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When opportunity knocks

Published: 
13 Sep 2016

A serendipitous search for a new phone for his wife sparked the birth of Mobile World, now in its 12th year

Inspiration strikes at the oddest of times. One morning in January 2014 when Tai Nguyen was out shopping for a new phone for his wife, a gift from his annual work bonus, he struck a hurdle. He’d already been to two shops and yet no one was able to provide him with the complete picture of what he could get for his money. Had they been able to show him 10 models within a similar price range, he said he could have made a decision. At that time, a mobile phone was a big investment costing around VND 5 million, while the average income per capita in Ho Chi Minh City was just VND 1.1 million.. He had the money, he was willing to pay, yet could not find what he wanted. Tai Nguyen smelt a business opportunity. The experience sparked the idea for Tai’s enormously successful Mobile World, which would later become a key player in Vietnam’s hardline retail industry. 

A relatively young enterprise, Mobile World was established in 2004. Its explosive growth has impressed many experts who had been predicting the impending failure of the retail electronics field at that time. Today, Mobile World continues to record consistent development despite the volatilities of the economy. Retail Asia Publishing and Euromonitor International’s Top 500 Retailers in Asia Pacific 2015, for example, ranked Mobile World JSC second after Saigon Coopmart in Vietnam’s top 10 retailers.

Considered one of the fastest growing retailers in Vietnam by revenue, earning on average VND 70 billion every day, compared to Nguyen Kim shopping centre’s VND 25 billion, Mobile World brings in VND 1 billion every 13 minutes. As a result, the company accounts for 30 percent of the mobile phone market in Vietnam and is considered by locals to be a familiar and trustworthy electronics retailer.

Table 1:Revenue of Mobile World

Source: MWG Annual Report 2009-2015 (mwg.vn/report)

Despite the many long-established competitors in the electronics retailing field, the company retains firm control of its dominant position. Mobile World’s success is undeniable, due to its significant performance in three major areas: its audacious strategies, a thorough understanding of consumer behaviour and effective management.

Bold business strategies for greater success

Gaining a technological advantage

In 2004, although the e-commerce industry was yet to become popular in Vietnam, Tai wished to open a business selling mobile phones. He was quick to recognise the opportunity to create a comprehensive website that could provide detailed information from technical facts as well as images of the various types of mobile phones available in Vietnam. With the launch of the website, Mobile World became the first in the country to allow customers to obtain online product knowledge prior to visiting a store. This improved the purchase experience, making it possible for customers to research a product before spending a considerable amount of money on a mobile phone.

Go small but quick

While Mobile World’s other main competitors focused on developing a large 5,000 square metre stores in hypermarkets model, selling everything from appliances to electronic devices, Mobile World pursued a niche market. It did not concentrate on selling large appliances, which required  large storage and display spaces and which yielded slow growth rates. Speaking in 2015, Mobile World’s CFO, Vu Dang Linh, said in 2015 that the company instead decided to engage in information and communications technology (ICT) products such as mobile phones, tablets and laptops that are for appliances in this industry.

With less than 1,000 square metres per store, the cost to open a new Mobile World outlet is definitely lower compared to others in the industry. As a result, the number of Mobile World stores has been increasing rapidly over the last few years. In 2009, the company had 38 stores, but by March 2016, this had grown to 654 stores across the country. The strategy has enabled the company to expand to major cities such as Ho Chi Minh City and Ha Noi, as well as other provinces in Vietnam. Outlets are established quickly. When a fire gutted a Mobile World shop in January 2016, three days later, while the media was still busy reporting the incident, it reopened. Many people were surprised at that time, but few knew that this was the usual time taken by the company to open a new store.

Table 2: Number of stores of main hardline retailers in Vietnam (2011–2016)

Source: Adapted from MWG (2016), Nguyenkim (2016), Pico (2016)
 

Understanding customer behaviour

Undoubtedly, satisfying customers’ needs is the essential key to the survival, profitability and growth of every company in a highly competitive marketing environment. Although Mobile World was the first firm in 2004 to launch the comprehensive website that launched the online-shopping model in Vietnam, the company adapted to the behaviour of its customers very well. For instance, a decade ago, mobile phone mom and pop stores dominated the mobile phone retail market. Notwithstanding this, instead of adopting the same retail concept as other mobile phone shops or following the online shopping model, the company invested in a spacious, user-friendly and comfortable store where customers can easily compare and consider their choice among the numerous mobile phones displayed. As a mobile phone represented a major item of expenditure for many individuals at that time, people needed to be offered choices before making an informed buying decision. The first Mobile World store was bigger than any mobile phone outfit from hardline retailers or mom and pop mobile phone establishments. This enabled customers to have a look, or at least try the many phone models before making a purchase.

Additionally, customer service is one of the company’s strong points and people trust the brand. The warranty policy of the company is available online and in every store. It is also explained in detail by the sales staff to customers at the point of purchase. With its return and exchange policy, consumers can return products within one month of purchase, with Mobile World receiving them at 80 percent of market value. Instalment payments, free delivery nation-wide and technical guidance have also left a deep impression on the public. For example, Mobile World is the first company in Vietnam to offer no interest on instalments on the purchase of selected items. It is also the only provider to offer a complimentary one-year warranty for screen protectors for mobile phones.

Management in retailing industry is not a simple task

In 2006, Mekong Capital invested US$4.5 million in the two-year-old Mobile World based on its management abilities. CEO of Mekong Capital, Chris Freund, later revealed that it was the best investment decision that the fund has made so far. Indeed, managing more than 650 stores over the past 12 years as Mobile World has done is not an easy task. Tai said while opening a new shop is not difficult, effective management of the stores is a huge challenge. Realising that, he applied a vigorous Enterprise Resource Planning (ERP) system to the company right from the start, and at a time when this concept was still not even familiar in Vietnam. The system allows Mobile World to effectively manage the performance of any shop at any location without the direct supervision of the board of directors.

Mobile World also attracts employees with competitive salaries, bonuses and stock options. In 2015, the board of directors made a 7 million stock issue worth more than VND 500 billion in an employee stock ownership plan (ESOP) for their 900 employees. This policy not only improves employee income, but increases their sense of ownership and commitment to the company.

Changes in demand, price fluctuations, and currency exchange rates, meant prices of products on the website had to be synchronised with the stores located around the country. Tai installed electronic price tags in all stores that are linked to a price tag system that is updated and synchronised every two days. This enabled the company to apply its pricing strategy efficiently as well as created a consistent customer experience from its website to its stores.

Challenges are still ahead

Mobile World has achieved its results because of its management style, breakthrough tactics and customer care. While the electronics retail industry is a profitable industry with great potential, challenges still remain. The advancement of technology has obstructed the development of many firms. Meanwhile, the disappearance of mobile phone brands in Vietnam, such as Motorola, Sony Ericsson and Blackberry, has had a deep impact on the business. According to a recent survey, Apple and Samsung are currently the two big competing firms in terms of launching the latest mobile phone technology in Vietnam. It is also predicted that Apple will sell its products without intermediaries. In the U.S. and several developed nations, the company intends to work with mobile network operators directly for mutual benefits. Mobile World should be aware and be ahead of these trends that are both full of opportunities and challenges.

With its strategy to seek a presence throughout Vietnam, including rural areas, Mobile World could be close to its customers while finding its “blue ocean”. Given its strong belief in the small store concept, it will not be surprising if Mobile World ventures into other areas beyond hardline products.

 

Source:


Khai TN Nguyen is a lecturer at the School of Business, International University – Vietnam National University HCMC.

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