Posted in Marketing & Strategy Articles, Total Reads: 1772
, Published on 25 July 2014
India is one of the fastest growing smart phone markets in the world. Customers are moving over from feature phones to smart phones, as the smart phone makers have reduced their price below $ 150.However , the penetration of smart phones in India is still very low , around 10 % and is expected to grow in future. The options available to Indian consumers have increased many folds since the last 5 years.
The overall increase in volume of Mobile phones is not much; however there has been a significant migration from feature phone to smart phones due to the increased preference of Smartphone and blurring price difference. This growth is fuelled by devices based on Android Operating system. Android OS has captured more than 70 % of Smartphone market. However, windows OS based smart phones have also started gaining popularity, after Nokia Lumia series being launched by Nokia.
Samsung is the market leader in the Smartphone market having more than 35 % market share, followed by Micromax at 15 %. Other dominant players in Smartphone segment are Karbon, Lava & Nokia.
Smartphone market is expected to grow at a CAGR of around 40 % for the next 5 years, as per the report of IDC (International Data Corporation). This has attracted a lot of global players to launch their devices in India, among them the major are Google Nexus, HTC, Gionee, Apple, LG, Blackberry and many more. They all sell through EBO (Exclusive brand outlets), MBO (Multi Brand Outlet) as well as through E-commerce websites. Companies which have a strong brand presence like Samsung, Micromax, Nokia, Apple, LG prefer going through the EBO route more, as they can control the store environment more effectively in the exclusive stores. The price at exclusive stores is slightly higher as compared to a multi brand store, but since consumer is looking for reliability and trust they prefer to purchase through an exclusive store, while buying Smartphone. An interesting point to note is that, service is being handled by the Mobile equipment manufacturer in separate service centers which are either managed by the company or outsourced in some case, still consumers especially those who purchase smart phones prefer purchasing at an EBO.
The brick and mortar setup of smart phone is being challenged by new entrants who are trying to enter the market through a click and mortar setup instead of spending on distribution. This business model requires less initial investment and hence the risk of launching a new product is also reduced. It is difficult for a new Smartphone maker to predict the demand for the Smartphone initially, hence deciding on the number of outlets and distribution strategy becomes difficult. As the internet penetration is increasing in urban households and people have started buying even the consumer durables over the internet through various e-tailors, new Smartphone makers are taking an e-commerce route to launch the product.
Xiaomi which is also known as the Apple of china tied up with Flipkart, India’s largest e-commerce company to sell its Smartphone’s exclusively. Motorola also took the same route and launched Moto-G & Moto-E over Flipkart exclusively and received a very good response. The prices offered through these e-commerce sites are less than that offered by the retail outlets since the company does not need to give margins to retailers and Indian consumer being price sensitive have started preferring buying through e-commerce websites.
The high demand for Xiaomi Mi3 on the initial day of its launch, caused the page of Flipkart to crash within a few minutes of its launch. The similar incident occurred during the launch of Moto G & Moto E phones. As per Flipkart it received more than 1 lakh registration for the phone. Xiaomi Mi 3 was sold out within 39 minutes of its launch. The head of India operation of Xiaomi apologized to the public and said that they underestimated the demand. They will be making the product available again on 29th July 2014.
This incident shows that the consumer are increasing preferring online websites for purchasing the fast moving consumer durables like Smartphone, and the change in this behavior is exploited by manufacturers who instead of paying a high margin to retailers, are paying a less margin to the e-commerce websites like Flipkart and passing this benefit direct to the consumer. Indian consumers have loved this proposition till now, and it would be interesting to see how their behavior changes with time, and will this move by Smartphone makers rejuvenate the direct distribution strategy which was implemented beautifully by Dell in the US markets.
Whatever may be the result, the consumer is certainly the winner and will get better product in less prices and more value, in the coming years. Happy Buying to all!
This article has been authored by Abhijeet Singh from FORE School of Management
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