China is home to so many high-tech companies, it is almost hard to believe. Stroll around the center of Shenzhen for a few hours and you will quickly grasp the sheer scale of the industry, its key players, its disruptive influences and its sleeping giants. With each successive trip across the Taiwan straits I feel that China, and Shenzhen in Southern China’s Guangdong Province in particular, is growing and maturing to a size and a level of influence that will soon drape silicon valley in shadow. Today we are focusing on one player in particular. Allow us to introduce Gionee.
Outside of China at least, Gionee is one of Shenzhen’s lesser known companies. They have been in existence since 2002 and by all accounts, are a very forward looking company that is enjoying good growth and significant market share in China. You can also add a thriving and lucrative global OEM/ODM business and an nascent but growing brand presence outside of China. Gionee may not be as cool and disruptive as Xioami or OnePlus, but they are without doubt a very significant player in China’s highly competitive technology industry.
To call Gionee a sleeping giant however, would be to pander to a the view that they are not already a giant in their own right. They are certainly very big in China, but have yet to really make any waves in Western markets, certainly they are way behind their Korean neighbors Samsung and LG in terms of global mind share. Regardless, Gionee is in fact a company that has its sights on Western markets, taking a very long and considered approach to expansion that has seen them first take on foreign markets that lie closer to home.
Building the Channel in China
One thing that many end-users often don’t really understand with too much clarity, is just how the sales channel can influence the availability, and inevitable success or failure of a product. It affects all products in all areas, and even the influence of the Internet cannot change a world where most things still get sold after you found it to be available. You need to know that a product exists in order to want it.
For most companies it is crucial to have the right relationships with the right distributors to actually get your product on the shelves of stores, or even on the product page of a website. This may mean having to bend the knee to an entity that you will rely upon to get your product in the customers’ line of sight.
The strategy that Gionee have employed in China is a common one that several major device vendors employ. Need a sales channel? Build your own. Gionee has invested heavily in creating a vast and tendril-like channel that has become the very back bone upon which their successes have been built. Gionee has more than 40 of its own dealers installed in almost every Province in China, with individual service centers for each. It also has more 500 Gionee outlets in almost all of the larger tier one and tier two cities of China.
Today Gionee claims around 10% of the GSM market in China, and just over 7% of the Chinese handset market overall, making them a very significant player in the world’s biggest market.
This sales channel took many years and plenty of Renminbi to establish. Its maintenance of course is also a drain on company resources, but when we visited Gionee in Shenzhen a few months ago, they were adamant that the creation and maintenance of the sales channel was a key element in its success, and would be a strategy it would adhere to in the future.
If you compare the costs involved with high profile, global marketing campaigns – I’m talking Super Bowl ads, TV ads, major sponsor deals worth many millions and more – the cost of establishing and maintaining your own sales channel seems quite reasonable.
Miss Xin Chen, Product Marketing Specialist at Gionee told me straight up during the meeting:
“We have no expertise in marketing on this level, it’s not one of our core competencies. We stick to what we know best.”
I was at first a little surprised by the sheer honesty of the company ethos; stick to doing the things that you do well. Gionee is not at all worried about the fact that its marketing is not of the scale or quality of Samsung or LG, and is content to pursue a strategy that that has served the company well since its inception in 2002.
In the past few years LG has expanded its sales channel into Vietnam, Myanmar, Thailand, the Philippines and Malaysia. Gionee has also now become available here in Taiwan. Gionee has also had a sustained and significant presence in Africa with its channel presence in Nigeria since 2010. India is also a major target for the company with its channel slowly but surely taking root in world’s 2nd biggest potential consumer base.
Gionee began expansion into these countries in 2011. Today, exports to these countries represent approximately one million handsets a month, a major supplement to its domestic income, and one it will aggressively cultivate in the months and years ahead.
Addressing the High-end: The Gionee Elife S5.5
We were lucky enough to get sent an early sample of the new flagship device Gionee, the Elife S5.5 a few weeks ago. Catch the full Elife S5.5 review here, but the short version of our verdict is that it is a fantastic addition to the current high-end Android smartphone segment. It’s the slimmest smartphone on the market at a mere 5.5mm and is constructed with some quite spectacular build quality – a testament to Gionee’s other core competency. Manufacturing.
Gionee is well aware that in the quickly developing markets where it wants to expand and grow, take India for example, the end user may well be in a position to acquire a high-end device. The sales of attractively built and feature filled Android smartphones will grow in all markets as the price of high-end smartphones also drop. Gionee wants a big piece of the high-end segments of developing matins like India.
The Elife S5.5 is Gionee’s weapon in that high-end segment. You are getting a stunning 5 inch Android device that is actually very competitively priced. The hardware is not of the same class as a Galaxy S5 for example, especially in the area of processor platform and camera, but for the target audience, the Gionee Elife S5.5 is positioned well, leveraging its relationship with MediaTek to produce a great looking device with performance that more than meets demand.
Winning the West?
While visiting Gionee we were shown the Elife S5.5. Of course we were totally impressed with the device and considered it within the context of Western markets. How would it do against the current crop of high-end devices? What will be your strategy in Europe and the US? Our questions were greeted with a cautious response – although we do intend to expand into Western markets, it is not our immediate goal.
Gionee also explained that in fact the company already had a growing and successful business in Western markets with its ODM business. Gionee makes handsets for several players in Europe and the Americas. Ones that we know about include BLU who are major player in the Mexico, Guatemala, Honduras and Trinidad with some in roads the US also. Then there’s Micromax who have a presence in Russia as well as India and Bangladesh, Sri-Lanka and Nepal. You may not have heard of Fly, a Gionee customer that covers the Ukraine and Turkey.
The point that Xin was making, was that OEM relationships are often the best way to expand into new markets. In the case of the West, it makes sense for Gionee to again keep to doing what knows best, building on years of experience as an ODM manufacturer. Attacking the West head on by attempting to build a brand name and image that competes with Samsung, Apple, Nokia, LG, Sony and others that have vast experience to draw on, would be a mistake. A fully fledged assault on Western markets armed with a billion US dollars would represent a huge risk to a company with very little experience.
We have seen several of China’s smartphone manufacturers eye Western expansion with different approaches and strategies. Two of the most notable being Xioami and OnePlus who leverage social media and slick branding to create a customer base of loyal fans. These are two of the most openly disruptive examples in China right now, taking the Shanzhai spirit of smaller, more nimble and versatile players taking on the big guns.
But this does not fit Gionee, a company that has firmly routed traditions and practices, and one that is very much aware of its core strengths – building sales channels, forging relationships to get your product on shelves, while also leveraging your manufacturing prowess in terms of design and scalability to become a leading global ODM.
Gionee is an example of a company with a strong identity within – an identity that probably outweighs its outward brand identity in terms of real value.