The African mobile phone market used to be dominated by Nokia and Samsung. Transsion, which has become the "King of African Mobile Phones", has established extensive and effective offline sales channels in nearly 60 African countries based on second- and third-tier cities.
Transsion has successfully seized the market share of African mobile phones from Samsung, but new entrants will face higher competitive barriers.
Transsion continues to increase the development of new markets such as India, Pakistan, and Bangladesh, new market revenue continues to grow, the proportion of revenue from the African market is gradually reduced.
As of June 2020, the smartphone share increased by 5.22 percentage points compared to the same period in 2019. On the one hand, the company relies on the domestic industrial chain to reduce costs and establish a mature supply chain system, and on the other hand, it has established local factories in India, Bangladesh, Pakistan, and Ethiopia to cover the local market.
Relying on its advantages in the field of mobile phones, Transsion initially formed a "mobile phone + mobile Internet + home appliances, digital accessories" business ecological model. Founder Securities Xue Yimin and Chen Hang believe that the African Internet is still in the growth stage, the future continues to be optimistic about the company's Internet Product Incubation.
Here is the translated text of their report:
1 Past: entering the African market to capture Samsung's share
1.1 African markets previously dominated by Nokia, Samsung
During the feature phone period, Nokia dominated Africa.
Nokia dominated the feature phone market in Africa thanks to the cost performance of Nokia phones.
In the smartphone era, Nokia used Windows Phone instead of Android, which led to Nokia's decline in the African market.
According to Opera Software, in December 2010, 87 of the top 10 most popular mobile phones in Africa were Nokia phones, and 8 were Samsung phones.
However, with Nokia losing its leadership position in the mobile phone market, Samsung became the leading manufacturer in the African market.
Samsung replaced Nokia as the African mobile phone market leader.
In 2012, Samsung launched its "Built for Africa" product line to attract African consumers by developing energy-saving appliances that are durable in high temperatures and suitable for unstable power supplies.
In 2013, Samsung designed three smartphones, Grand, Star, and Neo, specifically for Africa, providing African consumers with dual SIM and dual standby phone products.
1.2 Transsion adopts the strategy of "global vision, local execution" to enter the African market.
1.2.1 Build a niche market in second- and third-tier cities
The company's founding team mainly comes from the mobile phone division of Boeing Co. Mr. Zhaoge Zhu, the chairman of the board, used to be the head of the overseas market of Boeing Co.
Mr. Zhu left Portier in 2006 to found Transsion, and since 2003, the share of mainland brands in the domestic market has been gradually declining due to the fact that foreign manufacturers have started to sink channels and seize market share by taking advantage of cost advantages.
After 2003, the market share of domestic mobile phone brands declined year by year due to the impact of foreign mobile phone brands.
Transsion was established in 2006, and with the listing of itel brand, the company started to enter the African mobile phone market.
Based on the company's own strength and the competitive environment, Transsion took an important step to deploy in the second and third-tier cities in Africa to attract consumers with low prices, increase marketing efforts, and establish a network of sales channels to promote sales in rural and urban areas.
1.2.2 Extreme localization of products to solve consumers' pain points
The company focuses on niche market research and development, and in each market, it enters in different African countries, the company uses local teams to deeply understand the actual needs of consumers in the local market and innovate for them on a personalized basis.
(1) Deep-skinned photography technology: The company has a huge amount of dark-skinned image data samples, on the basis of which the database can be used for dark-skinned facial feature detection and face attribute detection model training tests.
At the same time, the company independently develops classification training model algorithms based on localized scene data, parameter tuning algorithms for actual scenes, and develops products with dark-skinned face beauty function to focus on solving the problem of taking photos to beautify the face of dark-skinned users in Africa and India.
In June 2020, in the "Look Into Person (LIP)" international competition held by CVPR 2020 (International Conference on Computer Vision and Pattern Recognition 2020), the top conference in the computer vision field, Transsion's image R&D team won the "Dark-skinned" award. Portrait Split Track Champion.
