The robbery and rebirth of Huawei’s offline stores

According to Canalys data, in the fourth quarter of 2020, Huawei mobile phones fell out of the top five in the global smartphone market share rankings; in the first quarter of this year, Huawei’s mobile phone shipments ranked seventh in the world, with a market share of only 4 %about.

For well-known reasons, Huawei’s mobile phone shipments have experienced a sudden shrinking after the chip is limited. The mobile phone business is frustrated. How should Huawei, which sells mobile phones, respond? Photon Planet recently visited a large number of Huawei offline channels and interviewed several insiders to try to explain to you how Huawei’s offline stores have transformed.

Nearly ten months have passed since the “chip” ban. Huawei’s mobile phone business seems to have begun to stagnate. Although a small number of mobile phones have been supplied one after another, they are always out of stock. According to a staff member of a Huawei authorized store, Huawei’s mobile phones have gradually been out of stock since October last year.

According to past practice, Huawei’s P series went on sale in March and April in the first half of the year, but now there is no accurate listing news for the P50; the Mate 40 series flagship machine was also postponed last year. On the whole, there is no confirmed news about the launch of Huawei’s new machine, and the old machine is out of stock or even suspended.

Nowadays, apart from the occasional small amount of panic buying activities on official online channels, it is difficult to directly buy Huawei series phones, especially the two high-end positioning products of the P series and Mate series, which are seriously out of stock. 70% of China’s mobile phone market sales are concentrated in offline channels. Huawei’s current strategy is to concentrate its limited mobile phone inventory on offline channels so that consumers can see and touch. A strategy adopted by the market.

A mobile phone industry insider told Photon Planet that the franchise fee for opening a Huawei authorized store is generally more than 1 million yuan. In addition to the cost of pressing goods, the official authorized store’s annual expenses are very high. For these expenses, it seems difficult for Huawei to convince these agents that it is becoming more and more difficult for offline stores to support revenue.

Let consumers think that Huawei still has mobile phones

In the scorching July, the scorching sun scorched the entire block, and pedestrians were wrapped in the sultry air, and their steps became more hurried.

We came to a Huawei offline authorized experience store, the glass door was a bit heavy, and then the air-conditioning air rushed in. Seeing someone enter, the idle clerk did not show much enthusiasm. The few customers in the store are a bit deserted, and compared with the heat outside the glass door, it looks like two worlds.

On the outermost table of the store is the Mate 40 series, the latest flagship machine currently on sale by Huawei. Take a closer look, but there are only three or four real models that can be tried, and the others are all models.

According to the staff of this store, only the latest generation of Mate 40, Mate 40 pro, Mate 40 RS Porsche design and folding screen series are currently on sale for high-end machines, but only Mate 40 Pro 8+ is in stock in the store. 128 5G models and 4G models of the same model just released on June 26, if you need other models of the Mate series, you need to adjust the goods.

The production of other old models has been discontinued, including the new P40 series released last year. In addition, the nova series has only a few new products such as nova 8, nova 8 pro.

Regarding the issue that Huawei’s mobile phones are out of stock, the clerk’s unified answer is that the Mate 40 series still has a small amount of inventory, but the specific number is not disclosed. However, the serious shortage of Huawei mobile phones is actually an open secret.

A mobile phone dealer sighed to Photon Planet that Huawei’s mobile phones are currently out of stock + price increases in unofficially authorized offline channels. Their business is very difficult to do. Take the Huawei Mate 40 8+128G 5G version as an example. The original Huawei Mall price was 4999 yuan, but now the market price has reached 5630 yuan. The increase in dealer prices just reflects the shortage of supply in the market.

In the official authorized channel, a store clerk reported that the price increase of the Mate 40 series has reached 400-700 yuan since its launch.

Under the normal market supply and demand environment, generally, the longer a mobile phone is on the market, the lower the price will be. After being out of stock, Huawei’s mobile phones did the opposite. The price of Mate 40 went up for half a year after it went on the market.

