Abstract

The Chinese mobile phone distribution network is characterized by aggressive cooperation among bigger companies and acquisition among smaller players.

Cooperation among Bigger Companies

This type of cooperation is mainly involved with operators' alliances with 3C chains and specialty chains, and international brands' partnership with large agents.

As operators begin ordering customized mobile phones at a large scale, procurement costs, subsidies, and inventory risks have all increased. Partnering with retailers like Gome, Suning, and Xieheng allows operators to share this risk, and make up for operators' deficiencies in distribution channels and sales experience.

Since 2004 international brands such as Nokia and Motorola have been making heavy use of direct supply. which has greatly increased distribution efficiency. However, the strategy has also increased the requirement for the size of the sales team and management outlay. Under these circumstances, large national agents like PTAC and Telling Communications have become the brands' outsourcing partners, providing logistics services between the factory and the consumer, sales, and maintenance. They also help the brands manage FD platforms and relations with retailers and sales agents.

Acquisition among Smaller Players

In China' central and western regions, small- and mid-sized channel players have been involved with aggressive acquisition activities or have invested in joint ventures to combat pressure from 3C chains and operators, and to increase their negotiation power with mobile phone makers. With the development of the Chinese 3G mobile phone market, the customization and joint procurement led by operators will be the mainstream model in China's distribution network. Judging from China Unicom's development CDMA operations, China Mobile and China Unicom's efforts to cooperate with large retailers, and the close cooperation with PTAC and Telling Communications, working with open channel players to jointly procure mobile phones and to share subsidy cost and profits will be the main distribution model for operators in the future.

Appendix

List of Companies