(2) Multiple SIM: Mobile phone penetration in Africa increased from 29% to 69% from 2008-2013, and according to GSMA Intelligence, the average number of GSMA licenses in 2013 was 3.8, with at least 13 countries having four or more GSM operators.
With low coverage and varying signal effectiveness from operator to operator in different locations, coupled with expensive cross-operator tariffs, African consumers are used to carrying multiple SIM cards with them.
Transsion launched its first dual SIM phone in Africa in 2017 and has since launched a 4 SIM 4 standby phone to cater to local consumer demand.
(3) Customized personalized service for different markets: African consumers' sweat is highly acidic and corrosive to mobile phones, Transsion developed surface anti-corrosion coating technology based on the pH database of African consumers' sweat, and the waterproof and anti-corrosion design function can resist acid up to PH3.5.
In addition, Transsion has developed a fingerprint sweat and oil-proof algorithm. For hands that are often stained with oil and sweat easily, the probability of success in unlocking Transsion's fingerprint is higher than those in the industry.
1.2.3 "Advertising + Channel" to build cultural identity
Transsion has signed partnership agreements with Premier League Manchester City and Leicester City to become the team's official partners.
In 2019 TECNO signed a three-year partnership agreement with Manchester City to boost Transsion's presence in the Middle East, and in 2020 TECNO and Manchester City will build a football training camp in Dubai.
2020 Syinix, Transsion's mid-range and high-end appliance brand, and Leicester City become official brand partners. Transsion's influence and visibility will be enhanced with the development of its communication efforts.
In Africa, Transsion adopts a sales model based on channel distribution. Transsion currently has more than 2,000 dealers worldwide, resulting in wide coverage and strong penetration.
Transsion's dealers purchase mobile phones and other products from the company and then sell them through subordinate dealers or their own terminal stores.
Transsion assigns staff to both secondary distributors and end stores to obtain information from the terminals, provide feedback to the distributors, and provide solutions to the distributors.
Localization creates a cultural identity and Transsion's visibility creates a barrier to entry. According to Africa Business, Africa's best brand category for 2020, TECNO is ranked 5th, itel is 17th and Infinix is 26th.
Transsion has been cultivated in Africa for many years, and its reputation, popularity, and influence have formed a relatively high barrier to competition after years of building.
1.2.4 Function machine-based, seize the African smartphone market
The company quickly seized the African market with its price-performance ratio advantage, and Samsung's market share squeezed out significantly. In 2013, the company entered the African market and quickly seized market share, and Samsung's market share fell rapidly from a peak of 34% to 13%.
From 2015 onwards, the market share of TECNO and itel accelerated as the company deepened the localization of its products and the coverage of its sales network.
By the end of 2016, itel had become the highest market share mobile phone brand in Africa, accounting for 20 percent of the market, surpassing Samsung's 19 percent.
By the first quarter of 2018, itel and TECNO had market shares of 16% and 17% in Africa and the Middle East, respectively.
The company leads the feature phone market share, with TECNO, itel, and Infinix making a joint effort to enter the smartphone market.
According to Counterpoint data, in Africa and the Middle East, functional machine market, the company TECNO and itel in the second quarter of 2020 is up to 27% and 46% respectively, much higher than Samsung's 2%, market share ranked third HMD in the 10-15% hovering between.
In the smartphone market, Samsung market share in the second quarter of 2020 is still as high as 26%, the company through the precise positioning of the product gradually encroach Samsung market share.
TECNO, itel, and Infinix cover the high-end, low-end, and trendy teen market, respectively, and Infinix in particular was launched and quickly grabbed a 5% market share.
In the second quarter of 2020, the market share of TECNO, itel, and Infinix will be 11%, 5%, and 4% respectively.
2 Now: based in Africa, tapping into emerging markets for mobile phones
2.1 Emerging market potential is realized and the company's revenue continues to grow.
The company's products are focused on mobile phones, mainly TECNO, itel, Infinix. Transsion Holdings is a mobile phone-focused company engaged in the design, development, production, sales, and brand operation of smartphones.
The company has achieved market leadership in emerging markets such as Africa, South Asia, Southeast Asia, Middle East and Latin America.
