From Ajay With Love!
So now let’s move on to an outlook some key brands should have for the year 2019.
For a brand to succeed, it has to have a strong presence in the Rs.5-20k segment which contributed close to 75% of the overall market in 2018 as per Phonecurry.
1. Xiaomi With its sheer momentum, and the fact that the new e-commerce rules become applicable only from 1stFebruary, the brand may just be able to hold on to its leadership position in Q1. However, Q2 onwards, I do see a challenge for them from #Samsung which has its major contribution coming from offline.
#Xiaomi will have to handle the pressure from:
a. Trying to compensate their online sales which is 70% of their total sales due to the new policy.
b. Other major online and offline brands.
They need to speed up the steps decided by them for offline.
I see them move a rung below to No. 2 by Q2 unless they have something great up their sleeve which we don’t know yet in terms of products and channel strategies.
My suggestion – Work on product differentiation and push up the sale of Rs.10-20k price segment phones.
2. Samsung With its offline understanding, strong retail base and a wide portfolio, the brand can only gain. They had the maximum launches in 2018.
I predict a growth for them starting Q1 and them taking up the pole position in Q2.
However, they cannot leave an inch of space if they want to be the No. 1 brand in 2019 and need to optimise the online channel as well. The launch of the new #SamsungGalaxyM series with three smartphones dedicated to the online space to take on Xiaomi could be it, though I would have preferred the initial launch to have happened offline.
My suggestion – May be a good idea to sacrifice their margins in the growing mid-segment and increase channel margins in these segments to make it more attractive for the channel to sell, if they don’t want to take the route of making the products price aggressive.
3. Realme The brand has done well for itself till now. However, I am not too convinced about three factors:
a. The reducing hype of their launches. If one would have noticed, the time duration for which the device was available online for every new launch has been increasing. b. From what I know, #Realme online sales is more driven by retailers purchasing – expecting the brand to sell like Xiaomi – rather than actual customers buying as is the case with Xiaomi. c. No clear channel strategy – In fact, frequent changes in their decision on how to approach offline. Possibly due to the team’s poor exposure to India as a market and offline as a channel.
At a 1.5% margin no one can do business in the long term without 2-3 rotations in a month. It may happen in Q1 but for sure not possible in Q2 specially with the mayhem happening. Whoever is picking up the distribution today will not be able to continue at these margins for long. The so-called distribution structure they have, looks more of a short term to me today. They really need to have senior experienced people now at the top to handle offline.
One more thing would be a better product portfolio presence in the growing price segment of Rs. 10-20k price which is missing.
I would expect them to hold their position in the top 5 at best in Q1, but the ranking will most likely show a decline starting Q2.
4. Vivo The only brand in the top 5 which remains a major offline brand with limited online presence.
My suggestion to them would be not to follow #Oppo in the creation of an online brand like Realme. Rather focus on increased tier coverage, WoD and DoD.
They have managed to create the WOW!factor for some of their models. Their marketing in terms of the use of brand ambassadors and properties has been good. Fine tuning it a little more should help them grow. They will remain in the top 5.
5. Oppo Oppo has been primarily an offline brand. My first fear was their products getting cannibalised by Realme. With the new changes in the e-commerce policy the cannibalisation issue gets bigger with Realme now going aggressive offline.
They have to play very carefully and totally dissociate themselves from Realme.
Channel strategy could be same as Vivo.
Another thing would be to consider increasing their channel margins a bit to keep their distributors on hold. It’ll not just be disheartening to them to see Realme selling similar specification products at 20% lesser price, the distributors are most likely to move to other brands who are migrating from online to offline.
As a brand, they have not been able to build any solid hype around any product last year which they would need to address now.
I would expect them to lose market share or remain at the same % due to cannibalisation and pressure from pure online brands moving offline.
How about having an experienced Indian team to run the operations in India?
6. Huawei/Honor These are actually two separate brands, but I am considering them as one. Huawei, as we all know, has unsettled #Apple from the No. 2 position globally, despite being banned in the US. It is putting in a lot of money on strengthening its camera capabilities and differentiated finishes. I am hearing a lot of the its top line hardware like the Leica 3-lens camera in P20 Pro and the Twilight finish – a shiny, rainbow-effect finish differentiating its products from the many monotonous smartphones in the market. They are No. 2 after Samsung in terms of the product launches across segments and need to leverage that.
Their challenge is offline sales. It’s just not about having a distribution presence but about a channel which is driving. The channel talks about old unsettled issues. If these are genuine issues, the time has come for them to resolve all of these and reboot, if they want to be in the top 5 in India. In any case I would expect them to grow from where they are.
A distribution overhaul followed by regional meets is my suggestion to them and it should be done NOW.
7. Transsion (Itel, Tecno and Infinix) Transsion may not technically be a global brand as it does not sell in the US or Europe. However, in Africa, it is THE KING,and the volumes there give it a tremendous back-up in terms of their supply chain. A No.1 brand in Africa, the brand commands a 30% market share there. In India too they have been showing growth QoQ and are the 6th, if not the 5thposition, brand by volume.
