facebook| twitter|  russian| Phone Search:
  • RSS
Samsung Galaxy Note. First Look

Today, large companies, especially corporate giants like Samsung, do not surprise users with extraordinary products...

First look. Sony ST21i Tapioca Microsoft Windows Phone 7: Reasons for Failure First Look at Samsung Galaxy S3 as a 2012 Flagship
Reviews Editorials


Rambler's Top100

Overestimation of the mobile terminals market in 2003 by several manufacturers

The given material tries to describe current situation in the market of terminals in Russia in more detail. All basic calculations have already been resulted in the material about sales of terminals in the first quarter; here we only try to explain the situation thoroughly. Many have stated such wishes, as the distance from this market has not allowed making corresponding conclusions.

In 2002 the Russian market has shown quite good parameters on sales of mobile terminals, but in absolute numbers Russia did not look the champion, the market has not grown up yet. In comparison with the European market we still have stock for growth, penetration of mobile communication is not big yet. Together with the growth of the market several companies plan to increase their market shares, as in the generated market it will much more difficultly to make it, it will borrow years of laborious work and huge budgets. Now all basic players have already represented their forces in Russia, feel the consumer in large cities and an intrigue of new year in struggle for regional subscribers. Plans of the majority of terminal manufacturers for 2003 were also formed from this in Russia.

And here the mistake of only one company in estimations of the market has affected the general situation, which has resulted in rather sad consequences for all, both manufacturers, and distributors. However, let's estimate a situation in the market on the end of 2002. In Russia obvious overweight on regional sales was planned, in comparison with those for Moscow and Saint Petersburg. Thus up to 70 percent of regional sales have fallen to budgetary phones. In advantageous light have appeared those manufacturers, who have inexpensive models in their model line, exactly they have gone on the regional markets. All the market in 2002 has made about 8 million terminals (including grey deliveries), and on the share of budgetary models was fit 35-40 percent. By the most sustained estimations the market of 2003 should make 10 million terminals, while some part of analysts has estimated the market in 14 or even 15 million terminals.

Initially in the estimations of the market the companies adhered the estimation in 10 million, but all has changed, as soon as the leader of the market, Nokia company, has specified for its 4 distributors the plan for the first quarter. Reasoning from simple addition of figures and the account of other companies, resulted, that the market is estimated by the company in 12 million terminals at preservation of the market share, or in 10 million at sharp increase of share. On mature reflection the second scenario looked unreal for the majority as in Moscow sales of the nearest competitor, Siemens are higher, and in regions for Nokia it is hard to advance production, as in the model line there are no very cheap devices. The presence of Nokia 3310, which in retail costs about 75 dollars, does not play the big role, it is the unique device for today and besides old enough, however, about it a bit later.

In extremely competitive market of terminals the information on estimations of sales volume from Nokia was distributed at first among other distributors, and then manufacturers. Someone from manufacturers in the urgent order has reconsidered the plans aside increase of sales, blessing the desire to make it was presented yet earlier, but someone, on the contrary, has remained at former forecasts. The flywheel has been started, and the market has come to movement.

In the beginning of the year Nokia distributors have tried to execute the plan lowered from above, but already to the beginning or the middle of February have understood, that couldn’t make it. Having chosen a plenty of phones from Nokia, they could not realize them through retail networks, the market was not ready to this. A plenty of devices has caused overstocking of retail networks, the majority of big players had practically all models from Nokia and they could sale them till 4-5 weeks. The normal commodity rest, as a rule, differs depending on the company, but does not exceed 2 weeks. Seemingly, the overabundance of phones should affect only purchases of new devices from Nokia, and other manufacturers won't affect in any way. But all occurs just what isn't needed.

Money is enclosed in plenty of purchased devices, in normal situation they could go on portofolio formation of the offer, i.e. purchase not only Nokia phones, but also other manufacturers. Now it does not occur, as the companies do not have money to it, and credit lines of manufacturers have been chosen in the beginning of year. In normal situation such overstocking for distributors would pass unnoticed, but also other manufacturers (not all, but nevertheless) would inject in wholesale channels of distribution great volumes of devices. Has created a situation when the stock of phones in retail has exceeded critical, began overstocking. Here it is important to note, that historically the majority of big distributors are multibrand, they work with several manufacturers at once.

