A Decade With Trade

A lot has happened in the last 12 years in the smartphone space and my today’s blog is more focussed on the smartphone channel side.

I have been in this industry since the year 2007 when the market was small, rather very small with few players like HTC, Apple…

It used to be a major offline market then and as late as 2011-12, I still remember allocating just 2% stocks for the online trade. How things have changed in the last 7-8 years!

Just a quick flashback:

1. Online has grown substantially in this period with different agencies pegging it between 35-40% of the total market with a forecasted growth in the future. Flipkart and Amazon are major players and almost all leading brands are also selling from their own e-commerce stores. To throw more light on the online trade growth, the number 1 brand itself commands a 11% share of the total online business. Which is huge!

2. The organised trade in the southern part of India controls close to 45-50% of the offline market in the 5 states in south. #Poorvika, #Sangeetha, #Big C, #Happi are a few relevant ones. They were there even earlier, but in the last 7-8 years, they’ve blossomed and become much more organised and a force to reckon with for any brand.

3. National organised trade has gone through a revamp with the downfall of Hotspot and TMS some years back. #RelianceDigital and to some extent #Croma has made a comeback. #Reliance is expected to grow further with the expected O2O model to be launched soon.

As a first step, Reliance Retail has started a pilot of assisted e-commerce in its small #Jio Stores whereby its staff can help the customer place orders from Ajio.com through a kiosk inside the store and deliver/take returns from there itself. This would be a big business and a game changer considering that the company operates over 10k stores across 6700 cities and towns down to Tier III and IV cities. It’s important to remember that a lot of people in the smaller cities are not online friendly for various reasons and are not going the online route today. Just to highlight, the electronics category contributed to 28% of Reliance Retail’s revenue of approx. Rs. 36000 Cr. in FYE 2019.

4. Growth of state/area centric chain stores with five to more than 100 stores – a smaller manageable version of TMS/Hotspot run by owners and not by professionals as was the case with TMS/Hotspot. We can expect these chain stores to grow in the near future. Gujarat a high smartphone penetration market has quite a few of these as does Kerala. The concept is also gaining ground in parts of Maharashtra.

5. The recent emergence of O-Line-O– an offline to online and online to offline business bridge in Mumbai. It merges the online shopping experience with an offline service, brings the retail to your doorstep, with the services developed keeping the customer in mind along with the friendly neighbourhood expert to help them. Other benefits on offer include no cost EMIs, zero down payment, exclusive offers and more. As of now the customer can choose his favourite products from over 75 neighbourhood stores. It promises delivery within 4 hours and hassle free services-repairs, replacements, easy loans, instant exchange etc., all from one store. I am sure as the concept gets tested and proves itself to be successful, more partners from other cities will also join. I had mentioned about such a concept in my blog dated 10thDecember (www.sharmaajay.com/home/rewriting-rewiring-reviving-offline) as a possible way forward for offline. It did have other suggestions as well and it would be interesting to see them get adopted as well.

Quite a churn in/of the channel in the last 10+ years I must say.

With just five brands controlling 80% of the total market, and each brand having its own strengths in offline or online, the growth now and in the future from the channel perspective can come only in two ways:

1. Having a presence in both channels rather than staying focussed on one channel. One can see this happening for practically all major brands. But then, this will not be easy considering the strong grip of the brands that have seeped their roots deep in to the system over the years. However, in this fight, brands selling well today have to realise that there is little scope for error and overdoing something or having a high-headed approach may be counterproductive. Offline channel as per the feedback I’ve received is already complaining of online players coming offline and pushing them far too much in every aspect. They are big today. The channel cannot afford to go without them, and thus have to keep stocks. But they try their best to convert the customers at the time of purchase. Obviously the after effects will be soon felt by the brands. This offers scope for new entrants with reasonable product differentiation and a solid team which has super channel relations and whom the channel can trust. The best of brands have fallen in India not only because of lack of R&D, delay in latest technology adoption but its people, policies and channel management.

2. Leveraging the channel strengths of brands – primarily the Indian brands – who were once in the top five and for some time at the number 1 or 2 spot, which have taken a big hit in sales to reach out to multi cities and retail outlets which they once catered to. I have been a strong propagator of this since the beginning of last year while I was working, but possibly I was thinking ahead of time and these brands thought they could make a comeback which did not happen. It is only logical that they play in the lower price segment where the Chinese brands are not present, and give access to their mid and higher end channel to these Chinese brands, and of course, seek benefits of their strong R&D. Focus on strengths is key.

A leading brand globally successful but not in India has just tied up with a once leading Indian brand to handle their distribution. How it works out for both parties in the long run is a question, and will show whether the brand had taken a hit earlier due to its people or its channel or its policies. So what counts here is the right people and not necessarily the same channel. Policies would hopefully be determined by the brand and hence not a variable being considered. People will be most important as they will bring in the channel.

The exodus of #Comio, #Homtom, #Mobiistar has brought a high degree of uncertainty in the channel in attempting to work with new and struggling brands and unknown/new people or brands/people who have failed their commitments in the past. It might be prudent for them to let people who know the offline business handle it rather than fitting existing people into these profiles. One must not forget that trying to make a comeback after a not-so-successful stint is more difficult than starting afresh as there are bound to be old issues on stocks and claims with old partners.

#Meizu, a good brand is one such example. #Gionee is another. The only difference is that these two brands had kind of exited before they tried to make a comeback.