Entrepreneurial Intelligence: Knowing when you need a team

Saif Abdullah started HiPHONE TELECOM, a retailer of mobile phones and accessories, in 1994 in UAQ. He opened his second store in Dubai in 2001. He accelerated his business after opening a shop in Ajman City Centre in 2003. Omran joined Saif as an operating partner in 2009. HiPHONE TELECOM today operates over 24 kiosks and stores in the UAE.

How did HiPHONE develop?

S: I got ‘lucky’ with my first mall location in Ajman City Centre. I learnt professional retailing – products, displays and customer service – running cart. I learnt that you have to please mall landlords – meet their standards - to get good locations.

Why lucky?

S: We got recognized early as a kiosk retailer.

How did you get into retailing phones and accessories?

S: I started a 500 sq. ft. shop HiPHONE with 25, 000 Dirhams when I was 21 years. In those days phones were big and did not have covers. I started selling battery chargers, replacement batteries, and antennas etc. Phones used to cost 3000 Dirhams. I could not invest all my startup money in phones. I started by buying accessories in Dubai, paying cash. Accessories used to sell very fast. Plus I needed to budget for shop decoration and trade license. I was working with the Government and used to come to the shop in the morning and evening. I observed customers and learnt what to buy to sell.

S: You created a full shop?

S: The shop had a second floor for a repair technician. I couldn’t find a technician to service mobiles. I didn’t even know what I needed to look for in a technician. I had not studied technology. So I got a technician who had worked on radios. He and I both learnt how to repair mobiles together.

How did you price accessories?

S: Accessories have better margins. I looked at prices in the market. I ‘wanted’ to give a discount. But then I started evaluating the products, based on material and finish, and charged different prices.

Did you make money from the first day?

S: Yes. But I recollect giving the first customer a free product.

O: Accessory business is risky. You have to rotate capital, purchase stock though there is previous inventory.

Why did the desire to do business arise?

S: I used to accompany my father to his store. I used to read my books but observed him doing things. I recollect him counting money. I wanted to open a business and be like him. I imbibed business observing my father.

When did the market start to give you credit?

S: 2004. I don’t like credit. I prefer paying cash. I prefer working within my limits. I am hesitant going beyond my capacity.

When did you start going outside the country to buy?

S: In 2012. I had no need to go abroad. I was predominantly doing retail. Our volumes were still small. Direct buying was not cost effective.

O: We started doing wholesale after we created our own brand. We needed variety and smaller depth.

How did you convince MAF mall management to trust you with space? You were from the souk.

S: I started in the mall with a cart, not a kiosk.

O: The mall was not designed for carts in the walkway. The risk of the mall management for a cart in Ajman was low. The mall had low foot traffic. They created the idea of souqs and bazaars. We got lucky to get a space for a cart.

You experienced the mall customer?

O: In malls we get all types of customers from nationals to tourists. They all need one thing and that is quality and variety. Also in malls, you may have 4 to 5 customers at the same time therefore that made us put more staff in a kiosks so that we can keep everyone attended to and pleased with our service.

How important was your sitting in the shop for the growth of your business?

S: We still do that. If we don’t know what the customer wants how we can know what to buy.

O: Aggressive growth happened from 2009. We were a small accessory company that also sold mobile phones. The business was stable with positive cash flow. We were growing in a controlled way. Our sales were around Dh27 million, from 9 locations, with 27 employees.

How did you learn to design kiosks?

O: Saif had knowledge of carpentry and construction. He built a kiosk to his design, evaluated it, and changed it till it was working. He changed a lot of designs. He may not know how to make engineering drawings but had an intuitive feel of how customers would engage with products.

What was important for the growth of your business?

S: My first desire is to make the customer happy. A happy customer precedes the flow of money. I am always looking to do that little bit extra. If the customer wants a particular thing I am always looking to give him something nicer, a better quality product. Customers, when they see better and nicer things, tend to buy more. I also learn from customers who don’t buy.

