By Ibrahim Ahmad
Micromax Co-Founder, Rahul Sharma, remains determined in the face of intense competition from Chinese smartphone brands.
In an interview with Voice&Data, Sharma, who scripted the ‘Challenger Brand’ Micromax success story, finds himself challenged for next level growth. He shares more on the roadmap. Here’s why Sharma thinks Micromax will remain a winner in the war for India smartphone market.
Voice&Data: Chinese vs Indian brands – the smartphones battle is getting hotter, how do you expect the story to play out, given the slide that Micromax is facing owing to competition?
Rahul Sharma: We take our competitors very seriously and are very well in tune to the developments in the market. Market dynamics change every quarter and as a brand we are always enthralled to reinvent ourselves and come up with compelling product propositions to bring the best for our consumers. I believe that whoever invests in bringing the best value proposition and converts the smartphone into an intelligent phone will truly win this game. Our recent entry into premium segment of smartphones with our Dual 5 is one such example as the smartphone brings Qualcomm Snapdragon 635 processors, 3200 mAh battery, metal body, 13 MP front dual camera, 13 MP selfie camera and more all at an affordable price point of Rs 25,000. Another compelling product is our Bharat Series, which is aimed at first generation smartphone users in the country who still haven’t migrated from a feature phone. The smartphone is the most affordable 4G VoLTE device, running on the Android Marshmallow, and is attractively priced at Rs 3,499.
We are also simultaneously focussing on making our pedigree stronger in international markets as well and currently have operations in Middle East, Russia, Nepal, Bangladesh and Sri Lanka. Our international business is doing extremely well – contributing about 8% to the overall revenue and about 15-25% to the overall volumes. We are currently selling close to a million units in the international markets and are amongst the Top 3 brands across geographies.
Voice&Data: What according to you have been the big changes in the industry in the last two years and how are you enabling Micromax to stride ahead?
Rahul Sharma: The mobile phone industry is a very dynamic space to operate in. Over the last two years, it has observed significant shifts such as the move from 3G to 4G, transition of physical wallets to mobile wallets, and increased consumption of video content. In this dynamic scenario, there are four key things that we at Micromax focussed on: These are – asset building; making our service network robust and strong; investing in future technologies; and user experience. And, we have a lot to show there.
Asset Building-Factories. From just one factory in Rudrapur, have built our assets and today are a large contributor to the government’s ‘Make in India’ initiative. We now have additional three factories at Telangana, Bhiwadi and the one near completion in Madhya Pradesh. All these investments happened in 2016. Today, we have one of the largest manufacturing infrastructures in the country, making us less dependent on any external factors for our requirements. Therefore, while we continue to see newer players entering the India market, we believe Micromax is set to take the big leap of being the top player in the country and growing our international dominance as well.
Improving our service network and promise. In 2016, we had more than 30 million active consumer base and even if a percentage of that faces any product issue, it’s a huge number. Our service team took the challenge to improve the situation. For 800 frontend engineers who were stationed in the service centres, we needed to build their capabilities and skills. Transparent mechanisms were initiated to strengthen and give more power to these engineers. We introduced a project called “PROMISE” in October 2016 to track individual work, create a transparent system and improve service by end of December 2016. A tracker was made for the engineers and they are rated on four qualities – Process, Speed, Cost and CSAT. This was a tracker that scored them on a daily basis and by month end they were put into four categories that were – Golden, Green, Yellow and Red. With the help of such processes in the system, by November 2016 there were only 13% products that were coming back from the service centres and rest were all serviced in the centres either on the same day or in seven days. As far as our turnaround time goes, customer service was done on the same day for 68% while 90% of the customer service calls were processed in seven days. Result: In October 2015 there were 34% open calls and in January 2017 there were only 7% open calls.
Investing in future technologies. Setting up of ‘Orbis Capital’, an independent fund is a step forward to expand our investment strategy. Backed by Micromax as an investor and strategic partner, the fund is targeting to raise a capital of $75 million and will focus on investing in consumer internet companies both locally and internationally. This fund will look at investing in consumer Internet companies that have local relevance from across the world.
User experience. At Micromax, two years ago we emphasised our focus on software as well. We realized that the mobile screen is one of the biggest assets, as consumers today spend close to 70% of their time on the phones. We wanted to provide a seamless experience of multiple tasks that a consumer performs through a smartphone and help them with an intelligent assistant. AROUND, the software platform that we introduced was a result of that. It helps the users organize most aspects of their daily life, learn what is being done and forecast what they are about to do; presenting the users, the right information at the right time from various apps.
