Mobile Retail: A Rs 135,000 crore Market Already

Among the fastest growing sectors in the country, telecom has been zooming up the growth curve at a fiery pace. The last few years saw India adding many firsts to its list of achievements. Some of these are-the world's lowest call rates (1 paisa/sec), fastest growth in the number of subscribers (15-20 mn per month), fastest sale of a million mobile phones (1 week), the world's cheapest mobile handset
(`777), and the world's most affordable 3G phone (`4,999).

Ever wondered who apart from the telecom service providers and handset manufacturers, have helped achieve these distinctions? The middlemen. These middlemen are muscular, have a pan-India presence, and good nexus with the top brass of the telecom industry. They are growing at a rapid pace. For the industry they are not the main revenue earners, but their contribution is prominent. They are the distributors and retailers of the telecom industry. Yes, these are the people who made it possible for every Indian to get access to a mobile phone. They have achieved some targets and a lot still needs to be achieved. And, they are on the prowl.

Who are They?

In terms of distribution, there is a clear demarcation between CDMA and GSM phones. CDMA is distributed directly through operators, except BlackBerry and Motorola, who distribute handsets through Brightpoint. Whereas in GSM, it is through the open market. Major phone companies like Motorola, HTC, BlackBerry, INQ have Brightpoint as their 1 point distribution source. Brightpoint imports the devices directly from the respective manufacturers and then distributes it to the redistributors of the respective brands. At present, Brightpoint fuels the demand of around 25,000 redistributors across the country.

HTC, the Taiwanese smartphone maker has Brightpoint as its sole distributor in India. The distribution of HTC phones to retailers and redistributors is done by Brightpoint and to modern retail networks like Croma, Next, etc, by Ingram Micro. The smartphone maker is present in 70 cities through 700 stores. “As we produce only smartphones, we don't need to reach the nook and corner of the country,” informs Ajay Sharma, country head, HTC.

Nokia phones have been distributed through HCL Infosystems, but with the market expanding, the company had changed its strategy and started selling directly. In 2007, market leader Nokia decided to rework its 10-year alliance with its distribution partner, HCL Infosystems and the new agreement has led to Nokia venturing into direct distribution and sales for the first time since its entry into India a decade ago. Even as HCL Infosystems continues to remain its sole distributor and marketing partner till 2011, this will be applicable to just half the country's geography. At present, Nokia claims its presence in 200,000 retail outlets out of which 70,000 are its own. They also have around 120,000 selling points in rural parts of the country.

“The core focus of our retail is the philosophy of solution selling where the device is a not an end in itself but means to a solution,” says Shankar Subramanian, director, retail operations, Nokia India. The company says that the consumer needs at a Nokia retail point are met by combination of devices, services, and enhancements. “Our strategy is to be present both at mass retail formats plus 'concept' selling at high end retail points,” he adds.

The centers house a fully-equipped technical workshop which provides free internet access, a full display of the latest Nokia accessories, and a comfortable customer lounge for visiting customers. The centers also offer not only a redressal and resolution forum, but also total mobility solutions under one roof bringing together the Nokia care center, software assistance, service support, accessories sale, and other related care services.

“Keeping in mind our strategy to provide a holistic solution experiences to its consumers at all consumer touch points, we are also investing in Nokia care experience centers across the country where the consumers can both experience and receive support for Nokia's latest services and applications, such as music, messaging, maps, and games,” adds Subramanian.

Ingram Micro is the largest distributor for IT and telecom products in India and is the national distributor for Sony Ericsson. This company has more than 70 branches in India, and through Ingram Micro, Sony Ericsson has a presence in more than 15,000 retail outlets. Salora International is the second national distributor for Sony Ericsson. Salora has more than 4,000 retailers out of whom 3,500 are loyal retailers who place orders for products every month on a regular basis.

Apart from this, Sony Ericsson has 50 experience centers in the country where customers can feel, try, and buy the products. The company also sells its mobile phones through around 200 Sony centers.

“Additionally, Sony Ericsson will also look at tie-ups with cafes, retail stores, airlines, etc, where the Indian upwardly mobile consumer is headed,” informs Pawan Chadha, country head, Sony Ericsson India.

Currently, the company is running a co-promotion with Tata DOCOMO, wherein their subscribers will have access to the new Xperia arc and PLAY models, the company's newly launched mobile handsets. It will also help the customers in experiencing the 3G network on Tata Docomo's system and will let consumers access real-time video and multi-player gaming provided by Sony Ericsson on the new smartphones.

LG, one of India's most successful brands, does not go for the traditional route of having a national distributor. Instead, it has roped in13 distributors who will channelize its products to more than 30,000 retail outlets in the country. “Our growth is fuelled by a 3-fold strategy riding on an aggressive channel expansion, launching new products, and sustained marketing efforts in the market place,” says Vishal Chopra, business head, mobile communication, LGEIL.

