets of China, India and Europe, which are facing fierce competition from mobile phone manufacturers, a seemingly neglected market has ushered in an enterprise that is moving towards 200 billion market value.

In 2006, Zhu Zhaojiang, who was also the head of overseas market of bird mobile phones, went to major global markets and aimed at Africa, an unexplored land. After investigating dozens of countries and cities of all sizes, the voice holding company (688036. SH) led by it decided to make a breakthrough from Nigeria, which is located in the West and is also the largest population country in Africa. Almost ten years later, more and more underachievers came to this continent.

Therefore, the communication deeply cultivated here is called "the king of Africa" in the industry. Since it was listed on the science and technology innovation board in September 2019, its share price has risen from 35.15 yuan / share at the time of issuance to 222 yuan / share closed on February 5, 2021, with an increase of more than 532%, reaching a record high of 245 yuan / share, and the overall stock price has shown a steep upward trend. The latest market value has exceeded 160 billion yuan.

According to the 13.8301% shareholding ratio of qixinbao, with the help of voice holding, Zhu Zhaojiang's personal wealth has suddenly increased from 7 billion in 2019 to more than 24.5 billion now.

This shows that the capital market is optimistic about the development prospects of smart phones in the African market: there is not yet a wave of smart phones changing here, and the population is comparable with the current hot market India. Its potential is likely to be as good as India today.

Although Africa's smartphone market currently accounts for only 6% of global sales, it has quietly gathered together the mainstream mobile phone manufacturers. In addition to relying on the three series to stand in the first position in the industry, Samsung, Huawei, oppo, Xiaomi, etc. have been firmly established.

Its potential is well known. According to the GSMA forecast, the penetration rate of smart phones in Africa will reach 67% in 2025. And the advantage of a huge market is that there will always be opportunities for the underachievers. Founded in 2018, realme, which entered the African market the following year, has now ranked fourth in Egypt, the core market in North Africa. Lai Xiaofan, marketing director of realme in the Middle East Africa region, told the 21st century economic reporter that realme will enter the Egyptian market in 2019, and gradually set up Morocco and Tunisia as the fulcrum to leverage the African market.

"The reason is very simple. First, Egypt is a country with a large population in North Africa, with a lot of young people and a strong demand for mobile phones; second, as a cultural center in the Middle East and North Africa, Egypt has a great influence on neighboring countries, so that we can stand in Egypt and look at the surrounding markets." She continued.

But it's not easy to dig deep into the African market. The Internet penetration rate here is far lower than that of Indian and Southeast Asian markets where manufacturers have advantages, and there are huge differences in offline channels in different regions. For manufacturers, the need for targeted research and development of local demand will undoubtedly increase the cost pressure of global manufacturers, while Africa is not a lucrative market.

In the face of this huge but not so easy to move gold mine, how do players get into the game?

Slow down Africa

Africa, the world's second largest continent in area and population, has more than 50 countries and more than 1.3 billion people. Due to the fact that it is crossed by the equator from the central part of the country, it is hot all the year round. Therefore, there are different consumer demands from other markets.

Geographically, Africa can be connected to the rich Middle East in the north, and to the East is close to India, where the mobile phone industry is in a fierce competition.

But there is no doubt that there is a huge consumption potential to be tapped. The United Nations divides the African continent into North Africa and sub Saharan Africa by taking the Sahara Desert as the boundary. According to World Bank statistics, sub Saharan Africa has a total population of 1.107 billion in 2019, and the population growth rate has remained above 2.6% in the past 10 years, ranking first in the world. In 2019, the population under the age of 14 accounts for 42.28% of the total population, and the population aged 15-65 accounts for 54.71%.

A large number of young people show the vast market space in the future. From a macro perspective, many conditions of the African market are quite similar to those of India, a popular market: a younger population structure, great potential for economic growth, and similar consumer preferences.

But so far, at least, the level of competition among mobile phone manufacturers on the continent looks far less than India, the world's second-largest smartphone market.

The clue comes from the popularity of infrastructure. Wang Yang, a senior analyst at counterpoint research, told reporters in the 21st century economic report that India and Africa do have similar fundamentals at the macro level.