Not just AROUND, we are bringing compelling use cases by bringing best product proposition for our consumers. For instance, we launched Micromax Vdeo range in association with Google Duo, which helped bring video calling experience to masses, which is considered a case for very niche audiences. We have a long-term association with Corning and have brought the Gorilla Glass protection to masses.
Voice&Data: So, the next frontiers for Micromax. What will be the next level innovation in smartphones and what is Micromax doing there?
Rahul Sharma: In 2017, our focus has been about providing solutions to the consumers using their phones as a life hack. A large chunk of our efforts are concentrated around bringing products and services to the market that act as solutions to the fast-evolving consumer’s needs- be it the rural segment that demands for an able device at a compelling cost or the evolved user who wants the confluence of best design and specifications. We are aligning our product roadmap as per the industry trends. All our products will be aesthetically positioned and we can clearly see four key trends in the next two years:
- Camera: We see a clear acceleration towards better image capturing, be it the better software that enhances the camera capabilities, output etc. or simply the quality of cameras on the phones. We are trying to bring better camera quality to less megapixels as well to give best camera experience to our consumers.
- Screens: We are looking at innovation on screens as well, be it the bezel less phones, curved screens, or sharper resolutions. As more visual data is consumed on phones, users will demand screens to be improved and brands will follow the consumer.
- Battery: More data, more internet, more multi-tasking through phones mean that users would want their phones to be with charge almost all the time. While the best solution is to pack more milli-amperes into the batteries but the trend will be providing quick charge capabilities to those large batteries as well.
- Security: Two clear trends in terms of security as well. Security of the user and security of the data. With the government putting efforts towards integrated panic buttons on phones, User security will be a key trend and a conscious push towards digital payments will further enhance data security on smartphones as well. The ecosystem will have to come together to ensure that there is work towards data security both at hardware and software levels.
Also, as discussed before, we have spent the last six months building our capabilities and working towards overhauling the product portfolio. It’s ready as per current market demand, in 2017, we will work on fewer but better and differentiated products that have a longer shelf life and better quality. That is what the consumers expect today. Necessarily, this means that we will focus a lot in the mid-premium segment (15k-25K). We have been absent for long – but we have historical evidence that with the right products we can win this segment too.
Once we have achieved a good share in this segment (our medium term target is 8% Vs overall average of 13%), we believe it will pull up the entire range, including the entry-level phones. One thing about the budget/mass smartphones… it is now becoming very difficult to drive innovation and differentiation at that price bracket. We are working very hard to build disruptive business model that would significantly lower the acquisition cost for consumers.
Voice&Data: A well-established brand in the smartphone industry – Micromax is expanding its wings in various segments, what’s the vision and strategy behind this?
Rahul Sharma: While the mobile handset category continues to be our core business- we have also focussed our efforts to take charge as a consumer brand foraying in to products such as Air-Conditioners and TVs.
After mobiles and tablets, the Television category had not seen a fresh idea for a long time. CRTs were being replaced with LCDs and LEDs and the market potential to get new users was huge. Micromax introduced LED televisions in 2013 and today is the 5th largest TV brand in India. With an aim to be a consumer electronics brand, Micromax is now expanding its footprint into newer product categories (LED, tablets, laptops, ACs, accessories that include power banks, Bluetooth speakers etc.) and expects that non-mobility product segment could contribute about 25% to the overall business while offering consumers more innovative products and building a stronger business case in the consumer electronics segment.
Voice&Data: In terms of expansion of markets, what is Micromax’s road-map for urban and rural India, and international?
Rahul Sharma: Year 2016 saw a whirlwind of changes in terms of technology with all the telcos focusing on 4G VoLTE with Jio coming in. A market which took three years for the consumers to migrate from 2G to 3G; leapfrogged to 4G in just six months. Hence, we at Micromax as well are focusing on to coming up with devices which will enable the next phase of smartphone adoption in the country by hand holding consumers to upgrade from feature phones to smartphones. Bringing best in class 4G VoLTE smartphones will be an intrinsic part of our strategy for both rural and urban India. Some such example is our Bharat Series, which is aimed at first generation smartphone users in the country who still haven’t migrated from a feature phone. This smartphone is the most affordable 4G VoLTE device, running on the Android Marshmallow, and is attractively priced at Rs 3,499.