According to IDC, the company ranked fourth in 2019 with a global market share of 8.1% for its products, including 6.8% in India and 52.5% in Africa, making it the absolute market leader in Africa. From 2018Q4 to 2019Q4, the smartphone market share increased from 34% to 40%.
The company has aggressively implemented a diversified layout to take full advantage of its strengths. After gaining a dominant position in emerging markets for its mobile phone products, the company launched digital accessories (Oraimo), household appliances (Syinix), and after-sales service (Carlcare) businesses, as well as providing software and internet products and services. These include the company's own HiOS, itelOS, and XOS smartphone operating systems.
At the same time, the company has partnered with other Internet companies to launch mobile apps such as Vskit, Boomplay, Ficool, and PalmPay, covering short videos, music playback, e-novels, and mobile payments.
2.3.2 Offline main push, the online urgent need for logistics and e-commerce maturity
The African market is more fragmented than the more unified markets in Europe, America, and China, and Transsion has adopted a strategy of marketing everywhere in Africa. There are nearly 60 countries or regions on the African continent, with a lack of online retail and a complex mix of offline retailers, agents, and distributors.
This is why Transsion has adopted a "everywhere" marketing strategy, enabling African consumers to see the logos of the three Transsion mobile phones everywhere.
In contrast to the advertisements painted on roadside walls in rural China, Transsion's advertisements are placed directly on building facades.
The number of small dealers has increased significantly, with large dealers providing the main revenue. From 2015 to 2019, thanks to the company's high market share, the number of downstream dealers has grown rapidly to 2,398, with a CAGR of 119%, including 360 dealers in Africa and 2,038 dealers in India and other regions.
Among them, 360 dealers in Africa and 2,038 dealers in India and other regions have a CAGR of 119%, of which 360 dealers in Africa and 2,038 dealers in India and other regions have contributed 50.4% of the revenue.
Sales strategies vary by region, with Africa mainly focused on offline sales and India mainly focused on online sales. The online model has become the preferred choice for sales in the country as well as in some other countries by virtue of its low cost, low barrier to entry, and convenience.
However, the online model needs the support of a logistics system and mobile Internet service system, so the company chooses the offline sales model in view of Africa's low degree of development, numerous countries and regions, and diversified needs.
The company currently works with a number of distributors in Africa to create a sunken and highly penetrated offline sales model.
In Africa, the company has chosen to adopt an online sales model.
Online sales are promising, and logistics and e-commerce incubation are key. With the development of the African e-commerce market, the online sales model will still become mainstream in the future, the company is currently the largest mobile phone seller of African e-commerce Jumia, Xiaomi also entered into cooperation with Jumia in 2019 to enter the African online mobile phone sales.
In terms of logistics, Transsion subsidiary the company Yiwei Holdings and China Tong Express joint venture to set up Speed Africa Logistics the company, business covering express, warehousing, freight, and cross-border freight between China and Africa, with the intention of solving the lack of logistics the company in Africa.
During the epidemic period, Sodaflex formed business linkage with Carlcare, a professional after-sales service brand of Transsion, to provide "free repair and return" service.
3 Future: Layout the African Internet and build a complete ecological chain
3.1 Replicate the mobile phone experience to expand the digital appliance market
The company's digital home appliance products have begun to take shape in the market, with full coverage of the home appliance category.
Oraimo is a 3C product accessory brand founded by the company, mainly for smart speakers, smart bracelets, mobile power, Bluetooth headphones, etc., and has now covered more than 30 countries in Africa and Asia.
Syinix is a home appliance brand founded by the company, with main products such as TVs, refrigerators, air conditioners, washing machines, etc. The company's digital home appliance market is in Africa and Asia.
The company's digital appliance market is taking shape in Africa and Oraimo is now one of the most popular 3C accessory brands in the region.
The company is heavily promoting TVs, which form a link with mobile phones.
The penetration rate of TVs in Africa is higher than that of other home appliances. Therefore, Transsion chose TVs as the main direction of its home appliance business and launched Smart TV Infinix and entry-level TV itel in addition to Syinix, a high-end TV brand, and took advantage of its mobile phone sales channel to rapidly promote its TV business in Africa.
