Huawei is rethinking its retail strategy in South Africa after its deal with its former partner, Fantastic 1 Mobile, broke down in a legal dispute last year.
If negotiations with a possible new local partner are not fruitful, the company may instead choose not to have sales-focused retail stores in South Africa but rather build a brand and experience store similar to one the company opened last year in Milan, Italy. This store will probably be in Johannesburg.
Huawei’s GM for the South African consumer business, Zhao Likun, said in an interview with TechCentral on Tuesday that he can’t comment on the dispute with Fantastic 1 Mobile as the matter is before the high court.
In December 2017, Huawei refuted a claim it owes R22m to Fantastic 1, with which it partnered in 2016 to open Huawei-branded retail stores across South Africa, saying there was “no basis” to the company’s claim. The stores were closed in October 2017 after Huawei terminated the agreement.
According to its financial records and its discussions with Fantastic 1’s business rescue practitioner, there is “no basis” for claiming this money, Huawei said in a statement e-mailed to TechCentral at the time. Fantastic 1 founder Nisaar Ally strongly disputed this.
Fantastic 1 was placed into business rescue in June last year as the company “could not maintain the rental, staff salaries and marketing” expenses associated with running the stores on its own, said Ally. He said Huawei was in breach of its agreement. Fifty employees were retrenched because of the store closures.
Huawei sent Ally a letter on 4 September 2017 in which it said it was “enforcing its right to cancel the agreement and all store plans in their entirety” with effect from 4 December 2017. After receiving the termination notice, Ally was advised to close the stores or risk running up further debts.
Fantastic 1 signed the agreement with Huawei in late 2016 to build as many as 13 Huawei-branded retail stores across South Africa. Five were opened, Ally said.
Likun said on Tuesday that the South African market is different from others in that high-end consumers tend to buy their devices directly from the mobile operators and that sales-focused stores might not be the best model. Vendors operating their own-branded stores can’t necessary offer advantages over operator stores, he said.
“In the future, we will open one experience brand store, like our Milan store. In this store, sales will not be the main target. Experience and brand will be the main target for Huawei. This is our strategy. We have changed our strategy from sales stores to an experience/brand store. This is more important than sales.”
However, he said Huawei remains open to the idea of operating sales-focused retail stores, provided it can find a “good partner”. He said the company is in talks with a potential partner.
“Will only open retail sales stores based on the competence of the partners. We don’t want to reopen sales stores (if it doesn’t make sense to do so).”
He declined to say when an experience store might be opened, saying this is dependent on finding the right location at the right price. — © 2018 NewsCentral Media