Selling Status, and Cell Phones in China
nytimes.com
November 24, 2000
By MARK LANDLER
GUANGZHOU, China The after school crowd was drifting into the
Jegaxunlian phone store, and the staff was ready. Clad in shiny
metallic windbreakers that made them look like refugees from "Lost
in Space," sales clerks swarmed over the young customers.
They showed the latest cellular phones by Motorola and Nokia, as
well as local brands, Konka and TCL. They raved about new features
like wireless Internet access and a built-in Chinese- English
dictionary. They hawked plastic covers, in fluorescent red and
green, to spice up a plain phone.
"Everybody in China wants to own a mobile phone," said Hacken
Hwang, 23, the store's general manager. "For men, it's like having
a cigarette lighter. For women, it's like wearing an accessory."
Jegaxunlian is one of 200 stores that line a boulevard in this
southern Chinese city. Local residents call it Telecom Street, and
it is a popular gathering place for students, street hustlers, even
off-duty soldiers. Everyone, it seems, is looking for a phone.
Two decades after American corporations began talking about China,
making hyperbolic statements about selling cars and Coke to a
billion people, the country finally seems to have generated a
market that justifies much of the promotion.
Cellular telephones are a genuine revolution here. Not only are
they a way for people to sidestep China's cumbersome terrestrial
phone network, they are the status symbol of choice for a
generation of Chinese.
"As a hip Chinese yuppie in Shanghai, you're much more likely to
be concerned about carrying around the latest phone than if you are
a yuppie in London or New York," said Patrick Benzie, chief
strategist at Intrinsic Technology, a wireless Internet services
company in Shanghai.
"You're talking about a massive number of phones," Mr. Benzie
said.
Intrinsic estimated that China has 65 million cellular users, a
number it expected to grow to 105 million next year and 155 million
by 2002. By then, China will surpass the United States as the
largest wireless market.
China Mobile, the dominant cellular provider, has 40 million
subscribers and is the world's second-largest carrier. The largest
carrier, Vodafone AirTouch, recently paid $2.5 billion for a small
stake in the company.
China Mobile and its main rival, China United Telecommunications,
or China Unicom, do not sell phones at a subsidized price along
with service, as is done in the United States. So the onus is on
the phone makers to peddle their products. This has led to a
fiercely competitive market, in which the foreigners woo affluent
buyers with cutting-edge features while the local companies scrap
for the mass market.
"The foreign brands are doing massive amounts of marketing," Mr.
Benzie said. "That's the challenge for local companies."
From billboards to television commercials to displays in shopping
malls, cellular phones loom large. China, far from lagging behind
more developed countries, is helping set the pace in the design and
marketing of cellular phones.
Phillip Leacock, director of mobile-phone marketing for Motorola
Greater China in Beijing, said, "The U.S. has the latest of
everything in the wired-telephone business. But when it comes to
wireless, China has a much greater appreciation of technology than
the U.S."
Motorola has sold about 25 million mobile phones here since 1992,
and is neck and neck with Nokia in market share (each has about 30
percent).
Ericsson, Sony and the other foreign manufacturers account for 35
percent, while the Chinese companies battle for the remaining 5
percent.
China is important to Motorola, not least because its mobile-phone
business has withered elsewhere. The company, based in Schaumburg,
Ill., derived $3 billion, or 10 percent, of its 1999 revenues from
sales of phones and other products here. But with the emergence of
more than a dozen local producers, Motorola's China beachhead is
under threat.
Eager to defend its franchise, Motorola has turned China into a
laboratory for marketing ideas. It recently opened three
high-concept stores in Guangzhou, Shanghai and the western city
of Chengdu to promote its brand.
The stores, called Motorola Towns, feature Buck Rogers-style
displays about the company's technical achievements, like the radio
transmitter that Neil Armstrong used to talk to Mission Control
when he became the first man on the moon. Motorola's latest phones
are displayed in glass cases like jewels. They look less like
communications devices than like lifestyle accouterments.