How do you track trends and customers who browse but not buy?

O: We have a reporting system where frontline employees give feedback on what customers ask for and trends. There is nothing like direct observation on the ground.

S: We go on daily branch visits. The staff knows that I have been a salesman and understand their challenges. This helps us align the working of the company to the goals of the company.

Why did you bring Omran in?

S: In 2009 I was very keen to grow rapidly. I saw increased opportunity and competition. I had grown with opportunity. I now needed a strategy and a team to execute it. I was sensitive that I could not do it alone. I needed new thinking.

How did that come about?

O: Saif asked me to think about joining him. We sat together for a few months for me to understand the business. I needed to understand how he had implemented the business, his strategies, strengths of the business and the opportunities. He had the need. He couldn’t do it alone. One has to respect Saif for the judgment that he knew he needed a person. It was a challenge.

What we are today is a joint effort. He is not an owner who sits at home. He is hands on. He considers himself to be an employee.

How did you go about taking the company to a different level?

O: Saif asked me to get him 5 new locations at prime locations. The business model had been established for mall locations. I had seen Dubai growing for 12 years. We started tracking the launch of new malls.

His second concern was margins. The business was not using any bank facilities and ploughing cash flows into the business. Since the cash flow was healthy it had worked. But the net numbers needed to be healthier.

The third thing which happened was that he did not only shake hands, he hugged me and made me a partner. He aligned his focus and mine.

Challenges of execution?

O: We decided to begin direct purchases from abroad and launched our own brands “Maestro” and “iSAFE”, creating an asset in the business. We learnt sourcing in baby steps. We brought different varieties in smaller quantities from different companies. We could not put all our eggs in one basket.

We needed to hire more people - create an organization structure and delegate roles and responsibilities. We worked towards getting ISO certified to get our processes defined and working.

Challenges of store formats?

O: We need to differentiate between full line electronic retailers and HiPHONE. Customers need to recognize what we do well. Customers need to have a reason to visit us.

How did you convince suppliers to tie up with you? You were not electronic retailers.

O: It was the other way around. We had 19 locations. Suppliers were keen on evaluating our potential for selling mobile phones, even willing to give us credit. I think word had started to get around that we were professionally organized. If someone did due diligence on our credit history, we have no bounced checks. Saif’s conservatism paid off. In addition, companies that gave us products to sell discovered the sales we were generating. We got awards from distributors.

Skills to sell phones are different from accessories?

O: We do training for new and existing employees. Plus technologies and products are changing rapidly. Staff needs to be always current. Today’s customers are knowledgeable. We strive to ensure that staffs are never embarrassed in front of customers. Mobiles are high value purchases. We need to sell, activate, and trouble-shoot.

How did you manage shrinkage?

O: We have to be extra careful in kiosks. We have a robust IT system. We do tracking from purchase, delivery to store, sales and inventory. Regular physical stock takes are a must. Since malls are open till late we have to do stock reviews well past midnight. And because days are long, each kiosk is managed by 5 people over the week.

What worries you about the business?

S: The size of the market is becoming bigger whereas the price and shelf life of mobile phones is coming down. They change frequently. I am unable to buy larger quantities and take a position on price.

O: I was worried when I wasn’t selling brands. I focus on margins. And what competition is doing. There are many retailers selling similar products. I have to track market prices. A competitor was selling out and started selling at low margins.

The company is getting bigger. We are opening outlets more rapidly than before. Saif and I are signing bigger checks. So when I sign I worry because we are not risk takers. We don’t want to make a mistake.

Growth plans of HiPHONE?

O: We have undertaken some innovative actions. We have tied up with DU to create shop-in-shops in their stores to sell accessories. We are also working with them to become their retail franchisees. We are planning to expand geographically in the GCC to wholesale accessories. We will wholesale our own branded product products.

Manoj Nakra, who is with the Apparel Group, is a mentor of Dubai SME members.