"But we observe that India's smartphone market has grown rapidly in the past three to five years, with three differentiation factors compared to Africa." In terms of the cost of penetration, India's rapid penetration of smart phones has benefited from low-cost traffic packages launched by local operator reliance Jiao. In Africa, while the overall cost is falling, it is still expensive for most people.

In terms of distribution channels, according to counterpoint, 46% of India's smartphone sales in 2020 come from online channels, especially during the Diwali festival from October to November, which accounted for a record 68% share contribution. While the e-commerce market in Africa is still in its infancy, 85% - 90% of smart phones need to be sold through offline channels.

The overall development process is different, so that the current concentration of the two markets is also different. Wang Yang told reporters that the share of top 5 manufacturers in the Indian market has increased from 69% three years ago to 96% today. "As for Africa, we have observed similar trends, but at different rates, with the top five companies accounting for 70% of the total, compared with 62% three years ago."

Today, India has been in the process of huge aircraft replacement bonus, and because of the relatively lagging infrastructure deployment process, Africa is still a market dominated by functional machines.

According to the global mobile trend report 2021 released by GSMA, the average proportion of mobile phones accessing 4G networks in sub Saharan Africa is only 12%, far lower than the world average of 55%. The agency previously pointed out that 3G penetration rate in the region will usher in a turning point in 2019, and the penetration rate of 2G will be about 45.55%.

Wang Yang told reporters that in 2017, functional mobile phones accounted for about 62% of the entire African mobile phone market, and in the first three quarters of 2020, this share dropped to about 55%. "Especially during the period of life stoppage caused by the epidemic, local consumers recognize the importance of 'connectivity', so as data and equipment costs continue to fall and brands introduce more models to the market, we believe that the migration to smartphones will continue in the next few years."

For even mobile phone manufacturers who have entered the bottleneck period of the era of smart phones, they have rich experience and capacity reserve in terms of supply chain, product force, channel and logistics level to make a breakthrough in the current African market.

This can be seen from the financial report of the voice. After the listing, the company did not disclose the sales cost and unit price of its intelligent machines and functional machines in detail. However, according to the prospectus, as of the first half of 2019, the unit cost of voice intelligent machines was 315 yuan, with an average price of 442 yuan; the unit cost of functional machines was 45 yuan, with an average price of 62 yuan. The realized gross profit margin is not low. During the same period, the gross profit rate of voice in Africa was 30.8%, but in India, which is in fierce competition, its gross profit rate is only 15.31%.

However, the local operators in Africa are relatively weak, and the local mobile phone industry chain and supporting facilities are not perfect, which is the background for other brands to further expand here.

The "fragmented" continent

In the early years, Africa was colonized by different countries for a long time. This gives the continent a huge differentiation. In which the development of the manufacturers, also according to their own positioning characteristics, deep plowing in different markets.

Roughly speaking, Africa can be divided into three parts. North Africa, close to South Asia and the Mediterranean, has the characteristics of Arab culture; the vast sub Saharan Africa is a typical tropical population, mostly dark skinned Africans; South Africa, located in the south of the Tropic of cancer, has a relatively mild climate, with transportation to Cape Town, where there are many white people, and its society is somewhat like Europe.

Therefore, there will be obvious differential deployment.

"There is a big difference in channel form between North Africa and South Africa." Lai Xiaofan told reporters that in North Africa, most of them are independent stores, and users will buy mobile phones directly from independent stores and Ka (key customer channel); on the contrary, operators are the main market in South Africa.

Even North Africa needs to be detailed. She further introduced that the North African market can be roughly divided into three types: the first is Egypt, which has a mature market form and many mobile phone brands, and the industry is also highly competitive; the second category, such as Morocco, is mainly monopolized by leading brands such as Samsung and apple, which makes it difficult to develop channels; and the third is Algeria, where the local government requires mobile phones to be produced locally, so if you want to enter the market, then you can enter the market In China, we need to build factories locally and invest a lot.

