Jay Mart Plc was established on Dec 27, 1988 with registered capital of 2 million baht, initially selling electrical appliances on installment payments. It later entered the wholesale market for TV sets, VCRs and air-conditioners. Today Jay Mart is best known for its retail and wholesale business for mobile phones and accessories under all major brands from handset manufacturers and network operators. It also operates a retail space rental business under IT Junction, and J-Venue which manages shopping malls for general retailing. CEO Adisak Sukumvitaya discusses the company’s strategy and outlook.
BUSINESS:
Please explain JMART’s business model.
JMART has three main businesses, retail mobile phone distribution, rental, and debt collection. The mobile phone retail business accounts for 90% of revenue with a net margin of 2%, the rental business contributes 3-4% with a net margin of 15-20% and debt collection the rest with a 20-25% net margin.
Can you provide more details on the current operations of each business?
Our business model differs from that of our competitors because of the inclusion of rental and debt collection. We have more than 200 shops nationwide and are looking to expand. For the rental business we set up IT Junction with Big C in 26 locations, renting space to dealers who sell mobile phones, Sim cards and accessories. Thus with the retail and rental locations we are able to reach a wide range of consumers from A to D. This year because of high smartphone adoption we have witnessed a good response from the market and this benefits us because of the higher average selling price and higher margins. For debt collection we are currently managing 20 billion baht worth of debt of which 13 billion is accounts we have bought and 7 billion is outsourced to us by other firms. We have been operating each of these businesses for 15 years so we have developed very strong teams that can manage each business very well.
The debt collection business is growing with JMART. Can you provide more specific details?
We started the debt collection business 15 years ago and initially acted only as a service provider for firms such as credit card companies, banks, finance and leasing companies. We began noticing that it was harder to get more business and we were receiving fewer commissions so we decided to begin acquiring debt given our capabilities developed through servicing these companies. In 2006 we bought 1 billion baht in debts for 39 million and to date we have already collected 106 million. Every year we buy more debt because we see an opportunity in certain segments to grow more. Thus we have now acquired 13 billion baht of debt for 655 million and have already collected 520 million baht. These debts can last for 30 years and longer if extended by the courts. We try to help people by offering a discount on their debt today, which is what they need if they have to apply for a new house loan. Last year we earned 40 million baht in net profit in this area and this year we expect 70 million. A false image that people have of the debt collection business is that you need military or police as employees which is not true at all. We have a great team that has been doing this together for 15 years, we know how to manage the entire process and this is why we are comfortable with this business. We want to build it further, and possibly list the debt collection subsidiary in the market next year to raise more funds to grow.
Can you explain why JMART is successful at the mobile retail business?
Briefly, last year we sold 955,000 handsets and this year we expect to sell at least one million. Our average selling price in the first half of 2011 was 4,200 baht per handset versus the market average at 3,100 baht; this shows we have better sales in the mid-high range. I like to stress how we manage our inventory and cash. Retail mobile phones is a fast-moving industry in terms of speed of sales and technology, and inventory management is key to the success here. We have improved our inventory turnover to only 42 days while our competitors average 80-100 days, and our accounts receivable turnover is only 12 days. We monitor conditions daily. If we notice excess handsets that have yet to be sold we will either sell them off quickly as wholesale via our dealers or work with our suppliers to market them faster.
INDUSTRY:
How will 3G affect your business?
If 3G goes ahead next year we will benefit tremendously because of the demand for better smartphones, higher data, better-quality voice calls and so forth. We benefit directly through handset sales and our dealers that rent space from us will benefit as well. If 3G licences are approved it will be fantastic.
MISCELLANEOUS:
What are the biggest risks facing your business today?
Since we started JMART we’ve experienced cash flow problems, employee issues, but now as a public company with funds at our disposal our issues are different. What I constantly consider is how can I use the company’s funds wisely to grow JMART for our staff and our shareholders.
Has the flooding affected you?
Surprisingly, as of mid-October we had growth in handset sales of 7% month-on-month despite a lot of locations being shut down, so we haven’t been affected yet but we are expecting it. The key here is that we are prepared for our staff to be secure and once floods recede we can restart business immediately.
Where do you see JMART in five years?
I believe that we are only at a third of where we want to be as a company. I want JMART to be number 1 in any business in which it operates. In mobile phone retail we are the largest with the most coverage and the best profitability. In debt collection we are number 1 in size, and for retail rental we have over 10,000 square metres of space. Thus we will be looking to use our company’s strengths and platform to continue growing in the businesses we operate today and perhaps others in the future.
The Executive Q&A Series is presented by ShareInvestor, Asia’s leading financial internet media & technology company, and the largest investor relations network in the region with more than 400 listed clients. The interview is conducted by Pon Van Compernolle, vice-president of Merchant Partners. For more information, e-mail gancanapol@merchant.co.th or howard@shareinvestor.com or visit www.ThaiListedCompany.com