At the same time, relying on Transsion's existing technology, the company is able to provide internet support for TVs and link them with mobile phones.
Carlcare is a professional after-sales service brand established by the company, which provides services for mobile phones, tablets, home appliances, lighting, and other electronic products.
It has more than 2,300 service outlets and 7 repair factories, covering Africa, the Middle East, Southeast Asia, South Asia, Latin America, and other regions.
In addition, customers can also use the Carlcare app to book 2-hour fast repair service, and as of November 2019, the Carlcare app has reached 10 million monthly active users.
3.2 Laying out the Internet business to broaden the company's development space
Independent development of mobile Internet business will be the company's future growth. After the company completes the layout of its mobile internet business, it will open up the upstream and downstream of the mobile phone business and form a mobile phone-centric ecosystem in emerging markets such as Africa.
The company will then be able to expand its market by developing apps independently, which will contribute significantly to the company's growth.
The mobile internet business is expected to become another important main business for Transsion Holdings in addition to mobile phones.
By the end of June 2020, seven apps with more than 10 million monthly active users had been co-developed.
3.2.1 Content consumption accumulates future growth momentum
Three types of OS system complete coverage of the high, medium, and low-end market. The company has deeply customized three smart terminal systems HiOS, itelOS, and XOS based on the secondary development of the Android system, which are used in TECNO, itel, and Infinix respectively.
Among them, XOS has introduced a series of cutting-edge features such as dual clock lock screen, phone gestures, off-screen games, Wi-Fi sharing, and off-screen presses in order to comply with the young and fashionable consumer concept.
Transsion OS has become one of the mainstream operating systems in Africa and other major emerging markets around the world.
Leveraging its established consumer base, the company has partnered with a number of leading Internet companies in the mobile Internet business.
The company's huge presence in emerging markets has made it the partner of choice for Internet companies to develop their business in Africa, including NetEase, Universal Music, Warner Music, Sony Music, Palmpay, Reading, Google, Facebook, and others.
It has partnered to develop five applications with over 10 million monthly activity, with Vskit, Boomplay, Palmpay and Ficool being the most representative.
The company has entered into partnership agreements with Google and Facebook to enhance the competitiveness of the company's products. All of the company's mobile product names have been certified by Google and have undergone rigorous security and performance testing.
Google also provides APK pre-installation, product customization, system onboarding and promotion services for the company's products.
The company's mutual collaboration with Google has greatly enhanced the experience and competitiveness of its mobile phone products in Africa.
On the other hand, the company has also signed a software pre-installation contract with Facebook in 2019, which has become an important traffic portal for Facebook in emerging markets such as Africa.
3.2.2 Missing from the PC era, mobile fosters user stickiness
Mobile phone pre-installation and localization strategy helped the company penetrate the app market.
First of all, the company expanded the market share of mobile phones by sinking the market and deploying sales networks and after-sales service points in multiple locations and increased the users' reliance on Transsion brand mobile phones.
Secondly, the company acquired initial users through mobile phone pre-installation and finally achieved user retention through high-quality APP content and localized services.
Africa has not experienced the PC era, and app user stickiness is cultivated from mobile. Take Mi Chat as an example, the Chinese market where Mi Chat was located at that time had experienced the PC era, and each company had a certain customer base with high customer stickiness, which was a great advantage for the company to expand its business and gain market share.
However, Mi Chat is only a new type of free instant messenger, with a low user base that is difficult to accumulate quickly.
Apart from the differences in the product itself, Tencent WeChat can directly import QQ contacts and quickly seize the market by leveraging QQ's huge user base.
The hardware+software model has certain advantages, but it needs to be applied according to the characteristics of the market.
Some underdeveloped regions such as Africa have not experienced the PC era, so there is no customer base for all kinds of software, and the penetration rate of Transsion mobile phone is high.
It relies on software on hardware to accumulate users and form customer stickiness, so as to develop the market and take up a large market share.