"In terms of the North African market, the penetration rate of intelligent machines has reached more than 60%, and the replacement speed is improving, and the market has great potential." Lai Xiaofan continued. After gaining a foothold in Egypt, realme is rapidly promoting the layout of Morocco, Tunisia and other markets. At the same time, the Levant and the Middle East, close to Egypt, are also the key markets to be explored. From a strategic point of view, we hope to realize the trend of taking Egypt as the center and pulling the whole North Africa and the Middle East.

Indeed, for the global deployment of manufacturers, more emphasis is placed on the complementarity of industrial configuration. As a key node connecting the three continents of Asia, Europe and Africa, the Middle East has played a very good role in transit, which has formed a certain degree of radiation and continuous development relationship between the Middle East and Africa.

In the early days, the voice of "special love" in Africa started from the countries that took into account the aftereffect of population and economic development, which meant that the East and the West should be crossed first.

In an interaction between investors, senior executives of the company once introduced that the company first selected countries with large population base and good per capita GDP level in East Africa and West Africa as the core markets, started from some countries in East Africa, then expanded to central and western Africa, and further expanded the markets in North and South Africa.

"At present, the sub Saharan regions and countries have achieved good market share and position. Voice in key countries in North Africa, such as Egypt, Morocco and other markets, is currently performing well. In 2020, the market share of Q3 smart machines will increase year on year. " It is said that voice in South Africa also has a dedicated team in the deployment of operator business.

It seems that on the one hand, it is from east to west, then from north to South; on the other hand, it connects the north of the north, breaks through the South and then spreads. But they all end up "fighting each other".

Offline channel of decisive battle

What matches the economic growth continent is its price sensitive consumption characteristics, which also means that the African market is now particularly focused on offline channels.

In such an environment, the "step by step high system" mode, which takes advantage of the mode of quickly occupying the front door in a short period of time and breaking through the husband and wife shops extensively, coincides with the "king of Africa" communication mode.

They did not meet at home, but they met in Africa in this way. And as voice continues to expand in emerging markets in recent years, this encounter will become the next normal.

It's just that communication took root in Africa nearly a decade earlier than later generations. Its mode is summed up by the media as poster - wall - package billboard, as well as unity couple shop. In a nearly "overwhelming" way of publicity, to enter consumer awareness.

According to the report, the company has moved the mode of "smashing colored eggs and performing platforms" to Africa, which has greatly opened the eyes of local people. With the deepening of cooperation, it will support the partners with active business thinking to become senior agents.

This kind of landing mode similar to "encircling the city from the countryside" is basically interlinked in the mature mobile phone market. The "early" sound transmission paves the way for its strong market share in Africa under the support of the following three major brand systems.

Of course, the market-oriented playing method is continued and constantly evolving, so far, the voice is still deepening the market pattern through offline channels. This performance is not always unfavourable. According to the announcement of the company's prospectus, the contribution of the company's new dealers' increased revenue to the new revenue in Africa in 2018 was 53.23%, and that of the old dealers was 25.93%. In 2017, the contribution rate of new dealers was 15.40%, and that of old dealers was 51.59%.

Obviously, this test is not only the level of magnitude, but also a complex quantitative process.

According to reports, the company adheres to the channel sinking strategy, equips sales specialists to maintain long-term and stable daily communication with dealers, distributors and retailers, and timely obtain first-hand market feedback and demand information, so as to grow together with channel dealers. Make the product competitiveness and market share continue to improve.

Lai Xiaofan told the 21st century economic report that in North Africa, the development of e-commerce is still in its infancy, so more than 90% of real me sales still come from offline stores.

"The offline channels in North Africa are mainly divided into two categories: independent husband and wife stores or mobile phone and electric appliance chains (similar to Suning and Shundian in China)." She said that in key markets, realme generally covers most offline stores through local distributors, mainly independent stores. In some markets, there are also major cooperative channel operators (KA) or some local operators to achieve the maximum channel distribution coverage. "For some distributors with strong channel coverage, there will be exclusive agreements for a certain period of time, mainly considering resource focus."

