Nokia Tightens its Marketing Channels

Nokia’s distributors are facing problems in the Chinese market. Some of its major distributors, such as Calilee, are experiencing steady decline in profits since the end of last year.

Since its introduction in the Chinese market, Nokia has readjusted its marketing channel system twice. Before 2000, foreign brands that had dominated the mobile phone market in China sold their products through general agents, who could take advantage of their market networks to deliver the goods quickly to large and medium-sized cities in most parts of the country. As the number of mobile phone users has skyrocketed in China, by 2003, cheaper, domestically produced products with efficient distribution channels had captured more than half of the market share and covered tier 2, even tier 3 cities where foreign brands were unable to reach.

Nokia decided to search for provincial distributors in China and restructured their general agents in 2002. Another change is that mobile phone supermarkets, chain stores and household appliance firms have emerged in China since 2000. Thus Nokia decided to cooperate with terminal retailers, such as China Motion Telecom, EBT, Gome, Sunning, D.Phone, etc.

But they lost control over the product sales, since 2004 Nokia introduced the “Fulfillment Distributor” system (FD) to take charge of retail terminals according to its own distribution team. The FD system was designed to handle terminals in small cities and towns. Nokia now has over 5000 salespeople across China, and operates more than 110 flagship stores in addition to general agencies, in order to manage and control distributors and terminals in every city.

Under the FD mode, Nokia firmly controls the profit of its distributors and the amount of products in every region. Although Nokia is running with profit, its distributors are facing red figures. It has to cope with two emerging problems: balancing profits and resources at the various channels. This involves setting different prices in different markets and determining when to provide those markets certain products.

This is an abstract of a special coverage on www.cbfeature.com
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