Shenzhen’s Huaqiangbei Sellers Are Struggling As Phones Get Cheaper

This is the ground floor of one of the electronics malls in Shenzhen’s famed Huaqiangbei district. Huaqiangbei is a stretch of large malls and shops in the Southern Chinese province, and due to its proximity to some of the manufacturing superfactories in the city, it has a cluster of malls that specializes in carrying tech goods.

These electronics malls generally start out with booths on the ground floor and individual store units as you go up the floors. They’re typically buzzing with activity from consumers to wholesalers keen to check out the quality of new devices coming out of the factories.

But when I visited some of the malls last month, only a handful of the open booths downstairs were tenanted, and the shutters were down on almost every floor of one of the seven-storey malls. when I asked one of the shopowners what was going on, he said his former neighbors packed up progressively over the past months, forced out by the tight competition of hawking nearly identical products as one another.

Ling Liling, who runs a local phone reseller business called Weibintongxin, was at one of the booths downstairs. Her shop window carried an array of Chinese phones as well as Nokia and Samsung knock-offs. She said local phones were starting to sell a lot better these days, compared with several years ago when people were averse to buying local brands.

shenzhen upper1Furthermore, as Nokia’s brand name slips, there is no draw for the average Chinese consumer to pick up a Nokia, knock-off or otherwise, when a dual-core Huawei goes for just as much and works better, she said. Samsung Galaxy S3 knock-offs are still selling well, however.

She pointed out that as technology gets cheaper, with most makers running Android, resellers have to either rely on selling shiny knock-offs or hope for volume sales on white label phones.

Meanwhile, across the corridor from her, some homegrown brands like Yoobao and Meizu were enjoying comparatively better reception. Rather than imitate foreign brands, these companies have been building up their brand reputations over the past few years.

According to analyst IDC, the top five smartphone makers in China in Q3 last year were Samsung, followed by Chinese makers, Lenovo, Coolpad, ZTE, and Huawei, in descending order. Apple was knocked to sixth place.

shenzhen yoobaoThe display area for some of the local brands was noticeably more dressed up than the section carrying knock-offs

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The closing down of a lot of resellers in Huaqiangbei is also due in part to the government’s ongoing efforts over the past few years to clean up the district’s image as a gritty place to find knock-offs. The growing affluence of Chinese consumers also means that knock-offs aren’t the defacto choice as they used to be, as well.

Benjamin Dolgin-Gardner, who owns Shenzhen CE and IT (SZCEIT), said the average quality level of commodity phones has risen to very decent levels, which explains why so many phone resellers are being squeezed out.

shenzhen lastAnd where the electronics market in Huaqiangbei used to cover a fuller range of IT products like PC parts and peripherals, consumer tastes shifting over to mobile products saw most shops move their product lines to mobile accessories or phones. Jian, a reseller with Xiaozhang Accessories, said she used to carry PC parts, but they moved over to mobile accessories like power banks and micro USB cables. The strategy paid off in early days, but she’s starting to feel the pressure of the growing competition from other resellers coming in with similar commodity products.

“Tablets are the next thing that’s coming in a big way,” Dolgin-Gardner said. The average Chinese user, having been exposed to the Internet via the mobile phone, is craving a larger screen that will still take a 3G SIM card, and is accustomed to the Android interface. “It’s just an evolution,” he said.

This trend isn’t limited to Asia, he added. SZCEIT recently won two big contracts to manufacture tablets for a white label maker in the US, and another in the UK, which are expecting big demand for non-Apple tablets in Western markets.