The era of profitable cell phone sales in Africa is far away

In Africa, besides wigs, what else is a good business to do? Many people will first think of cell phones.

It is true that in recent years, with the advancement of infrastructure in Africa, the penetration rate of cell phones is increasing. According to the U.S. Pew Research Center, in 2002, about 10% of adults in Tanzania, Uganda, Kenya and Ghana owned a cell phone, and about 33% in South Africa. But by 2019, according to the GSMA, smartphone penetration in sub-Saharan Africa is about 45% and internet user penetration is about 45%, and smartphone penetration is expected to rise to 67% by 2025.

The huge market has attracted a large number of Chinese businessmen to flock to it, including a large number of cell phone businessmen from Huaqiangbei, who dived into various parts of Africa before 2013 to sell very cost-effective cell phones. They found that Africans’ desire for cell phones was comparable to Europeans’ desire for silk in the Middle Ages, and sales became incredibly easy, with many making a fortune here.

In addition to the influx of practitioners in Huaqiangbei, domestic cell phone giants have also targeted this market, such as Huawei, Xiaomi, OPPO, etc., have embraced Africa.

Huawei is one of the earlier Chinese cell phone manufacturers to enter Africa, in 1996, Huawei began to expand the African market, and has now become one of the mainstream suppliers in the African telecommunications market. Huawei Africa employees have written in Huawei’s “Voice Community”, “We insist on visiting customers every day to communicate with them about our progress, analyze their needs, and deliver plans and strategies in a timely manner.”

“Huawei phones are not priced much lower than branded phones in Europe, and they rely on service rather than price to gain a competitive advantage.” Says one African cell phone seller.

In fact, it’s not just cell phones; Africa is a developing market, and more and more investors are entering this land to be developed. European and U.S. Internet companies have a bigger presence in Africa, and in May 2020, Facebook is building an underwater cable about 37,000 kilometers long across Africa to bring more people online on a continent of 1.3 billion people. facebook says the main goal of the program is to increase connectivity to Africa.

According to research agency data, from 2015 to 2020, MTN (South Africa’s largest telecom operator) mobile tariffs have fallen annually, by an average of 40%. the decline in traffic tariffs means that the mobile Internet wave is accelerating, and applications such as social and information, as well as e-commerce, will also accelerate the run out of giants. in 2019, African e-commerce giant Jumia U.S. shares went public and now has a market capitalization over $1.1 billion.

However, this growing market has both risks and opportunities, and too many uncertainties are affecting investors who are crowding into the market. For example, policy factors, market conditions, etc., are creating too much uncertainty for these investors.

Everyone is waiting for this market to mature, and then harvest the traffic to become the next Alibaba, Tencent or byte jumping. Only, these people need more risk resistance to meet the challenges of the market.

In 2017, cousin told Peng Liang, the African market is good, let him go to Africa to do cell phone business. 2013, because Huaqiang North closed big transformation, cousin went to Africa to do cell phone business, more time, monthly income of 30,000 to 40,000 yuan, is a very easy thing. Long ago in the African market to earn the first bucket of gold cousin, want to grab into the larger market opportunities, he plans to invest in Africa mining.

At that time, Peng Liang was still selling cell phones at the building stall in Huaqiang North, and the profit of a cell phone was only 5 or 10 yuan, and the customers were becoming less.

His cousin’s cell phone business in Africa was flourishing, and he described to Peng Liang a prospect full of wealth: Africans’ desire for cell phones was much stronger than that of the Chinese. From Shenzhen wholesale a cell phone priced at three to four hundred yuan, to Africa profits can be seventy to eighty percent. Africans don’t care about the brand, they rush to buy, the only thing they care about is the battery to be durable. And in terms of functionality, they are more concerned about whether the phone is dual card dual standby or even multi-card multi standby.

At that time, Huaqiang North has long been no longer the prosperity of the past. The rise of the Internet, squeezing the market space. The rise of online shopping, so that Huaqiang North vendors face a survival crisis, encouraged by his cousin, Peng Liang is also considering a change of place.

At the end of June 2017, Peng Liang went to Africa, and he chose the second largest city in the DRC, Lubumbashi.

After a 15-hour plane ride, halfway around the world, Peng Liang did not feel very hot, but felt more comfortable than Shenzhen, the only thing is that the black people he saw were taller than Peng Liang.

Out of the terminal, Peng Liang had an illusion, as if time travel, back to more than 10 years ago in Luocheng County, Hechi City, Guangxi, potholes in the road, private houses, people wearing printed with “Jiangxi Lingma 66”, “Meituan delivery” and other Chinese characters half-sleeves, laughing in the street.

Peng Liang’s cell phone store is located in the center of Lubumbashi, the second largest city in the DRC, with a total of 30 square meters and a monthly rent of 2,000 USD. Later, Peng Liang felt that the traffic was too low and ran to the mall to rent a few counters for only $300 a month.

“We don’t call it selling cell phones, we call it wholesale cell phones.” Peng Liang said. His cell phone store can sell more than 2,000 cell phones a month, the net profit can reach 30,000 to 40,000 yuan. He hired six or seven employees, after airlifting over cell phones from Shenzhen, selling locally, mainly Huawei, HTC, Jinli and other cell phone brands, and then relying on several local distributors to distribute, more, some people take more than 20 units to sell, less can also take four or five units at a time.