In addition to this, as the Indian handset and telecom industry has undergone dynamic shift, the focus of consumers is shifting from just the hardware, to overall connected experience. Our Micromax Canvas 2, which is the world’s most affordable Corning Gorilla Glass 5 smartphone comes with an Airtel SIM to provide unlimited calling and data experience. Similarly, we created a compelling use case scenario for video calling with our Vdeo range of smartphones.
For our international markets, we currently have operations in Russia, Nepal, Bangladesh & Sri Lanka. Talking about the current scenario, our International business is doing extremely well – contributing 8% to the overall revenue and about 15-25 to the overall volumes. We are currently selling close to a million units in the international markets and are amongst the Top 3 brands across geographies. The revenue from the international business has been doubling year-on-year generating profits for more than three years now. We plan to introduce Micromax in markets like Armenia, Kazakhstan and Georgia in the CIS region and are also exploring Saudi Arabia and Iran in the Middle East and cluster of countries in Africa.
Voice&Data: How is Micromax’s distribution channel doing? How is Online vs Offline working for Micromax?
Rahul Sharma: India can’t be defined as one market but is many markets rolled into one. Online is a great experience leveller and has been able to bring in newer consumers to the fold for us, however, there is a large market that still exists where consumers like a personal experience of meeting the neighbourhood shopkeeper, experience the device and then making a purchase decision.
Unlike other brands, we don’t look at offline versus online as a challenge; instead, we view it as an opportunity. This enables us to identify and target the demographics of the consumers who are transacting through these channels. We have certain products that are online only and others that are focused on both offline and online channels. In the past, we have launched some of Micromax’s products exclusively online like Canvas Spark range and Xpress range which have done extremely well. From the trend, we have witnessed, both channels have been faring well for us and we are seeing steady sales both online & offline. We have further strengthened its distribution network from 34-35,000 to 60,000 outlets as majority of the users in the sub-5k category are offline users and are looking for compelling products that connect them digitally. We have a holistic mix of both the channels with 60% of our sales coming from offline channels and rest from online channel.
Voice&Data: What, in your view, has been the Make in India and GST impact on Micromax?
Make in India: Micromax has been a facilitator of the ‘Make in India’ campaign much before the mandate introduced by the government. We believe that local manufacturing is crucial for our growth in India, since it will help us enhance the design and push research and development of products to suit domestic requirements. Micromax started its first factory in 2014, much before the Make in India Initiative was introduced. We have Rudrapur plant which has the capacity to manufacture 1.5 million devices per month. We have invested in Uttarakhand, Telangana, Rajasthan and Madhya Pradesh so far, to set up our state of art manufacturing facilities. Our Telangana factory is already functional with a capacity of one million units per month. All together we will be investing close to Rs 2,000 crore in the next five years in our manufacturing.
Local manufacturing is crucial for our growth in India, since it will help us enhance the design and push research and development of products to suit domestic requirements of the Indian market. In the next two years, we aim to be India’s first and largest indigenous phone manufacturer. We are focusing on making India a manufacturing hub and plan to export products from India to other markets. As of today, about 70-80% of all our smartphones and almost all our consumer electronics are being manufactured locally.
GST Impact: It’s a huge and welcome change. In short term it might give some pains but in long term, it will provide the necessary support to organized distribution and will curb whole-selling which flourished earlier due to VAT difference across states. With the equalization of GST for e-commerce and traditional retail, we have already seen that brands that were only selling using e-commerce have started making efforts for retail distribution now.
The company welcomes the initiative by the government to balance out equations between the offline and online market taxation and deem it to be an appropriate step. We believe that Micromax products are extremely competitive and available at consumer-friendly pricing.
The computation of taxation in the pre GST era was different for every brand depending upon their share of sales in the high VAT states and also depending upon the average selling price (ASP) of the models. The factual representation for Micromax means that end customer price for Micromax mobile phones will remain same for customers in the time of pre-GST and post-GST.
Also, we stand committed behind the sales and distribution partners and to ensure that they are not treated unfairly in the changing regime, the company is proposing compensation to the partners, which are effected by the change. We believe that partners need to earn their due incentive for making Micromax products available to the Indian consumers. All the new portfolios will be marked as per the new taxation as soon as the same is applicable.