For mobile phone products of brands such as Xiaomi, OPPO, and vivo, the value retention rate after one year is only 50% to 60%, which is generally half of the original price. However, from last year to this year, due to chip problems, the value retention rate of mobile phones once reached 80% to 90%, and there was even a price increase. The same is true for some products including Honor, and the price has not been reduced even when the quantity is small.

A Huawei overseas marketing manager told Photon Planet that the current situation of rising prices instead of falling is actually a way for Huawei mobile phones to control the flow rate. The main goal at this stage is to let consumers see that Huawei continues to sell mobile phones. Especially for 5G mobile phones, when the supply is certain or the supply is small, Huawei’s channel partners are required to control the shipment volume and speed of mobile phones in stores, and the supply cannot be determined based on market demand.

There are many other ways that Huawei can control the flow rate, such as making appointment purchases and rushing purchases by time periods. They are all based on this principle. It is also a way to find a sense of existence by extending the time period for consumers to purchase a machine as a whole.

Huawei is affected by the ban on 5G chips, and 4G phones are not in this range. Today, the domestic mobile phone industry is in the process of transitioning from 4G to 5G. 5G has not achieved full coverage across the country. 4G mobile phones still have a market in many underdeveloped regions. In addition, the price of 4G mobile phones is lower than that of 5G mobile phones. Therefore, some consumers can still accept Huawei 4G mobile phones.

On June 26, the 5G version of Huawei’s Mate 40 series released a new 4G version six months after its launch. This is undoubtedly making up for the shortage of 5G mobile phones.

Through limited products, try to extend the timeline of products on sale, which is now a way for Huawei to stabilize the market.

Ecological chain becomes a life-saving straw for channel traders

Huawei wants to delay time by relying on a small amount of inventory, but this does not make much sense for the increase in store sales.

Originally, Huawei’s mobile phone business was the main source of revenue for the stores. The mobile phone business was frustrated. How could Huawei’s agents regain their confidence?

According to a staff member of a Huawei authorized experience store in Beijing, after the mobile phone was out of stock, the sales of her store did not appear to be particularly sluggish. She believes that the main reason is that the products sold are becoming more and more high-end and high-premium, and the customer unit price and profit margins are relatively large.

In addition, Huawei’s experience has attracted public attention, which has caused some users of other brands to turn to Huawei, and the customer base has increased. In addition, eco-chain products such as Huawei’s smart screens and smart devices have driven sales growth, and selling cars will also become an important direction for many stores to make up for sales.

When the mobile phone is out of stock, Huawei wants to find an increase in the sales of C-end products in the future, and ecological chain products such as smart devices and automobiles are undoubtedly given high hopes.

Throughout Huawei’s business system, there are many types of products. In addition to mobile phones, there are also PCs, tablets, smart screens, smart watches, other wearable devices, etc. Nowadays, they are also cooperating with car companies to sell cars. In addition, Huawei Smart Selection’s third-party cooperation products are also a supplement.

After the mobile phone market shrinks, these products naturally assume the heavy responsibility of Huawei and its agents to make up for sales. As the cooperation between Huawei and car companies unfolded, some official offline stores began to plan to expand their stores, and car sales and sales of ecological chain products were put on the agenda.

When it comes to smart homes or eco-chain products, many consumers may think of Xiaomi first.

A Huawei regional sales person told Photon Planet that in the actual sales process, due to the late start of Huawei’s ecology, the current user popularity is not very high. Compared with the main cost-effective “Xiaomi”, Huawei’s price advantage is not Not big. Huawei’s advantage is that its brand power has been recognized by the market. Many consumers have obtained a good experience using Huawei mobile phones, and then began to accept Huawei-related smart devices.

When Huawei’s mobile phone business loses volume, how to quickly move the ecological chain products to a broader market is the key to Huawei’s next stage of revenue.