I am already seeing their growth slowing down a bit. They cannot survive like this for long unless they come up with something innovative on product or marketing. I don’t see them in the top 5 for some time. Top 10? Maybe Yes.
8. HMD Global (Nokia) After several quarters of breakneck growth, #HMDGlobal’s mobile phone shipments plunged – 17% YoY in Q3 2018. The honeymoon period is over and HMD has a fight on its hands for 2019. Where they are today is purely product and nostalgia driven.
From what I get to hear from the channel, tertiary is a challenge for the brand as the partners are sitting on pile of uncleared stocks. One of the key reasons could be that their prices are not aligned to the Indian market. Well, even if they want to position themselves like the Apple of Android, they would need to spend some moneys on advertising. If they want to continue the way they have been till now, I see them sliding or at best being stagnant in 2019.
9. OnePlus #OnePlus has indeed caught the attention of the youth in India with 50% or more using it for gaming considering howsmartphone gaming has really caught on.It is an all-rounder of a device. Specifications of a top premium phone at reasonable prices. Primarily an online brand, it had started moving offline with baby steps through their own stores. They also partnered with #RelianceDigital and #Croma.
Being sold as an exclusive model by #Amazon, it has now extended its offline reach.
I just read an article of their Country Head saying that they would like to remain exclusive to Amazon and not expand too much. How they plan to do this is a question. My suggestion to them would be to increase their experience stores and also add niche outlets selling high-end phones.
As they play with limited devices in a specific price segment, they should be able to retain their top position in that price segment.
10. Lenovo/Moto The two can only grow from their 1% share in Q3, but need to play it right.
a. Globally they have been cutting more staff. So cost control has been executed.
b. They plan to revive the sales with a supply chain revamp, increased marketing push and the first device supporting Augmented Reality (AR).
Their offline coverage is there on paper but not working. Don’t know whether it is an issue of confusion on the strategy forward, availability of good devices or old issues haunting them, which is evident from the messages I am getting from partners wanting to clear out the stocks. It is not going to be easy for them but considering their pedigree and the revival plans mentioned above, one could take a chance with them. Hopefully the new management will be able to re-energise the brand. Don’t see them in the top 5 for sure. Top 10 may be.
11. Apple Apple traditionally alternates major #iPhone updates with more minor upgrades. 2018 #iPhoneXS was a modest improvement on #iPhoneX. So 2019 should see #Apple launch a game changing device. Globally the brand seems to be losing its sheen as is visible from their declining sales.
Specifically for the Indian market, one could see a spike in their sales in case they decide to assemble devices in India through Foxconn which should reduce the high duty impact and better the price. To share some data as per ET, the % of Android users in the US who shifted to Apple was the highest this year with a growth of 4% due to the launch of the relatively price aggressive #iPhoneXR. If US has this kind of a price elasticity, the price drop with the local assembly could work wonders for them. In any case, their baseline in 2018 is much eroded as compared to 2017 and they should only grow from where they are if not globally, at least in India. But will that figure still be interesting enough for partners is a question.
12.Asus While many will feel how come #Asus is featured, I have some strong reasons to include it. They have a good product portfolio at aggressive prices in all price segments. They have done reasonably well online and there is no reason why they cannot better offline. Just an issue of showing some seriousness in offline (which seems to be missing) and some marketing. I think it is a good bet for offline partners and has the potential to grow. Apple to apple it could compete with the best and give even Xiaomi and Realme a run for its money. They will show a growth and be in the top 10.
13. Meizu Meizu launched in December ‘18 with one of the device at a very aggressive price point. However I do not see the hype of the brand as of now. This is their third attempt in the Indian market and if they fail this time, they will never be able to make a comeback. A lot would depend on how they expand their distribution. Not in the top 10 for sure in 2019.
14. Indian Brands:The Indian brands still need to do a lot of homework. Getting their distributors’ confidence back, resolving old issues on debtors and inventory which plague them and their partners, and re-energising their team with some creative strategies of which, focusing on the sub Rs. 5k segment could be the first step.
They would also be adequately clear by now that they do not have the brand trust or the money power or the R&D to try and play in the mid or higher segment. And with no Chinese player in the sub Rs. 5k price, they should first focus there. Realme and Xiaomi could be eyeing that segment now and the sooner the Indian brands move there, better for them. I don’t see them coming back even in top 10 as of now.
And now to something which could change the landscape totally. Entry of Jio in large screen smartphones.
As per news, Flex is or will take up with the government for a tax benefit on an order of 100 million smartphones from #Jio to come up with a great offering. If they succeed at that tax rebate, Jio has the potential to create havoc. Obviously the all of 100 million will not come in a year, but even if they get half the quantity which is what they have sold for Jio Fusion phones, they could be a clear No. 1 in India. So watch out for them. One Big advantage they have is the fact that they do have their distribution in place.
As a closing remark, I would like to issue a personal advisory to all channel partners. Don’t get swayed into going after new brands without due diligence as mentioned in my blog https://bit.ly/2DUq0Z4. We have the recent case of #Comio. Based on the messages I've received, I would personally like the channel to be very careful with #Homtom.