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Raising the Bar: Chinese handset manufacturers gain popularity in India

December 19, 2014
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The penetration of 3G services across the country, along with greater content development and provisioning, has given an impetus to the Indian smartphone market. Driven by this growth in smartphone demand, several handset makers from China have recently made inroads into India’s price-sensitive telecom market. While brands such as Huawei, ZTE and Lenovo have been present in the market for some time and offer handsets only as a part of their offerings in the country, the new entrants that are in focus for their growing share of the handset market are Xiaomi, OPPO and Gionee.

Known for their aggressive pricing strategies, these players are providing strong competition to the existing players. They are employing cost-effective distribution strategies such as online e-commerce channels to keep costs low in order to gain price competitiveness.

tele.net takes a look at the innovative offerings, business approach and future plans of these three vendors…

Xiaomi

Founded by Lei Jun in 2010, Xiaomi gained popularity within a short period of time to become a leader in the Chinese smartphone market. The company ventured into India in July 2014 under the brand name Mi India and appointed Jabong co-founder Manu Kumar Jain to head its operations in the country. It partnered with e-commerce major Flipkart to sell its devices to the Indian masses.

Xiaomi’s strategy of conducting “flash sales” and the overwhelming response to these sales have garnered major attention in the Indian smartphone market. At the time of its entry, the company had set a sales target of a few thousand phones. In the first two weeks, it reportedly sold 20,000 handsets. By the end of October 2014, Xiaomi was reportedly selling up to 100,000 phones per week.

The reason for this success is its aggressive pricing strategy, under which the company offers high-end feature phones at competitive prices, along with the popularity of the operating system used in the devices, which is similar to Google’s Android. The high growth in the company’s handset sales is also a result of its effective tie-up with e-retailers, tapping into the emerging trend of people purchasing smartphones online.

Aside from looking to leverage the nascent smartphone market in India, Xiaomi was also attracted to the country as the industry here is not operator driven (unlike in the US). This has allowed the company to establish its brand without having to bundle its products with service providers. Prior to launching its handsets in India, Xiaomi undertook three months of preparation and set up call centres and service centres. Xiaomi also formed a core research and development (R&D) team and an operations team with a network of after-sales service centres.

The company came under scrutiny when security solutions provider F-Secure came out with a report that stated that Xiaomi’s Redmi 1S phone was sending data, including the user’s IMEI and other details, to a remote server. Based on the report and inputs from the Indian Computer Emergency Response Team, the Indian Air Force directed its personnel to not use these phones as it was believed that these devices were transferring data to Xiaomi’s servers in China. To deal with this issue, the company announced that it would set up data centres in the country by 2015 to host services for its Indian customers. This measure is being undertaken to not only address data security concerns but also to enhance the quality of service.

While the current focus of the company is to build on its partnership with Flipkart, it is also considering the possibility of selling its handsets through mi.com, its own e-commerce site. The strategy behind this is to offer users an integrated experience. The company is also planning to set up a manufacturing facility in the country but this is likely to take off only when the domestic electronics manufacturing ecosystem evolves.

OPPO

Founded in 2008, OPPO made a late foray into the Indian smartphone industry, in January 2014, after having established its operations across North America, Europe and Asia. However, like Xiaomi, OPPO partnered with e-commerce platforms Flipkart and Amazon for the sale of its products. Compared to Xiaomi, OPPO took longer to popularise its products in the country because of the market being flooded with similar-looking Chinese handsets at competitive prices.

The company’s sales improved only after the launch of its N1 and Find 7 devices, which offered added features such as a swivel camera and high-speed charging. OPPO’s swivel camera is motorised and can be rotated with a swipe on the screen, while its VOOC charging facility can achieve a 75 per cent charge in 30 minutes. These features were incorporated after extensive R&D using high-level testing standards and processes spread over years of development. Its recently launched device, R5, is reportedly the thinnest phone available with a thickness of 4.85 mm. These launches are in line with the company’s strategy of undertaking extensive R&D to differentiate its products from those of other established players and Chinese competitors.

As far as its plans for the Indian smartphone market are concerned, OPPO is focusing on scaling up its presence. It is planning to increase the number of its service centres from 30 at present to around 200 by 2015. However, it is not looking at other tie-ups with online retailers.

Gionee

Another emerging Chinese smartphone player that is gaining popularity in the Indian smartphone market is Gionee, which marked sales of 1 million handsets in 2013. The company is reported to have achieved remarkable sales in India despite having to compete with established smartphone vendors like Samsung, Micromax and Karbonn, which were offering handsets in the same price bracket as Gionee. Between February 2013, when it entered India, and November 2013, the company had reportedly earned revenues of Rs 2.5 billion. The strategy that helped it achieve this success is aggressive advertising and a diverse device portfolio. The handsets sold by the company are in the range of

Rs 1,750 to Rs 30,000, comprising  both entry-level and feature-rich (though price-competitive) smartphones.

The company is aiming to sell 5 million handsets in its second year of operations. To achieve this target, it is planning to launch phones that support several Indian languages, including Gujarati, Bengali, Tamil, Telugu, Malayalam and Punjabi. This is likely to draw more consumers in the lower-price category.

Gionee has also been advertising heavily across various mediums including digital and print. In order to position its brand better, the company has earmarked funds of Rs 400 million for 2014-15. As part of its expansion plans, it is opening 250 branded stores, adding 2,500 retail stores to its distribution network and increasing its service centres to 750 in the country.

Conclusion

According to the International Data Corporation, Xiaomi overtook Samsung to become the leader in the Chinese smartphone market (in terms of sales numbers) in the quarter ended September 2014. Having established itself in the smartphone market, the company is well positioned to increase its presence in the global market, including in India, especially if it continues to pursue its pricing strategy and establishes a strong after-sales service.

As for OPPO and Gionee, the prospects look promising, given their ability to come up with differentiated, feature-rich products at competitive prices.

Taking a cue from Xiaomi, OPPO and Gionee, several other Chinese brands are considering tapping the Indian smartphone opportunity. These include Zopo, UMI, JiaYu, Mogu, Iocean and Meizu, which are currently planning their market entry strategies. Going forward, the Indian smartphone industry is likely to be flooded with differentiated products that offer consumers plenty of choice and high-end hardware as well.

 
 
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