The headline was just a little sensational. “Oppo, Vivo, send Chinese expats home on low sales, high hostility”. Just a day later, as if to prove this wrong, another Chinese firm, Xiaomi, announced a surge in market share to tie with Samsung as the top Smartphone vendor in India, in the process overtaking yet another chinese vendor, Lenovo-Motorola.
Of course, rounding off the top 5 are Vivo and Oppo themselves, making it a 4 out of 5 as far as Chinese firms go in the top 5.
To any observer, this would demonstrate two things very clearly. The threat of ‘buy India, boycott Chinese products’ does not/has not worked in the handset category, and secondly, the reasons for the sales slump suffered by Oppo and Vivo are more about smart and effective marketing strategy than any sentiment issue in India.
Consider how Xiaomi, which entered the market well after Oppo, some three years back, has moved to take pole position. From an online-only strategy, the firm has scrupulously followed its maxim of handsets that deliver high perceived value for money, right upto its latest top-end model, the Mi Mix 2. Even as the popularity of its Redmi series demonstrated the demand for their models, the firm struck to its online strategy till very recently, only moving to an offline model when it was very sure about making it work.
Oppo and Vivo on the other hand, like their much written about compatriot Le Eco, seemed to be seduced by the big offline market, which, while significantly larger than online still, remains a high cost option after factoring in all costs including logistics, distribution and more. On top of that, both the firms seem to have voted heavily for a mass bombing strategy when it came to promotions, going for expensive bollywood and sports LED advertising, the template for mass market goods firms in India still. Clearly, the returns from the strategy have been mixed. Not only has it been an expensive battle to win, the high share of online sales in the higher value categories has also hurt these players. On top of that is the curse of too much money, with spends, be it on salaries, promotions or sponsorships being way too high as compared to prudent, established players. In this regards, they could have learnt some good lessons from Huawei, which has made slow, but steady progress with its Honor brand, and Xiaomi itself, which always had an Indian face for the firm in India. Perhaps the biggest inadvertent casualties or collateral damage from the Oppo and Vivo onslaught, were domestic players like Micromax, Lava and Intex etc, besides Gionee, another Chinese brand that was, until recently running a more calibrated but high spend campaign in the country.
Thus, for these players, the ebb in the tidal wave of money that Oppo and Vivo unleashed might offer fresh opportunities to reclaim lost ground, especially in the volume segments. It will not be an easy battle though, as other players including operators like Jio are also in the thick of things now, with their own advantages.
What stands out, for a number of the newer Chinese players, is that having local heads in charge matters, as that ensures a much more accurate report of the ground realities in the market. Bringing in expats who will use consultants to figure out the market is a tough way to make profits, that’s a given. this writer has heard of outrageous number and figures being quoted on replacement cycles of smartphones for instance, of as low as 12-18 months. That is nothing near the truth of replacement cycles closer to 24 to 36 months even today.
In a market as complex and large as India, large media splash outs are also a double-edged sword, which can cut you badly if your system and processes are not ready for the round. Xiaomi itself learnt this lesson early on when customer service became an issue, but it has done well to invest and take care of that too. The results are there for all to see.
It will be interesting however to see if Xiaomi also falls prey to the curse of the premium smartphone, where, it has become inevitable for almost every player to make a bid for the top end segment above Rs 35,000, attracted by its prestige value as well as Apple’s reign as the profit machine in that segment. As we pointed out earlier, one of the reasons for Samsungs stagnance in the larger market has been a disproportionate focus on the high end, even as the ‘new’ Nokia is also betting on the same. Even HTC, considered a strong and dependable brand till recently, has been let down with its lack of offerings in the mass volumes segments, besides glitches in supply logistics.
In a market evolving as fast as India is, we believe demonstrating a strong product and value at lower price points will hold a firm in greater stead than hoping to convert the new generation of Indian buyers to a high value handset on the back of a media blitz. The high point of excess might yet be Vivo’s jaw dropping bid for IPL sponsorship at Rs 2200 crores for 5 years, a jump of 454% over the previous 5 year period. It might just come back to haunt both the firm and IPL owners.