Can Chinese smartphone makers take on Samsung in India?

The five-kilometre stretch from IFFCO Chowk to Two Horizon Centre — which houses the corporate office of Samsung India — in Gurgaon’s Sector 43 is strewn with pale blue. The billboards along the road are blue, advertising kiosks sprouting all over the Millennium City are painted blue and even Metro pillars strapped with promotional screens are flashing blue, urging users to take selfies with dual-front camera. Asim Warsi, sitting relaxed on the twenty-second floor of Samsung’s office, too, flaunts a particular shade of blue: the reverse side of the visiting card of the senior vice-president of Samsung India is in blue. But it is “Samsung blue”, dark and deep, unlike the light blue of the Chinese smartphone maker Vivo that is splashed across streets and screens.
Over the last six months, the Chinese brand has beamed over 691 hours of commercials, making it the most visible mobile brand on the small screen of late. From a meagre 0.35% market share in overall handset market in the first quarter of last year, Vivo is now the fourth largest brand in India with 6.5% share, according to the latest numbers from the marketing research firm CyberMedia Research (CMR).
Perched on the third slot, with 6.7% market share, is desi brand Micromax which was dislodged from the top five smartphone rankings last year. Little known Chinese brand Itel has maintained its second place with 7.2%. Warsi, who heads the product planning and marketing team, however, is not flustered by the sea of Vivo blue as Samsung continues to lead the charts with 26% overall handset share and 28% smartphone share.
It takes a lot of things to become a market leader, to consolidate the position and be the most trusted brand, says Warsi. “We don’t believe in the next spec, but in the next experience,” he says, adding that an extra mega pixel makes no perceptible difference to the life of the consumer. “It doesn’t matter.” While “spec” might appear superficial to India’s largest handset player, for a bunch of Chinese mobile brands that ventured into India over the last two years, it means a lot. The top four Chinese players — Vivo, Xiaomi , Oppo and Lenovo — have not only grabbed 40.3% of the smartphone market share in Q1 of this year, they have also continued to stamp their dominance by not letting any Indian player enter the top five for the second consecutive quarter.
Vivo, the second largest smartphone brand in India, which entered the country in 2014, has leapfrogged from 10.69% smartphone share in December quarter of 2016 to 15.2% in the first quarter of this year, according to CMR’s preliminary data exclusively released to ET Magazine. Combined with the market share of its sister brands Oppo and OnePlus — all made by the same Chinese manufacturer, BBK Electronics — Vivo is closing in on Samsung in India. This is the big China-Korea battle for Indian smartphone market.
The Chinese juggernaut
“Chinese brands have started to hit Samsung,” says Tarun Pathak, senior analyst (mobile devices and ecosystem), Counterpoint Research. Despite having a huge portfolio of products, robust distribution network and massive retail reach, Samsung has been losing ground to Chinese upstarts.
The reasons are not hard to fathom. Unlike a global company like Samsung, which straddles several segments and price points, from entry level to premium and luxury, Chinese companies have a leaner portfolio. “It makes them all the more menacing,” says Pathak.
An average of 6 SKUs (stock keeping units or products) ensures three things: aggressive advertising, speedier product-to-market and removal of segmented marketing. Interestingly, Chinese brands have also created their own niches by focusing on selfie cameras, music and other specs. Gradually, it has weaned users from the leader. For instance, users looking for a good selfie camera in the Rs 25,000-30,000 bracket, which the top brand might not be offering, switch to Chinese companies, points out Pathak, adding that products launched on the basis of consumer insight have worked wonders.
Take Jagriti Kakkar. When the 28-year-old advertising executive in Gurgaon decided to dump her “over-priced” iPhone and go for Oppo last week, the reasons were dual. At Rs 31,000, she reckons, F3 Plus is value for money. “And dual-selfie camera is the icing on the cake,” grins Kakkar, who has lost count of the photos clicked by her. When Oppo — which entered India in 2014 and has actor Deepika Padukone as its endorser — launched F3 Plus, a dual-selfie camera handset, last month, it was not a shot in the dark. The product was based on consumer insight and rolled out after extensive market research by Nielsen.
