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  • Writer's pictureAjay Sharma

Real(me)ly Out(standing)?

Realme entered the Indian smartphone market in 2018 as a sub-brand of Oppo before getting incorporated as an independent entity.

The brand was conceived post the #Xiaomi success story which was built on 3 pillars - low price to specification ratio to create the customer pull, the growing online sales, and low investments. Even the product positioning was similar. It was called out as a Xiaomi “copy” in terms of the products, pricing and online strategy. The result: The brand grew from a market share of just 3% in 2018 to 14% in 2022. In this period, it created various records including that of the fastest growing smartphone etc. So far, so good.

Not much was said about Realme which had performed even worse. Realme’s loss in market share in Q4 over Q3 2022 was double that of Xiaomi- 6%. The data for Q1 2023 puts their share at 9%-the same as in Q4 2022.lt 2023 for Xiaomi and they were not too wrong with the latest data putting Xiaomi at No. 3 spot in Q1 2023 with a 16% market share - a reduction of 2% over Q4 2022.

Not much was said about Realme which had performed even worse. Realme’s loss in market share in Q4 over Q3 2022 was double that of Xiaomi, with a dip of 6%. The data for Q1 2023 puts their share at 9% - the same as Q4 2022.

Note: All data being quoted is from Counterpoint.

Both brands are primarily online centric brands and the weakening performance of online in a contracting market, and increasing sales in the mid-premium and premium segment were identified by most as the reason for the decline for Xiaomi. What went wrong with Realme was more or less the same as what went wrong with Xiaomi.

Now, the big question: What does the future hold for them?

Increasing challenges which could further dampen their performance. But, what are these?

1. The news of appointment of a Chinese as the new India business head broke on March 23rd. It took Realme six days to clarify that Madhav Sheth would continue to look after India strategy. Why the delay? To avoid the panic? As per inside reports all is not well and May 2023 end would bring in new surprises as far as the management is concerned. Channel partners would tread with caution with any brand with uncertainty around the top management.

2. A couple of alleged distributors and channel payment issues in Maharashtra and Haryana which has not left a good impression in the channel.

3. If the decline is sales was linked to the decline in online contribution, offline needed to be attended to on priority. Based on what one hears and sees, this does not seem to be happening.

4. If the decline in sales was linked to a reduction in demand, the brand had to step-up its marketing which is also not visible.

5. Changes in distribution partners with some of the distributors withdrawing due to high pressure for orders not commensurate with the demand and ROI.

6. The fact that the brand was losing share was evident in February. Unlike Xiaomi which went all out in terms of product launches, partner meets, fan festivals with the senior team covering a city a day to give that confidence to hold their flock, no such effort has been seen from Realme at least on the social media. This could be perceived as existing management’s loss of interest or direction. That is not a great sign and will certainly impact the future.

7. Tough times require experienced leaders. The lack of experience of the sales/distribution leaders and the lack of clarity from the top management will be a major stumbling block.

8. The brand has been allegedly encouraging wholesaling to meet top line, rather than ensuring bottom line of distributors through proper distribution. In a declining demand scenario wholesaling will keep on reducing as inventories get stuck in the channel.

If Xiaomi is finding it difficult to build up volumes, as I hear from the market, the challenge for Realme is bigger. And if the slip continues in Q2, 2023, Realme could move out of the top 5 brands with #Tecno and for that matter even a premium brand like Apple gaining ground fast.



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