It is difficult to tell, whose nerves have not sustained right at the beginning, but one of the distributor companies (wholesale) began to get rid of phone surplus purchased by it, they were on sale under the same price or even a bit less (with loss, which is theoretically compensated by the size of bonus) on which phones came in from Nokia. Extremely attractive price has compelled retail sellers to take the goods which they already had, and to provoke chain reaction. In the market began a collapse of the prices for one concrete model, it was Nokia 3310. Attractive by the price, the device is not bad sold at retail, but not so fast, as it is necessary for distributors. So, overstocking was the first reason of crisis in the market, but not the basic at all.

The second reason has developed historically, and it looks paradoxical. For large distributors it is more favourable to work with Nokia not directly, but through other distributor. This fact is explained by that, in this case the company is capable to form flexibly the portofolio, choosing only those models of devices, what are necessary to it, and in what amounts. A minus is non receipt of bonuses for sale of Nokia phones, absence of the certain privileges. With Nokia phones the last year picture was spoilt by one of Petersburg distributors who sold phones in a zero, compensating all expenses by bonus reception from Nokia. In the circumstances suffered all other companies, which have direct relations with Nokia. To receive big margin from Nokia phones it became impossible, even the great demand on the part of consumers did not compensate all costs. So, several distributors in private conversations in general declare that get Nokia phones only for assortment, to earn on them is impossible. At the same time the companies of the second link earn on Nokia phones that justifies all charges for them. The unequal conditions was created by unfair behaviour by one of the distributors and system of encouragements from Nokia have resulted to that the market became unstable. And again the situation around one of manufacturers should not seem to influence all others.

Once again it is necessary to remind, that our distributors are multibrand, and they have minimal safety factor. Now in general there is a speech about leaving of the market by one of the distributor companies, as losses have reached critical feature. Unfortunately, all our attempts to receive official comments from distributors have met a wall, to clear situation was solved nobody for some reasons. Someone did not want to spoil the relation with the leader of the market, someone opposite has already reached a boiling point, but has the investors, which are not in rate of occurring events. There was a paradoxical situation, there is a crisis in the market, but nobody speaks about it as hopes for sharp improvement of the situation. The beginning of April has shown, that such dreams have no basis under themselves, the situation in the retail markets has not improved in the cardinal way. Under our forecasts to get rid of terminal stocks will be possible only in May that in result will worsen all activities of sales in the second quarter. For this reason Nokia company has lowered a rod of sales for the distributors.

Seemingly, all became clear, the companies have modified their plans and in the future will try not to lead up a situation to the limit. But it is necessary to take into account the presence of the grey market, the developed situation makes sharply active this segment. So, official suppliers, when receiving new models of phones, for the clear reasons want to receive the maximal profit on them in the first month of sales. In conditions of overstocking manufacturers will try to delay deliveries of new models that create perfect conditions for grey suppliers. They start to compete with official distributors and take away from them a part of the market. In a case if deliveries go in parallel official distributors all the same appear in the loss as the market capacity has final, and new models are more attractive, than old. To get rid of old stocks it is necessary to lower, both wholesale, and retail prices, and it will result in loss of the profit. In the circumstances will not rescue also that fact, that big distributors has price protection on the part of the manufacturer, the situation is too global. The intrigue now develops around one who will exactly lose the money, manufacturers or distributors. It already depends on that game that the companies can lead, who will appear more strongly psychologically.

Interrogations of the distributors have shown, that the minimal stocks are observed now only by Motorola phones while in all other cases the market is sated if not to say is oversaturated. The most critical is the situation with Nokia, Alcatel phones. A bit better look sales of Sony Ericsson, Siemens, Samsung, echoes of a problem only affect them, but affect strongly. What the developed situation threatens the market? The answer is extremely simple, you already see it in streets, it is extremely aggressive advertising company from Nokia, thus it does not conduct to proportional increase in sales to enclosed means. So, in result we shall see falling of the prices for production from Nokia for the current modeling lines. In turn it can cause reduction of prices on Siemens phones, and further the wave will mention also other manufacturers. In case of Nokia reduction of prices does not become critical, is too high the margin of the company. And for other players such decrease becomes rather critical, exception will make only fashionable segment (Samsung, LG).

