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  • Writer's pictureAjay Sharma

To B(reath)e Or Not To Be?

The smartphone industry bears the brunt of prolonged COVID. Assert or defend, the confusion prevails.


A lot of things have happened in the last three months and the Indian Smartphone Industry, particularly the brands and the channel have been in two minds. While they may not be showing it in their actions, I am sure it is troubling them. For sure, they would be introspecting while keeping a close eye on the industry happenings.

I have tried to jot down some of the things they may be experiencing or thinking about. Let’s start with the Chinese brands which occupy 4 of the top 5 places in smartphones category. For them it is an issue of what lies in the immediate and distant future and hence how to plan for it. Invest or wait and watch? However, they also know that a delay in decision or a decision on a cut in investments can and will come at a cost. With #Samsung having gained in the last quarter and #LG, #Nokia and the Indian brands sensing an opportunity and planning a comeback, the Chinese brands know it is not easy to lose share and gain it back easily specially with Samsung going strong. The competition does not allow you to do that. One has to wait for the competition to make a mistake which may not happen this time around. So the confusion on what do the brands do now?

All brands have to also account for the impact of Jio’s entry in the low-end 4G/5G phones with a strategic tie-up with Google, with its affordable phone as and when it enters the Indian market. #Jio is known to be disruptive and with its plan to import 100 million smartphones, they will create ripples in the market with their aggressive pricing as we have seen in the past along with data bundling as well. One may say that their primary target are the 2G subscribers but not all of them will shift to smartphones. They are bound to cannibalise the Rs. 5-10k price segment which could mean an impact on existing brands including #Xiaomi, #Realme, #Itel and #Tecno and the upcoming Indian brands. How do these brands prepare for the onslaught?

The same applies for the channel. With brands trying to balance online and offline (the new terminology is mainline), the mainline is not happy with so-called online centric brands. Who is online centric is a difficult question today as Samsung, Vivo and Oppo also have a reasonable online presence. With online sales having risen post COVID-19 and no signs of COVID issue declining in the near future, every brand will understand the importance of a strong online presence. This issue will be faced by all brands though the intensity may differ, depending on the contribution of the online business in their case. How do the brands strike a balance between online and mainline?

The channel is also not very happy with the margins they make on the top 5. The % may be low but the high volumes and fast rotation has been taking care of their ROI. If the volumes for these brands decline the story will be different. How do they ensure that their distributors survive and the mainline channel still supports them?

The overall market has declined this year and for the mainline distributors it is already a major challenge. With brands looking at cutting down territories and adding more distributors to have a deeper penetration, the challenge for the existing distributors will only increase. They will, and in fact already have already started looking at other brands. In fact, the brands are also approaching competition distributors to get them into their own fold. I am also aware of distributors diverting investments to other businesses or even to brands planning a comeback. Remember, for a couple of months a majority of mobile phone distributors had become medical products’ distributors. To stick to the mobile business or to shift to another brand will be their issue! There are strong rumours of LG roping in one of the biggest distributors of Samsung. More in the pipeline?

I can say with confidence that one will see a lot of the large distribution houses parting ways with brands with whom they have been working successfully for years. Distributors with large territories and big infra, large front and back-end teams will have to live with the fear of smaller volumes and tighter margins with the top 5!

The mainline channel is not happy with their perception of majority of new and fast selling stocks getting diverted online – with paltry allocations to mainline, alleged price disparities between the two channels, the push of slow moving stocks to mainline and the thin margins they make. They are today gauging whether to invest in upcoming global and Indian brands. The issue again is whether this decision will work out in their favour as these brands have a very low market share today and what heights will they achieve tomorrow is unknown. Based on my discussions with the channel, the expectations from these global and Indian brands is high in terms of the product and pricing – to some extent marketing. Can they really be disruptive, which was their strength at one time, is a big question?

At the same time the channel has to consider the fact that the existing issues may get sorted out soon and any action which negatively affects their relationship with the brands they work with today may create issues for them in the future when things stabilise. What do they do?

At the retail level for the brick and mortar stores, facing the maximum heat, the issue is whether to merge with an LFR chain or to make their own chain (for the bigger ones) and/or to start O2O business through localised groups/Facebook page or something similar?

Like I always say “Customer Is King”. How will the customer behave in terms of reaction to Chinese brands, support to Indian brands and response to upcoming global brands is the key question. As of now the impact on the Chinese brands has been minimal. That could be attributed to supply shortages and the unpreparedness of the other global and Indian brands. But this will not last long.

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