Mobile device distributor and retailer, PT Erajaya Swasembada (ERAA) has reduced its sales target this year by Rp 1.5 trillion (US$ 146 million) following a tough first half of the year, riddled by protracted deliveries and shifts in consumers’ brand preferences.
ERAA spokesman, Djatmiko Wardoyo, said that previously the 2013 sales target was Rp 15.5 trillion, which was 21.1 percent higher than 2012 earnings.
“We have now revised our target to Rp 13.5 trillion,” he said, adding that the target was slashed due to lower than expected sales during the first half of 2013. The company’s net sales fell to Rp 5.9 trillion in that period from Rp 6.4 trillion in the same period last year. Net profit also declined to Rp 129.8 billion from Rp 212.4 billion.
“When we set the sales target at Rp 15.5 billion, we expected profits of Rp 550 billion. But with the revisions, the management has settled on Rp 400 billion,” Djatmiko said.
He added that the first semester had been “arduous” due to the domino effect of regulatory changes concerning the import of mobile devices.
The Trade Ministry in order to encourage domestic production of mobile devices, has stiffened the requirements importers must meet to import mobile devices into the country.
According to Djatmiko, the new regulation has lengthened the lead time of imports by two weeks; inhibiting the company’s ability to move goods swiftly into the market.
“In 2012, the average inventory turnover was 31 days. In the first half of 2013 that period became 43 days,” he said.
The problem, he said, was that demand for the latest devices, such as the BlackBerry Z10 and Q10, remained strong.
As a result, illegal importers noted this disparity, he said.
“The black market has usurped the role of importers in fulfilling the demand for devices,” he said.
Black market importers gained further ground because they were able to sell devices, such as the new BlackBerry releases, for up to 20 percent less than the official prices.
“The existence of this black market has put our margins under pressure,” he said.
ERAA makes 88.1 percent of their earnings through cellular phone and tablet sales.
“There has been a shift in brand preference. Blackberry used to have a strong hold in the market, but now, people are not replacing their old Blackberrys as before,” he noted.
Blackberry is a key brand in ERAA’s portfolio of 14 brands: BlackBerry, Samsung, Nokia, Sony and Apple, contribute 80 percent to its cellular phone sales. Djatmiko added that to stop further weakening in earnings in the second half, the company sought to improve the “efficiency of their cost structures” attributable to two major expenses — sales and distribution as well as general and administrative.
The company spent Rp 197.2 billion on general and administrative expenses and Rp 148 billion on sales and distribution.
“We have hired consultants to assess how we could become more efficient,” he said.
Djatmiko said the company would also improve their distribution network by establishing up to five new warehouses in Surabaya, Medan, Palembang, Makassar and Semarang, with Yogjakarta as an