In the store is a seating area, where customers can chat or take a
break from shopping. The idea is to create a sort of oasis in
China's frenetic shopping malls. Sales clerks, again in metallic
windbreakers, are on hand to demonstrate the features of Motorola
phones. The stores offer free repair service, regardless of where
customers bought their phones.
If this sounds a bit like Nike Town, the jazzy stores where Nike
sells athletic shoes and a dash of attitude, that is no
coincidence. Mr. Leacock said Motorola was influenced by Nike,
which pioneered stores that are entertainment attractions as much
as retail outlets.
The only two other players who have done this are Nike and Sony,
he said, adding "there was a huge gap in the wireless space."
Sharon Zhong, the manager of Motorola Town in Guangzhou,
acknowledged that many of the people who browse through her store
will buy their phones on Telecom Street, where the prices are 10
percent lower. But Ms. Zhong said she believed that many of them
will buy a Motorola phone.
"Improving the image of Motorola is more important than how many
phones we sell," she said. "The people over there might as well be
selling vegetables at the market. They can't explain all the
features of our phones."
Motorola Town draws about 4,000 customers a day. On a recent
afternoon, it buzzed with young people and families, who behaved as
if they were in a carnival fun house. People lined up to make calls
on a giant Motorola phone. Others hopped into a Mercedes sports
car, equipped with a Motorola car phone, that had been sawed in
half.
"The decor is very modern and striking," said Tang Ren-zhong, 30,
an interior decorator from the nearby town of Foshan, who brought
his wife and their two children on an outing to buy a mobile phone.
Pang Ke, a businessman from Jiangxi Province, said his friends
told him to visit the store when he came to Guangzhou. He whiled
away the afternoon there, reading the paper and calling friends.
But Mr. Pang also had a practical reason for coming: he was
looking for a new plastic cover to protect his battered Motorola
phone. Mr. Pang has owned the phone since 1998. He estimated that
he made 20 to 25 calls a day on it, and he acknowledged that it has
become almost indispensable.
"Before I owned one, I was fine without it," he said. "But if you
told me that I couldn't have one anymore, I wouldn't know what to
do."
With customers like these, Motorola will always be able to sell
phones in China. But the company wants to secure its position at
the high end of the market. So it has been designing products
especially for China. One new model, the Accompli, featured a
screen like that of a hand-held computer, where the caller taps out
the desired number with a tiny wand.
The Accompli also has an English- Chinese dictionary, useful for
business executives. And at nearly $600, the phone is not likely to
be bought by many other people. But in prosperous Guangzhou, there
is no shortage of people who can afford such a phone and would
prize it as a totem of success.
The Accompli is also able to transmit wireless data, a business
that analysts say has vast potential in China.
"The challenge for us is to renew our products so that we're not
just selling a basic phone," Mr. Leacock said.
Basic phones will increasingly be the province of the Chinese
companies, many of which are based near Guangzhou, in the Pearl
River delta.
Companies like Konka and ZTE are churning out phones, using
components from Motorola and other foreign companies, that cost far
less than the brand-name models.
Konka, the largest maker of color television sets in China, began
making cellular phones last year. The company said it expected
sales of $1 million this year and $5 million in five years. It uses
Chow Yun Fat, the Hong Kong movie star, to pitch its products.
ZTE, once partly owned by the People's Liberation Army, noted
proudly that 40 percent of its employees work in research and
development. But China's cellular market is driven more by style
than technology, a fact Motorola has recognized in building its
Motorola Towns.
Wei Zaisheng, a senior vice president of ZTE, defended the
emphasis on technology, saying that as the market matured,
consumers would demand advanced features over style. In the
meantime, he is not ready to cede the world's most promising
cellular market to Motorola or Nokia.
"As a local company, we can offer better service," he said. "And
as Chinese people, we understand the needs of the Chinese better." |
