Faraz Khan Malik, Deputy General Manager (Mobile phones Division) at Huawei Pakistan, is of the opinion that high-priced brand ambassadors do not guarantee the popularity and subsequently higher sales graph of the mobile phones, rather, it is the skill set that how smartly you play with your resources.
He is associated with the Chinese mobile phones manufacturing company since 2013 when the brand was underperforming. Today, he enjoys a much stronger position in the industry. While talking to MORE, Faraz looks back on 2016 and peeks into 2017. Let’s read what he shares.
Where Huawei stands today and what it plans for the year 2017?
Huawei currently holds 18 percent market share in the Pakistani mobile phone market. If we specifically talk about the main cities, Huawei has up to 25 percent market share in the big metro cities, including Lahore, Karachi, and Islamabad. In 2016 we crossed 100 million dollar business in the country, and we are aiming to go beyond $150 million in 2017. In 2016, our monthly sell-out reached 110,000 units; however, we aim to maintain monthly 100,000 mobile phones in 2017.
There will be fierce competition among brands in 2017 since many new players have already joined the race in 2016. Any brand that produces good quality handsets and is better in business strategy would lead the pack.
In the previous year, Huawei released remarkable mobile phones of likes P9 and P9 Plus, which received tremendous response from the customers. We introduced dual lens camera endorsed by Leica optics and released it earlier than Apple. Our primary focus was to improve the camera quality of our smartphones to enhance the photography experience. At the same time, we wanted to give better processing speed to our users. Recently, we have also launched Mate 9 which is equipped with an impressive 20MP dual-camera. Huawei works tirelessly to improve our smartphone features continuously. For example, in the newly launched Mate 9, we have introduced the patent supercharge technology which gives you a full day’s’ worth of usage with just 20 minutes of charging.
Huawei’s portfolio for 2017 is going to be another breakthrough for us, and we plan on gaining very considerable market share in the Pakistani market.
Huawei considers Apple, a primary competitor. When do you plan to beat it?
Yes, we are aiming to beat Apple, and we will probably do this in very near future. We will soon cross Apple in terms of the number of mobile phones sold. However, we will need another couple of years before we can supersede them in terms of value. In Pakistani market, our value and volume are already larger than Apple. Huawei is, without a doubt the second most major global smartphone brand in Pakistan.
You always refer to Apple and Samsung as your real competitors. Recently, Oppo showed impressive numbers in the Pakistani market, does it become a point of concern to you?
We as a company believe in healthy competition, and the same holds true for our vision for the Pakistani market. It encourages enterprises to come up with ever more innovative products and strategies giving greater benefit to the end consumers in the form of a wider variety of choices and better products. They are currently not taking our share.
Oppo is currently focusing on 1 product where they have faced cruel competition from Q mobile. Almost all our high-quality products start from PKR 20,000 and above. Moreover, in PKR 40,000 price range they compete with Samsung. In a nutshell,
Oppo is filling price gaps where they are either competing with Samsung or QMobile.
If you talk about our competitors, Yes, they have more branded shops, but let me ask you this; how many actual smartphone units are they selling from those outlets?
Huawei added a 3rd major distributor in 2016 for better numbers. What was the impact of that decision?
In 2016 our business has gained 35% year over year as compared to 2015 so that clearly indicates that bringing in a third distributor was beneficial for our business. In 2015 our market share was 11%, and that increased to 18% by 2016. Huawei has a long-term vision of distribution management where we want to set up different goals for our distributors. We firmly believe in having a vision for the future when coming up with strategy. We always tend to maintain healthily and growing business portfolio for our partners and ensure their profitability.
Can price war among distributors hurt a brand?
No. Brands have very clear strategies when it comes to the distributors. We have set protocols and procedures to avoid business scenarios which might harm brand equity in that manner. We always keep in mind the needs of the distributors and make sure that they are making good money. Such crisis only arises if you do not manage your channels well. Huawei has supported all the dealers and the retailers to the fullest degree. We have never devised any strategy which could result in a loss for our distributors. We will keep monitoring and support them to grow our business collectively.
Celebrity endorsements are a handy tool to get your brand registered, but that only takes you so far. For the complex Pakistani consumer, it only results in awareness, not conversion
Do you foresee a shift in mobile phone selling the model in Pakistan?
I anticipate certain significant changes happening in the model. However, I believe that there will be restructuring in the market. The market will shift from the Independent Retailers (IR) market to Organized Retailers (OR) market, in layman terms, from a simple shop that exists today to more structured retail outlets. Brand stores of Huawei and other brands are very clear examples of this concept. By looking at the stats, what I see is that the big dealers will be converted into mini-distributors. They will invest their money into brands.
They will try to make use of the brand’s muscle to get into this small self-created distribution models. In my opinion, it would not be a stable venture for them as primary distributors will shift those credit facilities to other dealers upon realizing a potential threat from the mini-distributors. In the end, the mini-distributors might face a shortage of funds. We also foresee a growth in the online business in the country due to the massive shift towards e-commerce.
Today a consumer can get better specs at much cheaper rates, why brands like Huawei do not consider to bring down prices?
The biggest and principal reason for that is the high tax rate in Pakistan which goes up to 20% for most of our products. Being a law abiding company, Huawei cannot do much in this regard. To offer better prices in the market, the government has to take some steps for mobile phone sellers. Grey channels must be banned.
We believe that government should aggressively monitor the import and sell-out structures of different brands in Pakistan. No doubt, the government is working hard to eradicate under-invoicing, but it needs to be more vigilant on the policy level. We have heard that PTA is planning to introduce a new software to curb the illegal smuggling of mobile phones in Pakistan.
Along with this if it also reconsiders the tax structure, it would be very helpful for the industry and companies will definitely work on bringing down the prices. It will help them generate better revenues for themselves as well as for the government, ultimately providing more value for the buck to the end user.
You have lesser branded shops at Hafeez Center than your new competitors. Is it a failure?
If you talk about our competitors, Yes, they have more branded shops, but let me ask you this; how many actual smartphone units are they selling from those outlets? We also keep getting suggestions to open more brand stores in clusters. Certainly, it gives good results in terms of visibility but does it give you an edge when it comes down to actual sales is the real question. I would not think of making 50 shops in one go in the same location as that would result in cannibalization. Ultimately it does more harm than good to your bottom line.
QMobile seems to be selling more with the help of big celebrities who hold and promote its mobile phones. Do you plan to bring onboard famous brand ambassadors in 2017?
It is not all about the brand ambassador; it is about creating a combo of product and ambassador.
Brand Ambassadors impact products but not at a significant level. It is more important to have a better nexus of product and value for a successful brand campaign. In the past, even without brand ambassadors, we have done successful campaigns with animated TVCs. So Huawei would consider working with brand friends rather than brand ambassadors. The way I see it Indian celebrities have the kind of power and value to convince end user, but Pakistani celebrities lack that impact as of now.
We will need another couple of years before we can supersede Apple in terms of value. In Pakistani market, our value and volume are already larger
Celebrity endorsements are a handy tool to get your brand registered, but that only takes you so far. It lends you visibility, but for the complex Pakistani consumer, it only results in awareness, not conversion/purchase. When it comes down to the actual purchase decision, many other complex factors come into play, and simple celebrity presence is not a significant factor.
The interview was first published in MORE Magazine January 2017 Edition