As a part of the bullish plan for the retailer segment, the company is planning to open 100 exclusive stores. “These stores will showcase our technology and innovation strengths, and also prove the ideal platform to experience LG mobile phones and the brands,” adds Chopra. The company is revamping its distribution network and making it more exhaustive to reach out to the maximum part of the country and consumers.

However, new handset companies like Micromax, G'Five, Lava, and Maxx do not follow any set structure of distribution. They leave no stone unturned to reach their customers. Mostly, they prefer going by the unorganized route, so that it gives them a quick access to a broader geography. For example Maxx has its presence in more than 40,000 retail outlets. “Maxx does not have its own retail outlets and organizes its sales completely through an organized network of dealers, distributors, and modern retail network including Planet M, NEXT, Hyper City, Croma, Reliance World, Hotspot, etc,” says Ajjay Agarwal, chairman and managing director, Maxx Mobiles.

Micromax, one of the most successful newcomers in the Indian handset business, has 60 national and state level distributors in 23 states. These distributors in turn sell the handsets to 8000 local distributors. The compny's products are also available at the typical mom and pop stores across the country. It is often quoted that the success of Micromax can largely be credited to its successful distribution model.

Getting Organized

The retail market for mobile phone handsets, airtime, and accessories is already a `135,000 crore business, growing at over 5% per year. In comparison, the consumer electronics and appliance market looks paltry at just `45,000 crore with a growth rate of just half of the mobile market. Also, there are more than 1,00,000 retail outlets in the country but only 1% of those are organized. But the figure is lucrative enough for entrepreneurs and business houses like Essar and BK Modi group to plunge into. In a span of 3 years, we have seen an array of retail chains like Mobilestore and Hotspot, Croma, Next and Easy Day opening their stores exclusively focusing on the mobile business. Already big names in retail business, Pantaloons and Subhiksha, are not far behind.

India has already emerged as the fastest growing mobile market globally, with close to 10 mn new handsets and 15 mn subscriber additions every month. This has compelled telecom distributors and retail houses to look at this business more seriously.

Pantaloon Retail of the Future bazaar group has a separate company called Convergem Retail India to cater to the growing demands of the mobile industry. As of now they are quite successful, as the group has opened its outlets in its existing Big Bazaar stores across the country, thus cutting down on real estate costs. The Mobilestore, another chain of retail stores, is a joint venture between the Essar group and Richard Branson's Virgin group. As of now they have opened 1300 plus stores in India, which is a testimony to the success of this business model.

A New Idea

As more and more people become tech savvy, the idea of a mobile store selling its products online is not a bad idea. Though portals like Indiatimes, Rediff or NDTV shopping sell mobile phones along with other items online, Chennai based UniverCell has gone one step ahead by selling mobile phones and all other accessories online. It is focused only on the mobile business, unlike other portals. UniverCell is selling mobile phones through its website 'univerCell.in'. All you need is a credit card to buy your favorite phone next time. The cool feature about UniverCell is that it lets you compare phones side by side just like in the showroom, and helps you to arrive at a decision. It stocks almost all the models introduced in India by Nokia, Sony Ericsson, Motorola, LG, Samsung, and others at both higher and lower end of the price band.

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Apart from this, there are many budding organized retail chains who are making a significant contribution to the overall handset sales in the country. Big C and Adarsh Mobiles are two big names in Andhra Pradesh and these two retail chain stores are limited to that particular state only. Combined, they have around 100 stores and are planning to add another 100 stores by the end of 2011. Sangeetha Mobiles and CellMall are some other successful names in the mobile retail business in Tamil Nadu.

More Ways than One

There are a lot of other means to do this business than only through distributors or retailers. Along with the action on the urban retail front, mobile handset manufacturers are also attempting to make in-roads into the rural parts of the country through tie-ups with the likes of ITC's e-choupals and DCM Shriram's Hariyali Kisaan Bazaar, a chain of rural utility marts for sale and distribution of their handsets. These stores mainly cater to the needs of the rural people.

Taking a clue from the popularity of the social media networks like Facebook and Twitter, Sony Ericsson is betting big on encashing this opportunity. “Given the importance of social media in India, where nearly 23,000,000 individuals are on the social networking site, Sony Ericsson will focus on ramping up its presence in the digital segment,” adds Chadha.

Besides, entry of BlackBerry services in India made Indian telecom operators like Airtel and Vodafone become more innovative in providing better customer experience. The operators started to exhibit as well as sell many handset models including BlackBerry and other smartphones.

Future Perfect

India offers an unprecedented opportunity for telecom handset players. Perhaps that is the reason that the Indian handset market is being flooded with new models every month; a customer has more than 200 mobile phone brands to choose from. It is a clear indication that it is the distribution network and easy availability of a brand that can make or mar the success of a handset model in a hyper crowded market like India.

Gyana Ranjan Swain
gyanas@cybermedia.co.in