The IDC data for 2019 is out! And… #Xiaomi, as expected, retains its No. 1 position with 28.6% market share followed by #Samsung at 20.3%. #Vivo manages to find itself hugging the No.3 spot with a 15.6% share. Amongst the top 3, the highest YoY growth was recorded by Vivo at 67%, and Samsung’s declining by approximately 3%.
If we were to only focus on the Q4 data, Xiaomi is at 27% market share followed by Vivo at 18.8% and Samsung at 15.5%, taking Vivo to the No.2 position. As mentioned by me in my blog <https://www.sharmaajay.com/post/song-sung-rather-a-ridiculed-one-for-samsung> Samsung has finally been relegated to the number 3 position. The chart with figures from different agencies is shown below.
Q3 data had shown Vivo and Realme within striking distance of Samsung, and the expectation was that Samsung would lose its No. 2 position in Q4, 2019, or early 2020. Well, it happened in Q4 itself.
Can Vivo displace Xiaomi from its No. 1 position? Absolutely! The brand has the potential but may need time as the gap is huge in terms of the volume – almost close to twice the volume it is doing today i.e., 20 million.
If it were a situation of a Xiaomi Vs. Vivo, let’s see what Vivo has in its arsenal.
The Channel Opportunity
1. Vivo is primarily an offline-focussed brand. Over the last 5 years, it has been able to generate a good WoD of close to 70,000. If we take the universe of active smartphone retailers as 1,80,000 – a number which Samsung claims to have already touched, there is more than enough room for Vivo to expand its network and hence its sales volume/market share.
Xiaomi’s WoD will be much lesser than Vivo and their scope to grow is higher than Vivo with the added advantage of its strong exclusive network.
Samsung has practically exhausted its options of increasing its WoD quantitatively. All they can do is a qualitative improvement.
Offline strength – Advantage Vivo
2. Online is growing by the year with the figure for the last year showing its contribution at 41%. Xiaomi is a clear leader here with a 45% market share. For me it is advantage Vivo as they are very small currently and can only grow from here. Just to set the perspective, Vivo ventured into the online space with their Z/U series in Q3 and became the No. 3 player with a 8.2% share in the same quarter. Both #Oppo and Samsung came with exclusive online models much earlier – Oppo with the K series in Q2 and Samsung with the M series in Q1. If they could reach the No. 3 position so quickly, they have the potential to grow further in the online space, thereby increasing their overall market share.
Samsung has also done well with its M series and has a growth possibility here but the momentum favours Vivo.
Online strength – Advantage Vivo
3. The challenges Samsung is facing from offline in terms of offline/online parity and now the #AmazonPay issue.
Channel balance – Advantage Vivo
The Positioning
1. Vivo is at a take-off stage:
a. They have the momentum on their side with the highest growth in 2019. I am not considering #Realme here though their growth would be very high. However, the base in 2018 on which they have grown, is too small.
b. Their Q4 YoY growth is a massive 96.5%.
c. They have beaten Samsung in its stronghold which is offline in Q4.
d. They have a balanced portfolio with a presence across price segments.
e. USD 200 - 500 segment showed the maximum growth and Vivo led in the USD 300 - 500 segment with a 28% market share. They were strong in the USD 200 - 300 price segment as well with the S1 in Q4. This to some extent is corroborated by the September GfK data. This is indeed an impressive feat considering the competition it faces from Xiaomi and Realme which play in the same segment with better price/specification ratios.
2. They have not cut down on their marketing, unlike Oppo. Also, the marketing that they do is fairly traditional focussed on what the Indians love – Bollywood and cricket. This is what works in offline. With IPL around the corner they will get an additional burst to their existing momentum.
3. Their belief on the brand. They are not following the easiest route of selling on price/specification ratio. Xiaomi and Realme fight it out purely on this. Realme’s rise is entirely courtesy following this Xiaomi route blindly.
If you play in the same segment as Xiaomi and Realme, it is challenging not to follow this game to be in the top 5, but Vivo has shown it can be done.
