Time to buckle up for Indian handset companies

By Krishna Mukherjee

Micromax hogged the limelight when a recent research report revealed that the homegrown handset maker has pipped Korea-based Samsung Electronics in terms of market share in Q1 of the current fiscal.

The research firm attributed Micromax’s success to its low-cost models, robust distribution channels, growing brand awareness among others. But it is not just Micromax, a look at a survey by research firm CMR says that four domestic handset makers — Micromax, Lava, Karbonn, Intex — are among the top five brands in India.

No doubt, Indian brands have struggled hard to gain market share and ousted foreign players but now they face a major challenge from the Chinese brands that are flooding the domestic market with cheaper smartphone models with excellent features.

Recently, when Xiaomi launched its Xi3 model in the India market, it ran out of stock within seconds of its availability on e-commerce site Flipkart. Not only Xiaomi, but China’s Oppo Mobiles also received a stupendous response since its launch in India.

Oppo is increasing its presence in India, with mobile phones priced as low as Rs 8,990, which is just about $150.

The onslaught of competition from the Chinese brands in India is hotting up, compelling domestic handset makers to look out for strategies to remain ahead of the curve.

According to research firm CMR, In terms of 3G smartphones, the share of Indian brands has dipped by 2% to 26% in Q1 CY 2014 compared to the same period in CY 2013, which could be attributed to the emergence of direct presence of Chinese OEMs/ODMs like Gionee, however, a dip any further than this could be jeopardizing and the Indian brands need to rework the strategy.

Price point is not the only attraction but affordability coupled with seamless features is mainly the driving factor.

In case of Xiaomi, its Mi3 phone comes with an android-based platform called MIUI (Mobile Internet User Interface), a live operating system constantly improving with frequent software updates which is hardly available in any of the phones by domestic manufacturers.

Currently, the domestic market is facing increased competition from Chinese brands such as Lenovo, Huawei, ZTE, Gionee, Xiaomi as they try to tap the Indian handset market.

According to a report by Canalys, India has now become the third-largest smartphone market after China and the US in terms of smartphone shipment, and so, India is being looked at as one of the key strategic markets by these companies.

However, domestic handset makers do not perceive these Chinese brands as a big threat. They believe strengthening the distribution channel here will be a major challenge for the Chinese companies, apart from understanding the consumer’s psychographics.

According to Tarun Verma, head-marketing, Lava International, Indian players have a distinct advantage over the global players in the form of their deep-rooted distribution network and great understanding of the consumer’s psychographics and demographics. “We have been able to effectively and directly manage our distribution network by incorporating a single – layer distribution model, wherein distributors are exclusively and directly managed and controlled by Lava. This helps in maintaining price stability across all markets, leading to high trade confidence,” he says.

In terms of gauging consumer needs, Indian players have been better able to understand the needs of the consumer and bring products according to their need.

Within the Chinese ecosystem, it is very much possible to offer products with best in class components; however, it is important to understand the consumer needs.

Ultimately, the consumer has to see value in the proposition being offered. Chinese brands will take at least 4-5 years to build a robust foundation in distribution set up, sales structure, effective after-sales delivery and marketing intelligence, elaborates Verma.

According to another domestic handset maker Wickedlead, Indian brands will always out-perform Chinese brands in the long-run on the back of robust after-sales strategies and strong relationships with consumers. Price wars and irrational pricing is part of an industry business cycle and only the toughest, smartest and fittest will survive.

At the same time, some players believe that the entry of Chinese brands will lead to a healthy competition and help them innovate. As a result, the market will see plethora of products at an affordable price point.

Celkon Mobiles has launched around 11 models with Kit Kat version this year. Out of which A35K, which was an entry level Kit Kat was launched at the lowest ever price of Rs 2,999 and Millennium Vogue Q455, which the company claims to be the slimmest smartphone, was launched at Rs 7,999. It comes with 1.2 Giga hertz Quad Core, 1GB Ram and 16 GB Ramwas.

“A35K has created wonders in more than seven countries with its price and innovation in related segments. We feel that this competition is crucial for the market to evolve as it would bring out the best among all the players. Our quality standards have always been top-notch and the reason for us to be the front-runners in spite of competition coming in. We have further plans to expand our portfolio and take the brand to greater heights,” says Murali Retineni, executive director, Celkon Mobiles.

Taking the similar line of thought, Sanjay Kumar Kalirona, senior general manager, mobile business at Intex Technologies, says: “It’s a healthy competition that works in our favor, as we believe that it helps us to keep innovating and deliver the best to customers. We have been in the industry for a longer time than most of these brands and thus, we have a better understanding of our customers and their needs. We are confident of our products, as confirmed by our year-on-year growth in market share. We do not fear competition.”

There is no doubt about it that the competition in the handset market is going to be cut-throat, and so the domestic players need to gear up to keep competition from Chinese brands at bay.

They need to invest in Research & Development, product design and development to remain ahead of the curve. This apart, strengthening the manufacturing ecosystem is the need of the hour and should be looked at seriously.