An alarming drop in retail purchasing power threatens more than $4 billion of MWG’s revenue, an open “rebirth”

Strong decline in purchasing power challenges MWG’s management

The sharp decline in retail purchasing power is one of the standout stories at Mobile World Investment Joint Stock Company (MWG) 2023 shareholder meeting, which achieved revenue of nearly VND 135 trillion last year, equivalent to about VND 135 trillion. $5.7 billion. The larger the scale, the stronger the influence.

Until the fourth quarter of last year, Mr. Nguyen Duc Tai – chairman of MWG and his associates could still be quite optimistic about the purchasing power story. The group’s management team even plans to submit to the general meeting of shareholders an employee bonus plan (ESOP). But the situation quickly took a turn for the worse in the first quarter of this year. MMG will have a second year in a row without an ESOP program.

“The situation is tense, purchasing power has problems,” said Mr. Nguyen Duc Tai. “You can experience it for yourself by carrying your car around the center of Ho Chi Minh City and counting how many shops are posting rental signs,” added MWG’s chairman.

Mr. Tai has always been famous for answering shareholder questions skillfully. He said a half-joking saying that if he lived in District 1, he would put on his shoes and jog right in the commercial center, because it is both spacious and air-conditioned, not crowded, and has plenty of oxygen.

Poor purchasing power caused MWG to adjust its business plan (P&L) this year, flat compared to 2022.

“Purchasing power of phones and electronics in the first months of the year is falling more than MWG’s forecast”, the report to the General Meeting of Shareholders stated. The cautious sentiment, delay in spending decisions for durable and high-value products is happening even among the middle and high-end customers due to the decline in consumer confidence in the face of the challenges of the economy. .

Meanwhile, customers with needs in the low-income segment have more difficulty in accessing consumer loans through installments. For essential goods such as food, FMCG and pharmaceuticals, the trend of saving and cutting consumer spending also occurs by buying products with the same use at lower prices.

Nearly 80% of MWG’s revenue is under double impact

Although at the meeting, shareholders, analysts of securities companies and investment funds mainly paid attention to the Bach Hoa Xanh model after the food chain underwent a strong restructuring since the end of last year; but the mobile phone and electronics segment with The Gioi Di Dong, Top Zone and Dien May Xanh are the main fronts of MWG when contributing 78% of the group’s revenue in 2022, equivalent to nearly VND 104 trillion.

“Telephone and electronics industry has been greatly affected”, said Mr. Doan Van Hieu Em, who is in charge of MWG’s business areas other than Bach Hoa Xanh, spending more time at the end of the meeting to tell shareholders. But Mr. Hieu Em added, in danger, there is more opportunity. The difficult period is an opportunity for MWG to conduct a “rebirth”, with actions that are not similar to those of the previous 18 years of business. “Even there are things we bring back to nothing (nothing) to take action, decisions are not stuck”, the MWG leader frankly.

The main message given by Mr. Hieu Em is that MWG will find ways to take advantage of every sales opportunity when customers come, not let customers leave without buying a product. Second, difficulties are opportunities for MWG to consolidate everything from costs – operations – people, to prepare when the market recovers. Mr. Hieu Em took the example of 2021, when two-thirds of MWG’s stores were closed due to the Covid pandemic, the group focused on sales in a quarter and exceeded the set business targets.

MWG is experiencing a double impact in this year’s business landscape. Besides the serious decline in purchasing power, the consumer finance segment is also a “big minus”. In the past, at one point, revenue from consumer loans accounted for 35% of the group’s total revenue. Now, this percentage has dropped to less than 10%. There are two reasons mentioned by Mr. Nguyen Duc Tai: one, 4 installment partners, 3 are in a frozen state, only one activity remains; Secondly, the loan approval process is also tighter, previously the rate was up to 60-70%, now it is only 20%. With a huge scale, MWG has built an internal installment system, which enables the group to take advantage of pushing up the installment sales to a very high level when the market is favorable, on the contrary, it is greatly affected when the market is favorable. freeze.

Typically, a retail chain uses three weights to measure success: customer traffic, conversion rate, and average order. As customer traffic and single average decline due to poor purchasing power, it is obvious that retail chains must make for higher conversion rates.

The show of strength makes the opponents groan

With MWG, the group’s management is likely to show the strength of a big man. The first is a new strategy with Apple products.

“MWG used to be not too strict about Apple’s selling price compared to competitors, which made the price of the group’s products sold up to a million dong higher at times,” said Nguyen Duc Tai. It is an opening for competitors to find customers. But soon this phenomenon will stop, which means that MWG will launch a price competition. “You will hear a groan in the near future, and it will last”, the not-so-happy message of the MWG president sent to other phone and electronics retail chains.

Another factor that constitutes the strength of MWG is complete data for evaluation and decision-making: from opening a new store to optimizing the store’s product range. The built-in data system helps MWG not rely too much on the knowledge of individuals, which Mr. Nguyen Duc Tai believes will not be able to help the corporation survive sustainably.

With a loyal customer base of millions, MWG has the ability to understand more about the consumption habits of its own customers, thereby fine-tuning its approach accordingly. “At any time, we can survey to collect customer insights,” said the MWG president about the strength of the large customer base.