Cellucom UAE files for liquidation as market sours
Posted on 06 April 2010 with 1 comment from readers
The Al Rostamani Group has filed an application with the Dubai Courts for the liquidation of Cellcom in the UAE in which the group holds a 51 per cent state saying the business ‘could no longer continue as a going concern’.
Once one of the country’s largest mobile phone retailers Cellucom has already closed all its 25 stores in the UAE and its former chief executive officer has left for Africa, The National newspaper reported today.
Bollywood glamour
Enlisting the glamour of Bollywood actress Sameera Reddy to open its third store, Cellucom grew rapidly in the UAE in the 2000s. But the mobile phone market has changed significantly in that period.
Mobile phones are now more like fast moving consumer goods with frequent price and model changes. There has also been mounting competition from larger retailers like the electronics giant Sharaf and hypermarkets like Carrefour.
At the same time shop unit rents have been rising putting additional pressure on profit margins. But perhaps it was the global recession that finally killed off Cellucom with the UAE hard hit last year after resisting its initial impact thanks to high oil prices.
It would be surprising if Cellucom is the last casualty to emerge from the recession. Luxury retailers have also suffered a disproportionate impact from the downturn.
The winners appear to be those purveying more ordinary products to average residents such as the Landmark Group which is still expanding its operations in other parts of the region. Supermarkets also benefit in an economic downturn as people still have to eat and eat less in restaurants and more at home.
Population trends
However, demographics or population changes are crucial to retailers who often rely on incremental growth to keep profits rising. Vacant rental property levels suggest a considerable exodus of expatriates from the UAE last year, whatever official population figures show.
Last month’s official statistics from Dubai purporting to show population growth in 2009 have been widely dismissed as misleading, and may have included some 400,000 real estate and construction workers who have been sent home but whose residency visas were not cancelled.
These remain difficult times for retailers in the UAE.
1 Comment posted by readers:
Having worked with Mr. Nagar in a professional capacity, I can confidently say this was a business on the brink for several years in part thanks to the business model and the lofty aspirations of the owner.
The gulf is a unique market considering the fact as to how quickly they buy new phones. Price however is a key competitive point, and not ambiance, sales or service unfortuantely- all areas where cellucom focused on. The prices were never really competitive and management including Mr. Nagar refused to compromise on competing on price along with their other competencies. Advertising on buses and the radio; and celeb invites can only do so much, but at the end of the day, people still want to have more money in their wallet.
Mr. Nagar also had other ventures in gold and the everpresent real estate market which took away some of the groups focus and funding. His Waterloo reminds me of the blue banana story where lofty aspirations and poor management unfortunately led to its downfall and eventual windup.
Africa is going to be an even harder market to penetrate, that I can assure Mr. Nagar, and suggest he really focuses on price this time from his U.A.E lesson.