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China's Oppo uses sales rep army and ad blitz to leapfrog over smartphone rivals
[JAKARTA] Chinese smart phone company Oppo doesn't believe in subtle marketing.
It has built a massive network of 320,000 retail outlets across China and other parts of Asia, its sales representatives earn commissions on every phone they sell, and it has filled the airwaves and covered thousands of billboards with advertising based on the endorsement of some of the hottest Asian pop stars.
The company also keeps total control of just about everything, from design to distribution, and making the phones itself rather than farming production out to contract manufacturers.
Oppo also sells a lot of devices through its own stores, deals directly with any retail partners rather than through layers of middlemen, and provides them with sales reps and generous incentives.
The aggressive strategy has been working, allowing Oppo to leap ahead of some of its largest rivals who rely much more on online marketing and the network providers to flog their products.
From nowhere a few years ago, Oppo has jumped into fourth place in smart phone sales in the world. In the third quarter, it jumped into first place in China with 17 per cent market share, according to research firm Counterpoint. It is No 2 in Indonesia, and is rapidly growing in India.
In many ways Oppo's marketing success is a testament to how commoditised the smart phone market has become and how the big Asian markets have become increasingly important.
Oppo's phones aren't much different from the medium-priced range of products made by rivals, such as Samsung Electronics and Xiaomi. Oppo, though, has managed to generate a lot of buzz for its phones, such as the R9 "Selfie Expert" that targets Asia's mass of social media users with a relatively powerful camera, making it the best selling smart phone in China in the third quarter.
It has been helped by recent stumbles by Apple Inc, which posted its third successive quarter of declining iPhone sales on Tuesday, and Samsung, which halted production of its fire-prone Galaxy Note 7 phones.
"No other brand could match Oppo's sales bombardment tactic," said a Shijiazhuang, Hebei-based executive with a mobile phone distributor that sells many rival brands.
The big question is whether the strategy is sustainable. Oppo's marketing cost base is higher than brands focused more on online selling, and increasing at a rapid clip. That is fine while it is expanding quickly but may not work if the growth rate slows either because it in any way lags rivals on product development or there is a wider economic dislocation, analysts say.
"I think the model is stable, but the growth going forward may be slow and require more investment," said CK Lu, an analyst at research firm Gartner.
Another issue is that in some markets where sales are dominated by the network operators the strategy doesn't work - one reason why it hasn't yet made a play for the United States market.
It failed in Mexico after selling through local carriers. Low brand awareness and pricing that was higher than rivals contributed to its problems there, said Strategy Analytics analyst Woody Oh.
The blitz marketing tactics were on full show at a shopping mall in Jakarta one recent morning. As well as boasting spacious and flashy stores, the company sent at least a dozen sales representatives - mostly young women - around the mall to ask shoppers if they want to try an Oppo phone.
The incentives help to create a driven workforce. One Oppo sales representative said in his best month he can earn commissions of US$1,500 - six times the minimum wage in Jakarta.
Its big physical presence across a country such as Indonesia also works well in smaller cities and towns where online shopping is less developed and people are more likely to want to walk into a shop to buy a new phone, analysts say.
"We manufacture all our phones ourselves... We don't engage distributors, we want to make sure we have end-to-end control over the consumer experience," said Sean Deng, chief executive of Oppo Singapore, who also introduced Oppo to Indonesia.
Oppo's strategy can be traced back to BBK Electronics, a main street retail brand and manufacturer of phones, DVD players and other electronics goods, that has been a household name in China since the 1990s.
Set up to target the overseas market by BBK's founder Duan Yongping and his right-hand man Tony Chen, Oppo entered the mobile market in China in 2008 when smart phone sales started to soar following Apple's iPhone launch.
Altogether, the combined sales of the four phone brands that come under the BBK-Duan umbrella - Oppo, Vivo, OnePlus and imoo - put the group in the No 2 sales position in the world behind Samsung, according to research firm IHS Markit. Vivo was No 2 in the China market, just behind Oppo, in the third quarter, according to Counterpoint.
US-based Mr Duan, nicknamed "Duanfett" in China because of both his own success and his admiration for American billionaire investor Warren Buffett, built his fortune from BBK, and successful investments in Chinese Internet technology company NetEase, as well as US online media company Yahoo in the early 2000s.
He has since shifted part of his focus to philanthropy, and he is no longer engaged in the day-to-day operation of the companies, according to people familiar with him.
Oppo's rapid ascent has caught its Chinese rivals who rely more on online marketing, such as Xiaomi and LeEco, flatfooted.
Xiaomi, once China's most valuable tech startup on the back of the online buzz surrounding its affordable products, has seen its fortunes steadily decline over the past three years, as its online-focused marketing failed to penetrate deep into rural areas, while its growth in big cities sharply slowed.