Global market clearing house

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Dublin-based handset trading site gsmExchange operates in a sector in turmoil. The old mobile phone trade is broken; part of it uprooted by HM Revenue & Customs’ campaign against VAT fraud and the rest struggling as competition is driving margins down and middle-men out.

But this idea of a market eating itself is really a parochial UK vision of dodgy dealers and box shifters, according to Essam Bishara’s assessment of the global distribution sector. The import/export market in the first half of 2009 has been buoyant, reckons the gsmExchange boss.

The grey market has been cleaned up by the clampdown on VAT carousel fraud, and the economic climate has encouraged traders to find new international routes to market. GsmExchange, set up by Bishara (pictured) in 1999, is the conduit for this new trade.

And business is good for it in these changing times. Its last audited accounts, for 2007, show growth in turnover and profitability of over 50 per cent. Bishara wants the precise figures held back, but the business is profitable, and increasingly so.

Its 2008 accounts, due to be filed September, will show further growth, he claims – although the leap will be lesser as new opportunities are more scarce. Membership is up 30 per cent annually in the first half of 2009, to 33,625. “People are turning to us as a way to increase, and at least to maintain, levels of business in times likes these,” says Bishara.

GsmExchange is the largest auction house of its kind, reaching 30,000 handset traders in 200 countries across Europe, the Middle East, Africa, Asia and the Americas.

It is not a venue for market or eBay traders to pick up a few phones on the cheap. One hundred units is a guideline minimum (and typical only of trade in exclusive devices like the Apple iPhone) and members are rigorously vetted, and reviewed – they are required to show a bonafide trading history, along with two references from existing gsmExchange members.

“We could have grown numbers more, but we are careful about who we invite onto the platform. And there is little viral marketing for the platform because members keep it secret. They don’t want their competitors to know their methods,” says Bishara.

The essential gsmExchange trading platform is a global industry clearing house for handsets. It enables registered members from across the globe, typically distributors and wholesalers, to dispense of excess stock or plug shortfalls in portfolios. Requests and guide prices are visible to all members but, crucially, transactions close in private. Nevertheless, the site provides a live-time feed of trends in the global supply and demand of mobile phones.

Bishara says: “There are a few other platforms likes ours – a couple in the UK, a couple in Central Europe, a few in the US and the Far East. But we are the longest-established and our customers tell us that we are the best. We charge a little more but it’s a better service.”

Typically, gsmExchange members recover their investment in their first transaction, suggests Bishara. Two thirds complete deals within four weeks of joining.

New platforms have been created to ringfence the process for certain clients, so manufacturers and network operators, global businesses, can control the flow of surplus inventory between markets.

Specifically, it has developed a bespoke online market place at Vodafone’s request, to run separately of the open trading floor and exclusively to subscribers. It is pitched primarily at network operators looking to run down stock inventory by trading between group business units, rather than offering it out to the wider gsmExchange platform.

Full article in Mobile News issue 442 (June 29, 2009).

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