According to a Huawei consumer, in May of this year, he snapped up the Mate 40E mobile phone in the Huawei Mall. At that time, the official sales strategy was a package, that is, to buy a mobile phone must be paired with a smart device. Although there is an option to buy a mobile phone separately, it is out of stock when you click it, and you can’t get it at all. In the end, he bought a package of mobile phone with smart sunglasses. The original price of 4599 yuan mobile phone with glasses cost a total of 7098 yuan.

Regarding this kind of package sales, he said that he was a little unacceptable, because the smart device with a high unit price was beyond his budget.

Photon Planet visited several Huawei offline experience stores, and some stores have package sales. The reason may be that they want to increase the sales of smart devices. In the case of insufficient mobile phone inventory, maintain market awareness and change users’ perception of Huawei. The inherent impression of the company, and then a smooth transition to the period when only smart devices were sold.

Regarding the question of whether ecological chain products can make up for the lost sales of mobile phones, many authorized stores generally take a relatively optimistic wait-and-see attitude, especially in areas with high spending power.

Taking smart watches as an example, the global smart watch market report for the first quarter of 2021 (January to March) released by the market research agency Counterpoint shows that the number one Apple accounted for 33.5%, and the market share of Huawei smart watches was 8.4 %, still ranking second in the world.

In addition, the aforementioned overseas marketing manager told Photon Planet that Huawei PC has broken through 20% of the market share in some countries in the Middle East, Africa, and Europe.

The market’s recognition of Huawei’s brand and technology has always been high. The main dilemma is that it started late and the market penetration is not enough. Compared with competing brands in the domestic market, Huawei focuses on mid-to-high-end products and has certain differentiated advantages.

However, the mid-to-high-end positioning is destined to be faced with a market with higher consumption power. In the lower-end consumer market, offline channel providers have shown a completely different attitude.

Zhang Zong is the owner of a Huawei authorized store in a town in Anhui. His store is also the only Huawei authorized store in the town. He said that the P series and Mate series are not available in the store now, and only a few models such as nova 8, nova 8 pro, and nova 7 se are on sale, and the supply is not sufficient. Before the mobile phone was out of stock, his store shipped around 50-60 units per month, but now only about ten units are shipped per month, and sales are significantly reduced.

Mobile phones are weak, and eco-chain products such as smart devices that Huawei has high hopes for in these underdeveloped areas have begun to fail. Bluetooth headsets costing four to five hundred, thousands of yuan, smart watches costing two to three thousand yuan…people in the town are not reluctant to buy them.

Moreover, to become an agent of Huawei, it is necessary to suppress the goods. Now there are about 50,000 yuan of Huawei’s smart device related products in the store, but it is difficult to sell.

Zhang Zong told Photon Planet that one of his friends also opened a Huawei authorized store in the local county. The store has 2 million to 3 million yuan of ecological chain products, which are also difficult to sell. Adding to the rent, their store has been at a loss in recent months.

Zhang Zong admitted that in order to reduce losses, he recently began to try to sell other brands of mobile phones in the store. As an official authorized store to sell other brands, although it does not meet the regulations, it is also helpless. “If you continue to lose money in the future, you must also consider closing stores or transforming into other brands.”

The person in charge of the above-mentioned regional sales said that after Huawei’s mobile phones were out of stock, the stores were closed mainly in some small places such as prefectures, that is, areas where the consumption capacity does not match Huawei’s mid- to high-end positioning. Taking the Yunnan market as an example, the closing rate of stores in Dizhou is about 30%, while the rate of closing stores in Kunming, the provincial capital, is less than 10%.

He also said, “Huawei’s chips are inherently limited, and these chips are mainly used to produce new products, and they are concentrated on high-premium products.” Therefore, Huawei’s current products are mainly the latest high-end series, and the overall customer unit price is high. , That is, to use limited resources on the cutting edge, and at the same time, priority will be given to areas with higher consumption power in the distribution of supply.

