September 22, 2017

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KMG adds Meizu rights in Egypt

by Stuart Wilson, Wednesday 22 March 2017

Karim Ghoneim, CEO at KMG
Karim Ghoneim, CEO at KMG

Egypt-based distributor KMG has added distribution rights for fast-growing China-based smartphone brand Meizu. Karim Ghoneim, CEO at KMG, said: “We are delighted to have started working with Meizu in Egypt. We are running a Meizu roadshow in shopping malls and at major sporting events. We want as many people as possible to see and touch the Meizu devices.”

“We are very selective in terms of the brands we take on,” added Ghoneim. “They must have real business potential, a long-term vision and marketing investment. We’re doing a soft launch for Meizu through Souq.com, which will be followed by a huge marketing push.”

40-strong KMG was established in 2003 and began to focus on mobility products in 2011 when it signed Infinix, quickly establishing the brand as a leading player in the Egyptian market. KMG, which is attending DISTREE Middle East in Dubai in May, believes it still has the capacity to support more brands in its portfolio.

Online channels

The Egyptian market has seen significant changes in recent years, driven by economic and political changes impacting channel structures and strategies. The growth of e-commerce as a viable route-to-market has also played a role in redefining the market.

Ghoneim explained: “Two years ago, online sales started to become a real channel in Egypt because of the likes of Souq.com and Jumia. We’re a preferred supplier for both sites and they continue to product good sellout.”

Despite the growth of e-commerce, the mobile device market remains dominated by the independent retailer channel.

“The independent retailer channel accounts for up to 75% of smartphones sold in Egypt,” said Ghoneim. “Online accounts for just 3% or 4% of smartphones with the remainder sold through organised retail and operators.”

In the IT products space, the scenario is reversed with organised retail the main route-t0-market, followed by independent retailers. While the share for e-commerce remains relatively small, it is clear that this situation will change rapidly in the years ahead.

“E-commerce can give better market penetration,” said Ghoneim. “In Egypt, most of the population is under 40 and we have high internet penetration and high levels of smart phone usage. The challenge for online is the development of logistics companies in Egypt.”

KMG acquired an e-commerce platform called www.e3050.com in 2015. The website is currently under reconstruction in preparation for a relaunch, highlighting how important KMG expects e-commerce to become within Egypt.

Local assembly?

In recent years, the Egyptian market has also been dealing with currency issues that have impacted the availability of certain products. The government is also keen to reduce levels of technology product imports to help redress its trade deficit. KMG continues to adapt to these market changes and also look for new business opportunities.

“We are looking at the possibility of assembling for a major mobile brand within Egypt. We would look to cooperate with a strong Chinese brand and leverage their research and development expertise,” added Ghoneim. “We understand there is always the possibility there could be more restrictions on imports.”

“We have opened discussions with one brand. We are waiting to see what laws the government puts in place and what new industrial zones are being created,” he added.

Structural changes

KMG has developed a highly efficient distribution structure within Egypt, using sub-distributors and three tiers of resellers to ensure adequate consumer reach and extensive penetration into the independent retailer channels.

Understanding how market issues impact the way vendors and distributors engage with different channels is vital to understand the evolution of the Egyptian consumer technology sector.

“Hypermarkets have lost some power in the last two years because of the limited availability of key products in the market,” said Ghoneim. “Hypermarkets were not flexible enough to change their contract and business model and their way of dealing with distribution to reflect this.”

“Distributors preferred to work with independent retailers rather than organised retail because they could get better terms and deploy better financial models. Independent retailers would work on lower margins. Organised retailers were also asking for margins that vendors could not support, so again they are not as powerful as two years ago,” Ghoneim added.

While it is clear that the Egyptian market has been through a turbulent few years, there is now a belief that the market has real growth potential in the years ahead.

“There have been some tricky times, but now we’re all looking forward and believe that Egypt holds real potential for all vendors. There is a huge population and massive potential for online channels to develop too,” concluded Ghoneim.

DISTREE Middle East 2017

We are pleased to confirm that Channel EMEA is an official Media Partner for all DISTREE events in 2017, including DISTREE Middle East. DISTREE Middle East 2017, which takes place from May 8th to 10th in Dubai, gathers together hundreds of senior executives from e-tailers, retailers, online marketplaces, distributors and vendors of consumer tech products. Thousands of pre-scheduled meetings take place between delegates during the event, accelerating consumer tech channel growth and development throughout the Middle East. This year’s event will also include a delegation of leading consumer tech retailers from Africa.

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