Mobile World denies closing thegioididong stores

Mobile World denies closing thegioididong stores

Mobile World Group (MWG)’s announcement of closing of seven mobile stores this year took the market by surprise as this was the first time Mobile World had reneged on its aggressive expansion strategy. However, a company representative clarified that the affected units were transferred to the Dien May Xanh chain instead of being closed.

vnreview.vn quoted Dang Thanh Phong, Mobile World’s marketing and communications director , said: “We transferred some thegioididong stores to Dien May Xanh to expand the household electronic appliance business (refrigerators, washing machines, air conditioners). No shops have been closed by MWG.”

The firm’s financial report stated that during this year’s first four months, the number of thegioididong stores dropped from 1,072 to 1,065. The total revenue from the chain of mobile stores was VND12.4 trillion ($546.2 million), slightly up 5 per cent on-year.

Thegioididong against budding e-commerce

According to the firm's website, MWG has a total of 168 mobile phone shops in Hanoi and 232 in Ho Chi Minh City. In fact, the number of stores is high in certain areas that it may lead to competition between thegioididong stores.

vnreview.vn also stated that MWG’s stores are crowding the streets in large cities, with three stores located on the same 3-kilometre street. According to the Ho Chi Minh City Stock Exchange (HSX) the firm’s huge branch network and its unreasonable distribution lead to competition between its own mobile stores. Therefore, the firm needs to restructure the system of its thegioididong stores and temporarily halted opening more stores in late last year.

According to HSX, the average revenue growth of each thegioididong store is nearly 0 per cent because the firm has to spend a lot on operating over 1,000 stores in prime locations of large cities.

Additionally, as e-commerce is becoming more developed in Vietnam with many popular names, such as Tiki, Lazada, and Shopee, the maintenance of traditional stores like Mobile World’s stores are becoming increasingly felt.

Reports of AC Nielsen and GFK identified that the market has reached the saturation point and will gradually go down. This January, the sales of the Mobile World's retail chain fell by 11 per cent on-year.

Bach Hoa Xanh may be MWG's mistake

Parallel with the decreasing sales of its mobile phone retail chain, according to enternews.vn, MWG has turned to focus on the development of Dien May Xanh chain specialising in sales electric appliances, and Bach Hoa Xanh - the firm's convenience stores.

“We want to develop these two chains into major business segments with their performance doubling that of the MWG chain. If it is successful, sales of the group will surpass the target of VND86.4 trillion ($3.8 billion),” confirmed the leaders of MWG earlier this year.

However, this seems a far off ambition as the Bach Hoa Xanh chain is currently deep in red. At the annual general shareholders’ meeting, MWG’s chairman Nguyen Duc Tai indentified that developing the Bach Hoa Xanh chain would be a bit early as the brand is not strong enough.Thereby, the store opening target in 2018 was revised to 500 stores in stead of the initial target of 1,000 stores.

At the end of the first quarter, total pre-tax losses, loan interest, and depreciation of Bach Hoa Xanh amounted to VND60 billion ($2.64 million) and three shops were closed. This was the major reason behind MWG shares falling by 20 per cent since the beginning of the year.

Industry insiders said that MWG’s decision to develop Bach Hoa Xanh is a “step back.” It may be a mistake to apply Dien May Xanh's development strategy to Bach Hoa Xanh.

Mobile World Group operates under two distribution formats, including the “thegioididong” which means Mobile World, and “dienmay” which means consumer electronics. Thegioididong.com currently distributes digital mobile devices (mobile phones, tablets, laptops, and accessories) in all 63 cities and provinces of Vietnam. The first store was launched in 2004.

Dienmay specialises in the distribution of consumer electronics and digital products. On May 4, 2015, dienmay.com has changed its name to DIEN MAY XANH with 600 stores in its distribution network across 63 cities and provinces.

vir