On the one hand, the market became more adult, it has grown, its various parts became more interconnected. On the other hand, ambiguity of estimations and actions results to disbalance, in fragility of the market. All in the upshot results in such consequences when the companies independently create critical situations. The time increase in the grey market (till September) will have a negative effect on official sales, having reduced amount of the sold terminals. But the total of the realized terminals remain the former, in fact the games of manufacturers will not affect this figure, this is rough influence in a chain of product realization. In the first five of manufacturers the situation practically will not change from the current position, we shall observe only those processes that occurred earlier. And it means, that in the Russian market by the end of year the leader will be Nokia, then Siemens will follow. The third place will get Samsung, it already now has stolen up close to Motorola company and is close on its heels.

For those who plan to get new phone in the near future it is necessary to wait for the beginning of summer then the prices become minimal. So, it is necessary to wait for reduction of prices on devices from Nokia. In case of Sony Ericsson phones such model as Sony Ericsson T68i becomes to cost much less, about 180-190 dollars, it, in turn, will provoke reduction in price of Siemens S55. If to speak about production from Siemens then surprises wait for those who is going to get models À50, Ñ55. We will repeat our recommendation, wait for summer, manufacturers will be compelled to critical reduce the price for their production.

We recommend wholesalers not to purchase large amounts of phones and do not pay attention to slight reduction in prices. It is necessary to take devices in amounts which will suffice for a week of work. At the big purchases the chance is great, that the subsequent reduction of price will suspend the goods in warehouses, money will be lost. Fixing of wholesale prices becomes clear to that they will be kept on extent as a minimum of three weeks. Historically such fixing it is necessary to wait to the beginning of July, to 15 numbers of this month the prices will be locked in on all the market. Then the summer calm will follow, it will be prolonged up to the end of August.

Eldar Murtazin ([email protected])
Translated by Andreas Von Horn ([email protected])

Published — 21 April 2003

Have something to add?! Write us... [email protected]

 

News:

[ 31-07 16:21 ]Sir Jony Ive: Apple Isn't In It For The Money

[ 31-07 13:34 ]Video: Nokia Designer Interviews

[ 31-07 13:10 ]RIM To Layoff 3,000 More Employees

[ 30-07 20:59 ]Video: iPhone 5 Housing Shown Off

[ 30-07 19:12 ]Android Fortunes Decline In U.S.

[ 25-07 16:18 ]Why Apple Is Suing Samsung?

[ 25-07 15:53 ]A Few Choice Quotes About Apple ... By Samsung

[ 23-07 20:25 ]Russian iOS Hacker Calls It A Day

[ 23-07 17:40 ]Video: It's Still Not Out, But Galaxy Note 10.1 Gets An Ad

[ 19-07 19:10 ]Another Loss For Nokia: $1 Billion Down In Q2

[ 19-07 17:22 ]British Judge Orders Apple To Run Ads Saying Samsung Did Not Copy Them

[ 19-07 16:57 ]iPhone 5 To Feature Nano-SIM Cards

[ 18-07 14:20 ]What The iPad Could Have Looked Like ...

[ 18-07 13:25 ]App Store Hack Is Still Going Strong Despite Apple's Best Efforts

[ 13-07 12:34 ]Infographic: The (Hypothetical) Sale Of RIM

[ 13-07 11:10 ]Video: iPhone Hacker Makes In-App Purchases Free

[ 12-07 19:50 ]iPhone 5 Images Leak Again

[ 12-07 17:51 ]Android Takes 50%+ Of U.S. And Europe

[ 11-07 16:02 ]Apple Involved In 60% Of Patent Suits

[ 11-07 13:14 ]Video: Kindle Fire Gets A Jelly Bean

Subscribe

Register | Lost password?

E-mail


Password




© Mobile-review.com, 2002-2012. All rights reserved.