EBT Mobile China,
a fast-growing retailer of mobile phones in China, is practising what
consultants preach by expanding westward into China's second-tier
cities to find new business.
It opened 51 stores in the first six months of 2006, taking its total to 144. A year ago, it operated in just 10 cities on the eastern seaboard but it has begun to expand inland and is now in 16 cities.
Shanghai-based EBT Mobile sees a lot more potential to expand geographically as the results from Wuhan, its first location not on the east coast, have exceeded expectations. It has also opened in Chongqing, the new mega-city of central China.
See yesterday's EngagingChina article for more on Chongqing and opportunities in China's second-tier cites.
The geographic expansion helped push EBT Mobile's first-half sales up 55% to £15m. Gross margin is up slightly too, to 11.1%, although the company is still making an operating loss.
The eight-year-old company reports its results in Sterling because it is one of the growing number of small Chinese companies listed on London's AIM market.
Unlike some of its more exotic bedfellows on AIM , EBT is in an established and easy-to-understand business -- selling mobile phones -- and its CEO, Zhang Ge, has more than a decade experience working in retailing in Hong Kong and the mainland.
EBT is a minnow in China's mobile phone market. So it has had to forge relationships with bigger fish to survive. It has links with mobile phone manufacturers like Nokia and Motorola, leading hypermarket retailers like Carrefour, and, most importantly, China Mobile, the country's dominant network operator.
EBT claims it is the only specialist mobile phone retailer to have been selected to participate in China Mobile's new line of "service halls". To date, it has opened 24 of these outlets, two more than originally announced, and its expect to open around a dozen more during the second half of 2006.
The only possible cloud on EBT's horizon is China's clampdown on the miss-selling of wireless value-added services (WVAS) like ringtones, which hit fellow AIM company, MonsterMob so hard -- see this EngagingChina story.
However, EBT says the vast majority of its revenues come from selling phones not WVAS. Anyway, it argues the clampdown could work to its advantage, because salespeople in its stores are better placed to explain how such services work and so reduce customer complaints and misunderstandings -- the reason for the clampdown.
The company recently raised £5m but more geographic expansion is presumably going to need a lot more funds. Sooner or later it is going to attract the attentions -- welcome or otherwise -- of a better funded western retailer. Last year, London-listed Carphone Warehouse was rumoured to be circling.
EBT Mobile is not doing anything startlingly original and mobile phone retailing is a notoriously fickle business. Nevertheless, its success demonstrates that a small specialised retailer can make progress in China by having a good strategy and executing it well.
