Cutting Room: Nokia and Brightpoint

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Rumour of Brightpoint’s failure to hit sales targets has been rife within the market for some time.

And in any sales business, achieving targets is the only goal. And as with any business, failure to meet those, often ends with dismissal. Case closed? Not in this instance.

Because the grey market is the only way out for sales channels struggling with tough targets. Nokia should cut it some slack.

The commercial agreements between Nokia and its partners are confidential. But historically, Nokia’s accredited distributors have been required to sell 50,000 units per quarter to retain a direct relationship.

New measures have been introduced too, but it is the headline volume marker that is most bothersome in a tough trading environment.

Brightpoint is handling high-end Eseries and Nseries devices, Nokia’s smartphone offerings.

But look at the statistics. Global handset sales decreased 9.4 per cent to 269.1 million units in Q1 2009, the “biggest quarter-on-quarter contraction” in the history of the industry according to Gartner.

Sales haven’t improved much. Q3 2009 figures showed 308.9 million units sold.

But, whether massive decrease or miniscule increase, it is clear developed mobile markets are hemorrhaging sales while emerging markets plaster over the losses some.

Nokia’s market share declined 1.5 percentage points year-on-year, with handset sales down from 117.9 million in Q3 last year to 113.47 million in Q3 this year.

Nokia has been hit badly from three sides – by strong new competitors, a maturing market and a recession. It cannot afford to let the slide be a slump, when it is market leader and relative upstarts like Apple, BlackBerry and HTC are taking its share.

Interestingly, both Brightpoint and its successful new competitors operate commonly at the premium end of the market, where there is some growth still in the west.

For smartphones, sales surpassed 41 million units in Q3, a 12.8 per cent increase from the same period last year.

The problem is, perhaps, businesses’ demand for BlackBerry-like Eseries phones and buggy Nseries handsets has not been sufficient, especially when there are genuinely iconic units from rivals available to them.

Nokia knows some amount of grey trade will go through, and is perhaps even necessary. It counts against its local sales figures, after all. Head office clearly disapproves of inter-market disruption.

But Brightpoint’s failure is not, apparently, like Carphone Warehouse’s.
Carphone recently committed to huge volumes of Nokia 5530s, only to sell a big chunk of them for grey market export.

By committing, it secured an exclusive and also stopped high street competitors from doing the same. That, or it has simply mis-forecast sales in spectacular manner.

Brightpoint and other UK distributors rely upon hitting targets to get the marketing kickback that comes with the achievement, and which is virtually the only real and direct financial incentive. It also secures their reputations with customers.

Clearly, however, some redress is needed in terms of reality and expectation by manufacturers.

 

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