India is the 2nd largest and the highest-growing smartphone market amongst the top 3 markets globally. It is also a market that has the highest room to grow with a smartphone penetration rate of just 25%. With the global market being essentially flat or marginally declining, India is therefore treated with great importance by the top 10, more so, the top 5 brands.
If one has to see the contribution of the brands other than the top 5, this has been declining QoQ and is already down to 12% in Q3. This does not give too much room for the top 5 brands to take share out of. After all, there are many more brands that will retain some share. This leads us to the fact that there is and will be a “jostling” amongst the top 5 brands to move up higher in the ladder by eating into each other’s share.
And in this “jostling”, the brand which is the most prone to suffer seems to be #Samsung. It’s share in a market of great importance, is declining. Around the same time last year, the company was riding high on a 22.6% market share, however, their share is down to 18.9% with phone shipments slipping down from 9.6 mn (Q3, 2019) to 8.8 mn this quarter. It is the only brand in the top 5 which has shown a decline. It is just about holding on to its No. 2 position behind leader #Xiaomi. On the other side, brands like #Vivo and #Realme are increasing their share and coming close to Samsung. *The share/volume data is as per IDC.*
People could say that the share drop QoQ and YoY is not immediately alarming considering their Q2 shares were much higher and assuming that this quarter was the adjustment quarter. However, one must remember that Samsung’s market share collapsed in China just a few years ago from 20% to a mere 1%. This should rather be treated as a warning signal!
The question now is for how long can Samsung hold on the No. 2 position. I read in an article, a statement by the Samsung Chairman D J Koh that, “If there’s anything to learn from competitors, we are learning. (There is always the risk that our) competitors are faster than us, or well-received by local consumers.” Yes, they probably are learning, but too slowly.
Let’s look at the ominous signs for Samsung in summary:
1. Its share/volume is declining. It is the only brand in the top 5 which has lost market share in Q3.
2. The share loss comes when the overall industry has grown substantially in volumes.
3. The gap between Xiaomi and Samsung is increasing.
4. The gap between Vivo, Realme and Samsung is reducing and fast. At this rate they are under a possible threat even in Q4 2019, forget 2020.
Xiaomi had the lowest growth at 8.5% and Realme the highest at 400%. It may not be correct to go by the %’s purely as the base figures/shares of Xiaomi on which the growth is being calculated were high and those of Realme pretty low. Better to just take them as indicators.
If Vivo and Realme continue to grow at a reasonable pace and Samsung continues to lose, we are looking at Samsung moving to no. 3, probably even no. 4 position sooner than later. Time to wake up, Samsung! Let us say Samsung did achieve a share of 25% in the previous quarter and the figures are shipment figures and not sales figures, so there could be some lag in the happenings.
Challenging 2020
2020 could be a make or break year for Samsung. It’s going to be very difficult for them to breakthrough once they start losing share to strong brands. The company has to address the loss of share quickly or face the consequences of moving down in the rankings.
It is a dominant brand in Brazil, Europe, Korea, and the US. However, Samsung stands decimated in the biggest market of them all – China. It is falling in Russia. Another failure in India over the coming years would certainly be problematic for Samsung’s future growth prospects.
In the Indian market being taken over aggressively by the Chinese brands, the only brand which can stop the tide is Samsung and it has to find a way to do that… now! In fact, with the Indian brands out of contention in the smartphone race, the only non-Chinese brand in the top 5 is Samsung. Between Xiaomi and the BBK (Vivo, Realme, Oppo and OnePlus) they take away close to 70% of the market.
Is it that they have been/are too conservative and/or were caught napping by the aggressive Chinese?
Road To Recovery
1. I think they have their roots covered in terms of a diverse product range. However, most of the people I’ve spoken with, do say that Samsung loses out to the Chinese in looks and positioning on particular specifications like camera, higher-specifications at aggressive prices, a tirade of new launches, etc.
#OnePlus which launches just one model every year in the Rs 30,000+ segment has beaten Samsung through some smart marketing (mostly social media) and word of mouth.
2. With a strong offline coverage and a gradual increase in focus online, though late, the distribution seems to be in place. Possibly the online contribution needs to be upped a bit.
3. Except for the basic price segment which still contributes a decent proportion to the Indian smartphone market (and it is declining), they cover the widest price spectrum especially in the mid-tier segment which is the fastest-growing segment. The only challenge here could be the price to specification ratio. They may need to relook at their pricing strategy at the risk of compromising their profits to some extent.
4. Relook at their investments in marketing and promotion. I don’t find them active at all. Even the online to offline brands like Xiaomi and Realme are spending on marketing. Samsung cannot go on the basis of the feeling that they do not need to spend on marketing as they are a known brand.
5. Highlight their strengths in R&D and innovation from a ‘benefit’ to the customer perspective. Coverage in the economic papers or sections of newspapers is not what normal customers read.
6. Being proactive rather than reactive. As of now they seem to be reacting to the actions taken by the Chinese. Launch of the A and M series was a good step but reactive.
7. Leveraging the first-mover advantage on folding phones.
8. Build on a success story of their 5G phones in China – a market where they are virtually a nobody.
9. With brand loyalty heavily in their favour, work on ensuring repeat buying. In any case with the replacement cycle increasing repeat customers are key.
10. Stop the attrition of good people at the middle and top level on one side and have a young strong Indian face or “Digital Star/s” with a strong social media presence like Xiaomi. The millennials love it and it is visible.
I personally believe very strongly in the brand and expected them to do much better when they launched the M and the A series. In fact, reduce the share gap with Xiaomi. This was not to be and that is the reason I decided to dedicate another blog on them.
Breaking News
Just read an article that Samsung has decided to outsource approximately 20% of its smartphones (primarily the low-end ones) to Chinese ODMs. The advantage would be in terms of the economies of scale as these ODMs also make for other brands which could get the costs down by 10-15% and along comes the nimbleness in developing and producing new budget phones quickly.
The potential disadvantage could be the risk associated with losing control on quality and losing expertise in making low-end phones which may be difficult to regain.