4. While Oppo’s net losses went up by 93% to Rs 688 crore (includes Realme) in last fiscal, Vivo managed to reduce net losses to Rs 19.09 crore from Rs 124.29 crore. Vivo can look at being profitable this year which should support them in investing more and driving their growth plans. Xiaomi which plays on very thin margins will have a challenge here.
The Result
Vivo will sustain its slow and steady growth trying to bridge the gap with Xiaomi. Samsung would be worried about moving down to the number 3 position something which they would never have imagined or seen in India. The repeat of what happened to them in China must be in their minds. If Samsung does not make amends and Vivo continues to perform the way it is with a “wounded” Realme hitting back, Samsung has reasons to worry about getting pushed to the No. 4 position.
To sum it up Vivo seems to be in the centre of things now. And here’s how.
1. Vivo was the first brand to confirm that any product launched by them will be available to both the channels at the same time, immediately gaining the confidence of the channel. This may also mean that their online growth may be impacted by the expected end of the U/Z series. If the other brands go with the same policy as expected, Vivo gets to gain as a negative impact of online does not hit them too hard, with their major reliance on offline.
2. The counter-attack by Xiaomi which possibly sees Vivo as a bigger challenge than Samsung. No wonder most Vivo distributors today are being approached by Xiaomi with committed higher business volumes and faster rotations thereby a higher ROI. Xiaomi gets to retain its leadership longer if they can stall Vivo. Seems like a good move by Xiaomi as they get hold of established distributors with high investment and distribution capabilities. Vivo needs to be careful here. Having beaten Samsung, Vivo will start eyeing the No. 1 slot. Vivo grew by 96.5% in Q4 YoY – the highest growth for any brand, even higher than Realme. On the flip side, Samsung had a de-growth of 15.4%.
3. Vivo has to do a trade-off between increasing the number of distributors and thus the retail touchpoints or relying on the existing distributors to give them the desired growth. Seems Vivo is going in for the second option. They need to be careful here. Addition of distributors doesn’t necessarily lead to growth. If not handled well, it could work in reverse. Making large distributors give up their existing areas to work in smaller areas may not be acceptable to the distributors who are being approached by Xiaomi. They will move to Xiaomi. It’s not always about matching turnovers but also egos/mindset. Dividing their areas and getting smaller distributors may work initially for Vivo, but may not help them in their growth due to financial limitations. intervention of the top management at this stage in the major markets where the new distribution plan has to be executed is a must! Leaving it to the local teams may possibly make the decision more personal than professional. The feeling of power especially when you are a growing brand gets into one’s head very quickly and can do severe damage. I am told this is also one of the reasons for Samsung losing ground.
4. Samsung has made major changes at the top to get back to their No. 1 position and is possibly re-strategizing their entire game plan. The man at the helm has worked in India earlier and seems to be someone who has a fair understanding of the market. They have to realise they are no more the No. 1 brand. In fact, they are looking at being pushed down to the No. 4 position or for that matter even the No. 5 position considering that Oppo and Realme are just a 1 million phones/qtr or 333k phones a month away from them and both are growing while Samsung declines. A quick call on how do they handle the resistance from the retailers who have put a temporary ban on selling their products is again very important. They have to realise that they would be in the best position to handle the supply chain issue due to the Coronavirus issue as they have high but relatively lower reliance on China, which should make them least vulnerable to supplies.
5. Realme has to first come up with exactly what is it that they want to do. Please read my blog <https://www.sharmaajay.com/post/the-real-me-downfall>. Just following the strategy of the leader is not going to make them a challenger to the leader. They have a lot of work cut out for themselves in offline which is still the major contributor to the business in India. Add more distributors at city level.
6. Oppo as per me seems to be content doing what they are playing second fiddle to Realme and Vivo. Reflects in their moves, market share and the ranking.
Vivo not being content at No. 2 is a certainty! When and how can Vivo beat Xiaomi is the question.
*All figures are as per IDC