After selling for a period of time, Peng Liang found that Africans especially fee cell phones, the return rate is particularly high, either the screen is broken, or the earpiece is broken. “They dance at any time, run, and even pick up the car, so that the chances of damage to the phone become larger.”

Refurbished phones from the Huaqiang North market are going to account for half of Peng Liang’s sales. In the eyes of dealers such as Transn, Huawei, they are cottage army, but Peng Liang said, ” Africans wages are so high, you sell really they can not afford to spend. The cottage market will always exist, and in the future, even if I don’t do cell phones, there will be others who do.” He said.

Peng Liang gave his employees a high salary, a base salary of 400 yuan, sold a commission of 3 yuan, staff wages from 1,000 yuan to 2,000 yuan. You know, the local police salary also only 2,000 yuan ranging, nannies only 700 yuan a month.

In Peng Liang’s opinion, cell phones are still a very big market in Africa. According to IFC, in 2020, the penetration rate of smartphones in Africa will be only 40%, and the per capita ownership of smartphones will be only 0.33. This is a huge gap with the Chinese market. According to the Ministry of Industry and Information Technology, by the end of May 2021, there were 1.608 billion cell phone users in China, and based on China’s 1.41 billion population, China’s per capita cell phone penetration rate is 113.9%.

What’s more, most Africans are willing to spend a month or two of their salary to buy a smartphone, despite their low income, and everyone basically has a feature phone, a smartphone, a feature phone to make calls and a smartphone to access the Internet.

“People are timely, focused on the moment, willing to spend money for themselves, many employees are moonlighters, and some employees will borrow money from their bosses even if they are sick and have no money.” Peng Liang said.

But profits are getting thinner and thinner. Like Peng Liang, Lubumbashi this street has seven or eight Huaqiang North people selling cell phones, we will cooperate with each other, but also competition.

Today, the profit of a cell phone has fallen to 100 yuan. In addition, returns have become impossible because of the epidemic, air freight has become expensive, 90 yuan a kilogram, which makes some “aftermarket phones” have to sell at a loss, because it is impossible to return to Shenzhen, not enough freight.

What’s more, Shenzhen and Huaqiang North from the end of the supply chain are strengthening the governance of intellectual property infringement and copycat machines, which makes the supply risky and unstable, sometimes the order cycle from 1 month to 3 months or even half a year.

Cell phones may just be a carrier for African companies investing and starting up in this wave of the Internet, and everyone hopes that the Internet can be like China and get an explosion in Africa.

“It feels like there are too many dollars and not enough African projects to invest in.” An employee of the first China-Africa venture capital incubator, Africa Program Innovation, told an overseas Internet product manager that venture capital invests in an expectation, and emerging markets are better able to build expectations and have greater imagination compared to mature markets; in other words, the risk is proportional to the reward.

In Nigeria, for example, mobile payment platform Opay announced this year the completion of its latest round of $400 million in financing, and Palmpay, owned by Transnational Holdings and NetEase, also received $100 million in financing. In addition to these two big platforms, South African fintech JUMO has also secured more than $100 million in funding, along with a variety of projects large and small.

“Everyone is adding to the infrastructure of payment tools in order not to miss the next Alipay in the future, and to create one of the most important links in the closed loop of the mobile Internet service provider industry.” A person familiar with the matter said.

In 2021, African startups are receiving much higher funding than last year, even though the business numbers are not growing by the same amount.

Almost everyone recognizes the opportunity in the African market, but challenges also loom over the huge market at all times, such as a volatile political landscape with a divided and diverse culture, a market of 56 countries rather than a single giant market like China.

According to partech statistics, the distribution of financing by country or region in Africa shows that, as in previous years, the amount and number of VC investments are still concentrated in a few markets such as Nigeria, Kenya, Egypt and South Africa, with the top 4 countries attracting 80% of VC investments and the rest still waiting for the ripple effect of economic inclusion.

Much of Africa appears to be very traditional, such as advertising consumption. In Africa, local consumers have a very high trust in advertising media, FM radio, outdoor advertising (such as painting walls), TV, these traditional channels are much higher than simply placing a variety of Internet advertising, they believe that the ability to put advertising in these places, the strength of the company will not be too bad, will not easily run. 2020, Kenya’s FM channel or advertising revenue is still ranked first, this is far beyond the investors’ expectations.

“All emerging markets way is similar, in like Indonesia, the Philippines Southeast Asia similar emerging markets are also the same, posting bus posters, painting the wall, etc., are very conventional promotion methods.” An overseas Internet product manager said.

In 2018, Jack Ma also contributed $10 million to set up the “Jack Ma Africa Venture Fund” to help young Africans realize their dreams, so that they can “seize the inclusive globalization and digitalization, so that 100 Alibaba can appear in Africa.

At that time, the overall shipment of cell phone market in Africa was 215.3 million units, down slightly by 1.9% year-on-year. Among them, 127.1 million feature phones were shipped, accounting for 59.0% of the overall market, while 88.2 million smartphones were shipped, accounting for 41.0% of the overall market.

And with the acceleration of network construction, the African smartphone market is now speeding up significantly. According to the first quarter of 2021, the African smartphone market is recovering strongly, growing by 16.8% year-on-year to 23.4 million units. And while the African market is still growing, in Peng Liang’s view, the risks are also increasing, and being here, is not a long-term solution. “We won’t fit in here, we’ll still go back to China.” Peng Liang said he usually still keeps his Chinese dining habits, eating a $10 serving of bok choy, $100 of grilled fish, and $20 of Lao Gan Ma.

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