The attitude of Huawei’s offline channels towards ecological products is characterized by polarization based on the differences in local consumption power.

New stores tend to MSC mode

Among Huawei’s offline channels, the only stores officially recognized by Huawei are directly operated flagship stores, authorized stores, and specialty stores. In October last year, Yu Chengdong said that Huawei had more than 10,000 authorized experience stores nationwide. And so far, there are no more than 10 flagship stores nationwide under the direct management of Huawei.

From the perspective of Huawei’s offline sales channel layout in the past, it mainly relies on authorized agents to support Huawei’s offline sales. Officially-operated flagship stores are brand image stores, which generally undertake the mission of brand promotion. The ultimate goal of authorized stores as agents is to make money.

Huawei can now use the term “drag” in its mobile phone sales business, dragging down consumers and the market, and at the same time, it wants to drag down these offline channels.

The sales of Huawei’s eco-chain products and cars have not started for a long time. In fact, it is still unknown how much sales will be brought in in the future. Whether partners can see the return is a key factor in determining whether they will stay.

In the long run, whether Huawei’s agent channels will expand or shrink will be adjusted based on market feedback. When the mobile phone business does not improve, if selling eco-chain products and cars can support the profits and losses of the agents, Huawei’s offline channels will not shrink significantly, otherwise it will shrink.

A Huawei insider said: “Whether Huawei closes the store itself or the partner voluntarily withdraws, this is not a one-way decision. Because for the brand, channel shrinkage itself has a lot of damage. Huawei’s current situation More helpless.”

Photon Planet learned from the above-mentioned regional sales person, “From the perspective of the brand, the current store operating model will not change, and everything will be business as usual; new stores will gradually move towards the MSC model, which will be Huawei’s offline channels in the future. A major trend of expansion.” The so-called MSC is a semi-direct model in which brands participate in the operation. The stores are larger, generally reaching more than 300 square meters, and the products in the store are directly supplied by the brand.

MSC is more similar to offline flagship stores, preferring new retail, and is mainly responsible for brand promotion and product experience. Bring consumers a full-scene interactive experience of Huawei products. Regardless of the store area, scale, product sequence, service quality, etc., it is greatly improved compared with the existing authorized stores; at the same time, the whole house smart and new energy vehicles are included in the store for display and sales .

From the perspective of Huawei, the future will mainly focus on the expansion of offline direct-sale stores, control investment by yourself, participate in operations by yourself, and be responsible for your own profits and losses. This may be a more controllable solution for manufacturers, partners, and Huawei itself.

end

Offline stores are the main sales channels for Huawei products. When the mobile phone business undergoes great changes, the product structure sold in stores will also change.

Huawei has a “1+8+N” strategy in the consumer business. 1 refers to mobile phones, 8 mainly includes tablets, PCs, wearables, smart screens, AI speakers, headsets, VR, and car machines. N can be understood as everything. Judging from the 2020 annual report released by Huawei, the revenue of eight major products including smart devices has increased by 65%. The mobile phone business is declining, and smart devices will become the main direction of Huawei’s consumer business.

At the same time, since Huawei announced the sale of cars in April, the number of Cyrus SF5 bookings within one month has exceeded 6,500, far exceeding Huawei’s previous official expectations. In order to make up for the mobile phone business, Huawei plans to sell cars more urgently. Huawei plans to expand its sales range by the end of July, with 200 experience stores and more than 1,000 by the end of 2021. In other words, IoT products and smart electric vehicles will become Huawei’s main substitutes for the consumer business side to supply the mobile phone market.

We are very pleased to see that even if the mobile phone business is in a downturn, Huawei has not fallen into the quagmire of large-scale store closures. Rather, after seeing new growth points, a new wave of store openings started. This is Huawei’s resilience.

(All interviewees in the text are pseudonyms)

This article comes from WeChat public account : Photon Planet (ID: TMTweb) , author: He Furong

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-robbery-and-rebirth-of-huaweis-offline-stores/
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