Innovation, Customer Service Spark Surge in Demand at GGear

Sales of electronic products are surging in Cambodia and competition among brands is increasing as consumers increasingly opt for new rather than secondhand products.
For example, Cambodians spent more than $45 million on flat-screen televisions between April 2014 and March 2015, up about 40 percent from the year-before period, according to the Singapore office of global research firm GfK, which said the number reflected rising incomes among the middle class. GfK research also found that sales of new smartphones in Cambodia fell 6 percent in volume in the second quarter of last year, though their value rose 11 percent – from $76.4 million to $84.9 million. It said 211,000 units were sold in the second quarter of last year, down from 225,000 units in the second quarter of 2014, but the average price of new smartphones rose 18 percent.
Sok Piseth, chairman of GGear Cambodia, an authorized distributor for South Korean conglomerate LG electronics, spoke to Khmer Times during the LG InnoFest 2016 Asia in Seoul about shifts in consumer behavior, illegal imports and the outlook for the market in Cambodia.

KT: As an authorized distributor for LG Electronics how is your business here?

Mr. Piseth: We started our GGear in 2011 and received authorization to distribute and retail all of LG’s electronic products, including mobile phones, TVs, air-con units, washing machines and so on. We saw very strong support from our customers, especially for air-con units, washing machines and TV sets because we provide very good service. Moreover, LG products are innovative and that makes it difficult for competitors to compete. The products are very high quality and so is the level of customer satisfaction.

For example, our washing machines were ranked number one in market share because LG had done research to move beyond the conventional washing machine to make units that are innovative and difficult to compete against.

KT: What trends do you see in the market for electronic products?

Mr. Piseth: Sales are rising a lot over the last few years. We are seeing this the most in terms of smartphones. For sales of TV sets we are seeing more interest because of the innovations in terms of technology and design every year.  

I notice the trend towards buying new electronics products is accelerating fast and we are catching up with other countries in the region. So, I asked why demand for new technology is rising so fast. I think it is because the government has been making electricity more accessible in the provinces, especially rural areas. The government is also trying to reduce the cost of electricity and this is boosting demand for electronic products. At the same time the middle class is expanding and this is fuelling more demand.

KT: Although the middleclass is expanding, second-hand electronic products continue to take a significant share of the market. Are you seeing any acceleration in the desire for brand-new products?

Mr. Piseth: Yes, we are seeing more people changing from using old or second-hand product to brand-new ones. It is important to note that the price of electronic products keeps decreasing and that they are becoming more affordable. Also, new products can save electricity expenses because they use less power. They also have warranties. So, the behavior of consumers is changing. There is greater demand for new products and this is a good trend for the industry.

 
KT: As demand for electronics products rises, more illegal imports are also arriving. Is the government tackling illegal smuggling or enforcing more tax on imports?

Mr. Piseth: Of course, we see the government is strongly committed to enforcing tax on imports. However, although we see the government is working to reduce illegal imports, we still see many electronic products being imported illegally at some border points. This really impacts government tax revenues as well as legal importers.

It is not only my company but also other local companies that comply with tax policies that are affected. We are a legal importer that offers a lot of jobs for local people. We cannot compete with illegally imported products. I do hope that the government keeps enforcing the law to combat smuggling. We are happy to compete in a fair market.

KT: Since last year, the government has more strictly enforced tax collection and tightened collections on the import of electronics. Does this affect your business?

Mr. Piseth: Well, we see with AEC already in effect that duties on imported products from other ASEAN countries will fall to zero, so we ask why we still see illegal smuggling. For the import of electronic products, the government imposed import tax, special tax and VAT. When the AEC began the import tax fell to zero, but the government imposed a special tax of 10 percent and a value added tax (VAT) of 10 percent.

But when we import products from outside ASEAN, the government charges us 15 percent import tax, plus other taxes like VAT and a 10 percent special tax. So the tax payment is big. That is why there are illegal importers. They don’t pay these taxes and this makes it difficult for us to compete with them. We recognize that the government is willing to combat smuggling, but we still see illegal products on the market and this really affects us and other legal importers.  

KT: Have you ever raised the issue with the government?

Mr. Piseth: Of course, we have been discussing this a lot, especially with the Cambodia Chamber of Commerce which represents the private sector. A lot of companies are raising issues like this. And, we do see the government addressing these issue and we hope that we will see even more changes.

KT: What is your outlook for the industry?

Mr. Piseth: I see the electronics market continuing to improve with the country’s economy, people’s rising knowledge about new technology and rising incomes. However, the industry still sees some challenges like illegal smuggling, which affects legal imports. However, I do believe that the government’s efforts to crack down on illegal imports will improve the industry.