Sky Li, global vice-president of Oppo, says that over 66% of consumers surveyed whined that while taking a group selfie it was difficult to fit everyone in the frame. Oppo realised that a wider angle camera will create perfect group selfies. “It’s a feature that most Indian consumers are demanding in their smartphones,” says Li, who also heads operations in India, which is one of the fastest growing regions for Oppo. This kind of careful research has helped it snatch 9% market share and become the fourth largest smartphone brand in India.
What has also helped the Chinese companies trump their Indian counterparts is their focus on incentives to channel partners. Vivek Zhang, chief marketing officer of Vivo Mobiles India, says that realigning of distribution strategy has proved decisive. In the two years since its debut, Vivo carried out extensive ground work to develop a strong offline retail base, resulting in a better understanding of the users, claims Zhang. With stores in 400 cities across 22 states, Vivo also happens to be the first Chinese smartphone player to set up a manufacturing unit in India.
“In just over two years, Vivo has established itself as a premium smartphone brand,” he says. It’s not only the Vivo-Oppo onslaught from two flanks that is posing trouble for Samsung. Another Chinese brand is snapping at its heels. Xiaomi closes in on Samsung as the smartphone shipments grow 11% in Q1 of this year, according to Canalys’ latest market report. With Samsung in first place, significant sequential growth saw Xiaomi and Vivo take second and third place respectively. Lenovo moved up a place to fourth, while Oppo fell back to fifth, says the media release by Canalys. While Samsung maintains its market share with sustained J-series shipment to its established, offline distribution partners, ensuring that it stays on top, Xiaomi accounts for 14% of shipments in the quarter, up from 3% a year ago.
“Xiaomi’s success in India is underscored by its online strategy. Demonetisation seems to have had no impact on it, as its target customer is young, internet-enabled and buys primarily online,” says Canalys research analyst Ishan Dutt. Xiaomi, which started as a purely online player and was the biggest smartphone brand in the online market with 29.3% share in the last quarter of 2016, sold over 3.6 million devices in March-December 2016.
For a company that has crossed annual revenues of $1 billion in India, its largest market outside China, this is not a small feat. “Today, we are present in more than 10,000 stores via our innovative offline distribution network,” says Manu Jain, vice-president of Xiaomi, adding that the company sells in more than 14,000 pin codes each week through its five online partners.
Ironically, Android, which has helped Samsung establish its smartphone leadership, has turned to be a potent weapon in its rivals’ armoury. “It is this very ecosystem that makes it possible for other brands to pose a challenge to Samsung,” says Deepak Kumar, analyst at B&M Nxt. That’s why innovation and customer-centric approach are important to create brand differentiation.
While Samsung continues to be a stronger brand than most of its competitors, Kumar believes that continued effort is required to keep it relevant to the needs of various market segments. It would need to differentiate on various fronts and also communicate more effectively to users and make them aware of those differentiations. “Innovation needs to be more disruptive across all price segments,” he says. At present, Samsung is more visible in higher price segments, while the mid segment, where Chinese players are the most active, is not adequately addressed, says Kumar, adding that Indian companies too vacated this space, which proved to be their undoing.
Desis fall behind
The desi brands squandered their first-mover advantage to connect with the youth. While most focused on first-time smartphone users, who were graduating from feature phones, they failed to see the exponential growth in smartphone replacement market. According to a recent survey by Counterpoint Research, two in three users plan to upgrade to a new mobile phone in the next 12 months. The earlier upgrade cycle of 24-30 months on an average by an Indian consumer has now come down to under 20 months.
While users are looking to upgrade to a phone with 4G LTE capability and VoLTEready, they also aspire to have a phone with better memory and battery life. One in three respondents is considering phones with a fingerprint sensor and better front-facing, selfie cameras as key features in their next purchase, the survey points out. Homegrown brands made another strategic blunder. While Chinese brands were aggressively hitting the territory, Indian players were juggling between selling and learning manufacturing. This divided their focus and resource application, says Faisal Kawoosa, principal analyst at CMR.