Wang Yang, who has been stationed in Africa for a long time, told 21st century economic reporter that so far, only voice brands have appeared in most African countries and population centers, benefiting from a strong sales network in the suburbs and even rural areas.

"Of course, more and more we see that the most prominent Chinese manufacturers like Xiaomi, oppo and realme are paying more and more attention to Africa." He further said that these brands are using the existing advantages to promote.

For example, Xiaomi's online distribution and oppo's strong network with key retail distributors. "These efforts have been effective in richer African markets such as Egypt, Morocco and Tunisia. On the whole, however, their operations in Africa are still limited to a few countries, offering only a few models. We expect that these brands will increase market entry in the next few years and take further initiative by launching more models and other means. "

Differentiated play

From about 2017, more and more top brands began to plan for the African market, and channel differentiation competition appeared.

The manufacturers represented by hovm seek to land by setting up regional departments and making relevant plans. In 2019, Huawei launched its online platform "Huawei mall" in South Africa and other places. Xiaomi established the Africa regional department in January and reached cooperation with jumia, an African e-commerce platform.

Realme is also good at playing the Internet. Lai Xiaofan told reporters that realme is actively cooperating with local e-commerce companies to seize this wave of traffic dividends. Especially during the epidemic period, many African countries have announced blockade measures, indirectly promoting the local market to embrace online channels.

"We have noticed a trend, during the epidemic period, the flow dividend of e-commerce has obviously increased rapidly, users' willingness to shop online has increased, and even spend more time on online social media platforms such as instagram and Youtube." She pointed out that, therefore, realme tried different online marketing methods, including online press conference, social media live broadcast with goods by promoters and so on, so as to increase the online sales share by maintaining the discussion degree of users on realme products.

"On the whole, such a strategy is obviously effective, especially the sales in 2020 are hardly affected by the epidemic." She concluded. During this period, realme also held fan challenge competitions and online fan gatherings through platforms such as tiktok and zoom, "all of which help to improve user stickiness.".

To some extent, the spread of new pneumonia is quietly changing many consumption concepts in emerging markets, including the Indian market next door.

Lai Xiaofan told the 21st century economic report that during the epidemic period, the sales of mobile phones in e-commerce had a certain increase, especially in the low-end entry-level models. "Due to the high unit price of mobile phones, users are still used to experiencing offline before purchasing, so the online sales growth of medium and high-end models is limited."

After the outbreak, she added that the consumption level of the North African market has declined, and it can be expected that in 2021, low-end models will remain the main focus of the North African market. Of course, although the market share of high-end computers has declined, the sales of mid-range mobile phones have increased, because some users will switch from high-end machines to mid-range products considering the budget.

However, consumers' requirements for products will not change. This is also the reason why voice has been able to break through the encirclement.

Through in-depth communication with the local market, voice targeted at the level of photography, battery and other "special" ability.

According to reports, it has developed dark skin color camera technology, night photo capture technology and dark face recognition unlocking function; aiming at the problems of frequent power failure in local areas of African countries, large temperature difference between morning and night, and excessive sweat on the hands of users, it has developed low-cost high-voltage fast charging technology, ultra long standby, current control technology for environmental temperature detection and anti sweat USB port.

Wang Yang also told reporters that in the eyes of African consumers, price, performance and photography are very important. "Photography is particularly important because local people think it's a symbol of the overall mobile phone capability." He also pointed out that durability is also an essential factor for consumers to consider. "If a brand can provide good customer service or warranty protection, this will give extra points."

It's not easy for global deployment vendors. If a special product quantitative landing is carried out for the African market, it means that the advantage of large-scale production cannot be realized locally, instead, it becomes an operational burden at the cost level.

It is true that realme does not follow the same mode of transmission.

Lai Xiaofan told reporters, "taking dark skin features as an example, we will not carry out photo adjustment for African users, but for dark skin color users, we will optimize the front and back photographers of self portraits, and present the user's facial contour more realistically and aesthetically."

According to realme's observation, neither European nor African users like excessive facial beautification, she added. "Therefore, in the camera calibration part, realme will present more realistic images, not because it caters to the preferences of African users, but based on the adjustment scheme output from our insight into users."

