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Crouching Tiger, Rising Dragon

|February 11 2016 |Smart Phones, market research, Editorial

With the influx and popularisation of Chinese smartphone brands in India, are indigenous companies in deep waters?

dragon_vs_tiger_by_shoze

The Indian smartphone market is turning out to be a full-fledged battlefield. It is teeming with a multitude of international players who have a host of intuitive marketing techniques and product innovation at their disposal. One thing is certain: the average Indian consumer is now preferring product specifications and technology over brand, at least in the budget to mid-range segment.

With this being said, an important question is raised: what about the original Indian smartphone manufacturers? With Chinese OEMs hogging most of the limelight when it comes to marketing, established international brands setting up manufacturing facilities within the country and the only qualm pertaining to service centre presence also being remedied by these international brands, is it the end of the road for the original, Indian players?

And that is the focal point of this article. This author tries to analyse the market position of the existing Indian smartphone brands, and also pits them up against the international competition within the country.

Easing into the basics: the consumer mindset

It is an open secret that the average Indian consumer looks for the value for money proposition over anything else in a new smartphone. This mindset has been the inspiration behind the budget and mid-range segments growing in popularity in the country, and has also attracted Indian and international OEMs to strengthen their sub-Rs 20k lineup in India.

To put things in perspective, the 91mobiles team has some extensive numbers in this regard:

  • For Indian brands: the sub-Rs 5,000 segment saw a 75 percent growth in the number of launches in 2015 over 2014. The Rs 5k – 10k and Rs 10k – 20k segments saw declines of 0.03 percent and 65 percent respectively.
  • For international brands: the segments of sub-Rs 5k, Rs 5k – 10k and Rs 10k – 20k saw a growth in the number of launches by 276 percent, 71 percent and 21 percent respectively.

Illustrating the point of budget smartphones becoming more popular, according to a report by Cyber Media Research, the average selling price of a phone in 2015 was Rs 10,700. The same figure in 2013 stood at Rs 13,000. Moreover, premium devices such as the Apple iPhone and Samsung’s Edge lineup contributed a mere 0.6 percent smartphone market share in India in 2015, owing to the popularisation of the budget segment.

All in all, the budget segment has become a fray of sorts. The aim is to optimise performance and provide as many value for money propositions as possible, in order to attract the consumers.

Market strategies

Now when Chinese smartphone manufacturers enter the country, they have little or no spending on promotional activities. The key strategy followed by established Chinese brands such as Lenovo, Xiaomi, OnePlus, and even the newer brands such as Coolpad and LeEco have been to piggyback on an established e-commerce provider in the country.

Let’s look at this conundrum from the 4Ps of marketing viewpoint. By partnering with an e-commerce website, the Chinese brands have some major advantages:

  • Logistics can be kept to a minimum.
  • Promotional activities can also be reduced. Although full-page newspaper ads are pretty much in vogue nowadays, it’s usually an initial occurrence to spark the hype in the country.

This means that the Chinese brands can focus completely on improving the product and reducing the price. Coming in from Shenzhen, the component cost is pretty low to begin with. So the products are sold at little to no profit, thereby keeping the price low. This in turn is affecting the growth in number of brands in the country.


91mobiles_number_of_smartphone_brands_in_India

The question now boils down to manufacturing and after-sales service, and this is where Chinese OEMs are actually trying to fill the gap. Earlier, for flash sale models, products were imported from China directly. But with campaigns such as Make in India, successful Chinese brands (such as Xiaomi) are being recognised, so a bridge between the supply and demand can be made seamlessly. In fact, the rise in production has also led to OnePlus phones going invite free – the OnePlus 2 and X actually achieving the feat relatively sooner than the OnePlus One.

Organisational strategies

The Chinese brands not only rely on business tactics when stepping foot in the Indian market, they also hire tried and tested talent. The Economic Times has listed out some of the key positions filled by Indians, and I’ll be highlighting the more significant ones:

  • LeEco’s Chief Operating Officer is Atul Jain, and the head of the mobile phones division is Anish Kapoor. While Atul Jain was previously the head of global emerging markets for digital appliances at Samsung, Anish Kapoor headed the sales division of the mobile phones branch for Samsung.
  • The director for MEIZU’s base in India is Govind Singh (from Huawei).

What this implies is that even before making their presence in the country, the Chinese brands hire the top talents from established organisations. The objective is to strike the competition in the initial stages, to create a lasting impact.

Market share statistics

According to IDC, the Q3 2015 statistics for the Indian smartphone market showed that Samsung had the most share, with 24 percent. Micromax came in at second position with a 16.7 percent share, followed by Intex at 10.8 and Lenovo at 9.5 percent. Lava slipped to the fifth position with 4.7 percent, mainly due to its inability to effectively cash in on the growing 4G market.

In terms of popularity, the 91mobiles team has conducted some extensive research, which is displayed below:


91mobiles_Share_of_Smartphones_launched

These statistics go in tune with a recent report from Canalys Research, which showed that Intex, Karbonn and Lava suffered a decline in shipments owing to tougher competition against the international competition within the country.

In terms of launches, here's the research conducted by the 91mobiles team.


91mobiles_total_Smartphones_launched

The problem for the Indian OEMs

The biggest victims of the influx of Chinese players in the budget segment has been the original Indian players, particularly Karbonn, Lava and XOLO among others.

The budget market share was the home base for these Indian manufacturers. In fact, the sole reason Micromax has climbed (and somewhat maintained its position) at the top of the smartphone sales ladder has been because of its presence in the budget segment. The company saw a market where budget devices were mainly restricted to feature phones, and pioneered the popularisation of decent performing devices which wouldn’t burn a hole in the buyer’s pocket.


91mobiles_micromax_popularity_curve

However, the growth stage for the Indian brands quickly turned to the maturity phase when international brands began strengthening their budget portfolio. In many ways, this trend can be attributed to the original Moto G, which challenged the Indian budget players in their own turf.

All this being said, Micromax still retains one of the top positions in the country when it comes to sales, and Intex isn’t far behind either. But there’s another glaring statistic: Chinese OEMs are steadily increasing market share, with a presence under 14 percent in the first half of 2015 growing to 20.5 percent of the market in Q3 2015 (Source: The Economic Times).

YU might be the game changer

Micromax’s sub-brand YU might be the game changer for Indian brands. It has followed a strategy much akin to that followed by the likes of OnePlus and Xiaomi, and is bringing in noteworthy devices along with one huge trump card – the partnership with Cyanogen.


91mobiles_YU_popularity_curve

In fact, the buzz generated by the company through just five offerings speaks for itself. YU is riding the popularity charts, and other Indian brands might want to take inspiration from the company’s strategies to survive in the cutthroat competition which is the budget segment.

The bottom line

So, with all the statistics and trends on the table, are Indian OEMs facing a decline?

Unfortunately, it does seem so. The need of the hour for Indian OEMs is to cash in on the emerging 4G market and improve the hardware on their devices. A bonus would be an effective restructure of the brand images to tackle the Oriental competition. All this, while maintaining the USP which brought them to the top in the first place – intelligent pricing.

Only then, can the Indian brands regain the stronghold that they had. And only then, can the tiger rise against the dragon.

 (Featured Image Source: Shoze, DeviantArt - shoze.deviantart.com)

(Statistics Source: The extensive research conducted by the 91mobiles team)



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