Date
22 September 2017
ZTE reaps a publicity windfall as China’s First Lady
ZTE reaps a publicity windfall as China’s First Lady

ZTE embraces online sales to dial up handset business

Among the various social events attended by Chinese President Xi Jinping {習近平} and his wife Peng Liyuan {彭麗媛} during their Europe trip was a football match in Berlin between youth clubs from China and Germany. As they watched the friendly sporting encounter, Peng pulled out her white smartphone and took some snapshots of the young athletes, providing a valuable photo opportunity for the global media. With the images flashed across television screens and newspapers, people in China were quick to notice that the First Lady was using the Nubia Z5 mini smartphone made by ZTE Corp (00763.HK), abandoning the iPhone 5 which she was known to flaunt previously.

The supportive gesture from the First Lady is great news for Shenzhen-based ZTE, which announced recently that it returned to profit last year after suffering a loss in 2012.

The telecom equipment maker reported a net profit of 1.36 billion yuan (US$218 million) for 2013, but sales remained a concern as they slid 10.6 percent to 75.2 billion yuan. Revenue from its handset business dropped at a faster pace of 24.6 percent from a year before to 21.7 billion yuan. Without tax rebate and subsidies, the firm actually had an operating loss of nearly 1.5 billion yuan for the year.

The outlook for 2014 is better. With telecom carriers stepping up investments on 4G networks, ZTE should see improved equipment sales. On the handsets front, the company, meanwhile, is seeking new channels to boost the profitability.

In recent years, distribution channels for sale of mobile terminals such as handsets have become diversified in the industry, but ZTE has been still relying mostly on telecom carriers to sell its products.

ZTE Chairman Hou Weigui {侯為貴} told the media that this has put great pressure on the firm’s inventory control. While teaming up with carriers can lift the sales number overall, it also means that ZTE has to launch many different models, resulting in scale disadvantage.

To tackle the problem, ZTE announced that it will start embracing the internet. Chief executive Shi Lirong {史立榮} said the group may sell its smartphones directly through the internet in future.

The group will mobilize its employees to sell phones through the social networks, 21st Century Business Herald cited Ceng Xuezhong {曾學忠}, the head of ZTE’s handset department, as saying.

ZTE is said to have sent an internal memo to its 70,000 employees, inviting them to be part of the “sales team”. 

An employee can open an account through a ZTE e-commerce mobile app named Weipinhui {微品會}, then forward the links through social media like Weixin or Sina Weibo to his friends, to win deals. He can get 5-10 percent commission if a deal is sealed through the process, while courier fees and after-sales services will be borne by ZTE. 

Shi aims high for the coming year, targeting both profit and revenue growth. In fact, the group is adopting the “quality smartphone” strategy under the leadership of Ceng. ZTE will launch smartphone products with a focus on quality, rather than quantity, aiming to enhance the user experience.

Ceng said earlier that the shipping volume of ZTE handsets last year was 40 million units. The number is expected to increase by 50 percent to 60 million units this year, with 40 percent of the phones targeted to be 4G products. The group plans to launch three 4G smartphone models this month.

ZTE is not alone in placing high hopes on e-commerce. Concerned about telecom carriers’ efforts to lower their procurement costs amid heavy 4G spending, handset maker Coolpad last week struck a deal with JD.com to sell its flagship handsets through the online shopping mall. The Shenzhen-based firm aims to generate 30 percent of its sales from online channels.

– Contact the writer at [email protected]

RC

EJ Insight writer

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