Lai Xiaofan told reporters that at present, realme's product matrix is based on the insight into the local market. Through regular user research and interviews with sales personnel at the front line of the market, it accumulates the pain point analysis of local users, and then carries out product design and product positioning adjustment.

"For example, we found that African consumers have a significant demand for memory and battery life, so these aspects will be particularly strengthened at the product definition stage." As a result, the realme C series, which focuses on large batteries, has become a local hit, and the digital series 7 series, which focuses on video, is also very popular.

"For the users who upgrade smart machines with functional machines, they are most concerned about four points: quality, storage, power and price. Because the affordable price is not high, the replacement time of this group of users is longer than that of other medium and high-end models. If the quality cannot be satisfied by them, it is easy to lose this customer. Similarly, as this group of users are price sensitive, if the price is slightly lowered, the perception will be very strong. For realme, to balance product quality, user experience and price matching, users will definitely choose you. " She concluded.

This shows that manufacturers with global supply chain deployment capabilities, even if they do not adopt the same R & D method as voice, it may not be a difficult problem to find suitable consumers in this extremely large market in Africa at this stage.

Consumption upgrade bonus

With the support of Chinese infrastructure suppliers such as Huawei and ZTE, Africa's communication facilities are also in the process of continuous improvement in recent years.

This will accelerate the iterative evolution of local communication capacity, and the deeper development of the Internet of things and Internet industry in a larger scale will provide soil for carrying capacity.

Wang Yang told reporters that Africa has been lagging behind in terms of "hard" and "soft" infrastructure, such as 3G / LTE coverage, price affordability, and acceptance of digital life.

"In recent years, however, there has been an increasing urgency and movement across Africa to provide better infrastructure. The 2020 epidemic has actually made stakeholders aware of the importance of connectivity, and we see a pick-up in deployment activities in this year. " He pointed out.

Consumption migration continues to advance. Wang Yang told reporters that according to counterpoint statistics, the biggest change in the price range of hot-selling smart machines from 2017 to 2020 is that the market share of the parts above $200 will drop from about 33% to 20%. The price range between $100 and $200 was the largest, rising from about 26% to 37%.

"There's not much change in the price range below $100. This is mainly due to the impact of voice on the sustainability of cost-effective products. " As for feature phones, he points out, more than 90% of the phones are below $25. "Smartphone market share is growing as we see potential high priced feature phone consumers turning to low-end smartphones."

Interestingly, in the course of its development in 2020, it will not be affected by the epidemic. Its revenue and net profit in each quarter showed a growth rate of more than 30% in a sustained development.

"We did see a contraction in the mobile phone market in Africa at the height of the epidemic. For example, in 2020, Q2 smartphone sales dropped 22% year-on-year, but rebounded quickly. In 2020, Q3 smartphone sales have increased year-on-year. " Wang Yang told reporters that compared with the huge impact of the epidemic on Europe and the United States, most countries on the African continent quickly and orderly reopened their economies.

As a result, voice's success in 2020 is largely due to its less than expected supply chain problems and its continued investment in marketing and distribution strategies, even during downtime.

According to the plan of voice, it will sprint to the high-end product line and break through the higher profit range. "In view of the outstanding selling points of high-end products and popular series, we will carry out multiple rounds of marketing promotion activities around the middle and high-end consumers to enhance the brand image." The above-mentioned executives said that the company's business ecological model of "mobile phone + Mobile Internet services + household appliances, digital accessories" has taken shape, further strengthening the competitive advantage.

Lai Xiaofan told the 21st century economic reporter that although the world will face a shortage of chips in 2021, it will mainly affect the shortage of 4G products. "Realme, as a 5g popularizer, will accelerate the drive of users to 5g. In 2021, realme's goal in North Africa is to increase its sales by 30%. Through 5g product layout, investment in mid end products, and cooperation with local operators and channels, realme will provide more 5g products to users in North Africa. "

The migration of communication generation is further deepening. In Africa, which seems to have not yet set off a fierce war, with the deepening of the globalization of mobile phone brands, new variables may have been quietly pregnant.