Visibility and top-of-the-mind recall help brands grab consumers. Take Sagar Mittal who bought a Vivo smartphone in January. Reason: sleek design, high-quality camera and a better battery life, says Mittal, an undergraduate student in Delhi University’s North Campus, who had never bought a Chinese brand before. What gave Mittal confidence to go for a Chinese brand, he says, was the familiarity with Indian brands which he had used for a couple of years. “Most of the so-called Indian brands were cheap Chinese knockoffs, to start with,” he says. Resistance to Chinese brands melted away as Indians realised that the desi brands they bought were originating from China.
No threat to Samsung, so far
While conceding that Samsung’s shares have been fluctuating, CMR’s Kawoosa doesn’t see a distinct threat to the South Korean major. “We don’t see a face-off between Samsung and Chinese brands any time soon,” he says, adding that even if it happens, Samsung is diligent enough to decide its own course. The two strengths, says Kawoosa, that will help Samsung are its sheer size and technology intellect. Further, Samsung is important in several segments through the value chain, such as memory and processors, he adds.
Warsi too doesn’t see any threat to Samsung’s dominant position. Sipping on masala tea and looking out the window at the concrete jungle of Gurgaon, he offers pearls of wisdom. “Any brand that stays connected to the consumer will stay connected to the market,” he says, adding that there are no shortcuts and there is no rocket science behind cracking the Indian market. Credibility and an understanding of Indian conditions over the past two decades have been pillars of its success, reckons Warsi. While other brands were planning to hop on to the Make in India bandwagon, Samsung upped the ante by focusing on another aspect which might have been missed by others: Make for India.
A Make for India task force, comprising employees from Samsung’s R&D, innovation, products and marketing divisions, was set up to understand the needs of the Indian consumer. Subsequently, the team drew up a list of India-specific features that resulted in the launch of the Galaxy J series.
The Ultra Data Saving (UDS) mode, which provides up to 50% mobile data savings with data compression, for instance, was rolled out in September 2015. UDS also delivers up to 2x battery standby time and frees up 11% RAM, leading to faster device performance, claims Warsi, adding that UDS saw over 50% adoption among Galaxy J series users. The S Bike mode, another India-centric innovation launched in March last year, worked on the insight that incoming calls were a major source of distraction for bikers. The S Bike mode has a smart reply feature, where callers will receive an auto-SMS informing them when the user will be available for a call. “Today, the feature has been implemented in Latin America, Middle East and Southwest Asia, following its success in India,” says Warsi.
The next innovation was Turbo Speed Technology (TST). Introduced in July last year, it helps in superior device performance, by shutting down idle processes running in the background and de-cluttering RAM. “We believe in offering the next meaningful innovation rather than in inundating users with specs and Mbps,” says Warsi.
Although Samsung’s market share has been stagnating, it is too early to write off the South Korean biggie, which won’t be a pushover like the desi players, say marketing experts. Ashita Aggarwal, head of marketing department at SP Jain Institute of Management and Research, Mumbai, says Samsung has been in similar situations in the past. “It trampled Nokia , survived a scare from Micromax and kept Apple at bay,” she says, adding that Samsung’s massive network of over 1.5 lakh retail outlets gives it a huge marketing muscle. What might also help the brand is the massive advertising spend by the Chinese rivals that might soon find it difficult to sustain the tempo. “Meteoric rise is mostly accompanied by meteoric fall,” she adds.

Micromax, the largest homegrown player, which was earlier considered a knockoff of Chinese brands, is betting on the possibility of a Chinese burnout. Conceding that Chinese brands became active in the offline space last year, Micromax co-founder Rahul Sharma recently said that the pace is not sustainable. “Even Samsung isn’t visible right now,” he reportedly said in Bengaluru. “There’s blue (Vivo) and green (Oppo) everywhere… it’s not sustainable.” Micromax didn’t reply to an email sent by ET Magazine. While an imminent burnout of these top Chinese players — like LeEco, which ran out of cash and is reportedly exiting India iX is debatable, the desi companies as well as Samsung will have to be on their toes to avoid getting trampled by the Chinese juggernaut.