When mobile phone retail chains first appeared in China in the 1990s, most of them were quite profitable, with a margin of as much as 30 percent on average.

But now, as the market competition grows fiercer, retailers find they are facing declining profits and mounting stockpiles. Is there some way to help mobile retailers maintain high profitability?

In the past decade, business people in every industry complained about sliding profit margins. But as we find, there are always some companies that not only survive the fierce competition but also make handsome profits, such as McDonald's, KFC and Wal-Mart.

Although these companies belong to different industries and differ in the products they sell, they share one similarity - they have all mastered the key factors for running a successful retail business.

Product

Good value for price is always what consumers want. Whether a product has good value depends on whether it can create value for its consumers. As for mobile phones, utility and personal expression is critical for creating value. Don't expect one mobile phone to satisfy the demands of all consumers.

For mobile phone retailers, the best strategy is to add value while reducing costs. For example, retailers could provide more customer services and increase the capability of the products. Meanwhile, they can also reduce costs by cutting procurement, operation and management costs.

Marketing

There are always some companies that will make money in every industry. Why can they achieve that while their competitors are scrambling to make ends meet? The reason is simple - they are able to build a strong brand through successful marketing strategies.

In China, branding will get even more important in the coming years. For handset retailers, products, services and prices are the key factors. Once a company builds up a strong brand successfully, it will have already covered a lot of ground.

Creating a pleasant consumption experience is also very important. Consumers now are paying more attention to the environment of a shop. They are not only buying products but also buying a cultural experience. If a mobile phone retailer manages to offer consumers a pleasant communication experience rather than just handsets, it will do well.

Business model

In developed economies, the services sector accounts for 80 percent of the total output. There are only two kinds of people - the ones who provide services and the ones who receive services. And these services are highly specialized, which is a trend for countries like China.

Although handset retailers have been promoting the concept of specialization in China in recent years, a few of them have achieved high professionalism in store management and services.

For example, after a consumer buys a handset, he will require after-sales services. Later, the consumer may start thinking about buying the latest model, which may have better functions and design. Presently, most retailers only provide after-sales services such as repairs. Actually, other services such as software-updating and recycling could be more useful for the clients.

Advertising

Advertising has become an important tool for retailers these days. Advertising can now be found everywhere, such as storefront signs, wrapping bags, leaflets and even price tags. A successful retailer is usually able to work out a detailed annual advertising plan and execute it effectively. Some retailers could even create special promotion events to attract the attention of media and consumers.

Management

Management is a daily task for every retailer. Supplier relationships, business development, cost-control and logistics systems are all critical issues for the smooth operation of a retail chain. For every retailer it is necessary to establish an efficient process management system and pay attention to every detail.

The author is an expert in handset retail chain operations. Having worked in some of the leading electronics retail chains in China, he is now the CEO of 8835.com, an online mobile phone distributor

(China Daily July 26 2007)