If This blog entry is to be believed, Samsung’s next flagship release – the Galaxy S5 should come with a faster chipset, fingerprint scanner, metal case, super high resolution display, and a higher resolution camera. Is this a case of sustaining innovation trap that large firms should be careful about? Though Samsung is doing its best to maintain the market leadership, watch out for disrupters!
Before I left for France in Jan 2012, the Indian Smartphone market was dominated by Nokia, Samsung, RIM & Sony. As per data (from a report) back in 2011 Nokia was a market leader in the Smartphone industry with ~45% market share, Samsung & RIM (now Blackberry) together at 36%. Apart from this five Indian Smartphone makers including a (then) obscure handset maker – Micromax made up 19% of the shipments.
Fast forward to 2014 – I am in India for a short span and am looking at buying a new Smartphone. While the Samsung Galaxy is pervasive here, the realization dawned that I was spoilt for choices in brands (see stats also for early 2013, late 2013) – even those that I never knew existed.
Are their signs that the industry “matured”? Is there no more room for product innovation?
My observation lately has been that not a day has passed when I do not come across a fresh article in the press about – increased Smartphone adoption, rising mobile-internet penetration and changing market dynamics in India. While I wondered about how purchase patterns have changed, I put some thought into the current state of the industry and the possible direction it may take.
The Smartphone Industry in India – Today
- India has 68 (!) Brands of Smartphone vendors…
…Only 30% of which are global brands (Src: EconomicTimes). In addition to Samsung & Sony, there are a host of players here. Samsung overtook Nokia in overall phone shipments recently but had already gained a dominance in the smartphone space a while back. Now, the tables are turned and domestic Smartphone maker Micromax poses a serious threat to Samsung in India. Apple hasn’t gained much traction due to its premium price point. Others like Lava, Celkon, iBall, Intex (yes these are the Indian players) have been raising the ante. Panasonic, HP & Dell are (re)introducing a vast range of products at competitive prices to get a seat at this table.
- Free OS platform & cheap chipsets cater to rising demand
Chipset makers Qualcomm, nVidia, Broadcomm are dominant suppliers to the bigger mobile players. Mediatek is a major supplier for budget Smartphone makers (or say tier-II mobile makers). Mobile display makers provide differing yet interesting options like (O)LED, IPS displays. Google’s Android has for now leveled the playing field by opening the OS platform for mobile makers (Any Smartphone maker can customize & use the software for free). A host of ISVs (Independent Software Vendors) also provide a variety of applications for these handsets.
- Brand agnostic Indian consumer & commoditized Smartphone
The Indian customer looking out for a bargain deal is a tough one to please. Availability of innumerable options has created pricing pressures. Dealers have resorted to selling a Smartphone by the inbuilt specifications rather than by the brand name driven by an onslaught from Asian OEMs. This is quite like the PC-industry where we’d care more about the processor, RAM, hard-disk space et al. In a cluttered product space, the seller talks just about the phone specifications – display, RAM, CPU, Memory etc. (Albeit the WinTel owners enjoyed a large portion of the profit pool, the same isn’t true for the Smartphone industry).
- eCommerce & social media improved distribution & reach
Distribution channel has seen rapid evolution in the recent years. Increased penetration of Smartphone is fueling the growth of mobile-internet in India and thereby increasing the overall internet-data usage across the spectrum of users. This has led to a flourishing e-Commerce industry which has been expanding (50% growth in 5 years – Src: E&Y) and is set for unprecedented growth (Reach 38M transactions in 2014 at a CAGR of 36% – Src: E&Y). Online retailers are in a race to offer deep discounts to make consumers get the best deal – in purchasing a Smartphone as well. If a phone maker worries about increasing its point-of-sales, online-retailers can compensate the lack of a large distribution network.
Online presence through social media & use of tools like targeted online advertising has improved the returns of advertising campaigns. The marketing team gets greater returns against its advertising spend generating greater brand awareness and increasing topline.
So, where are we headed?
Can the tier-II vendors win over market share?
The rapid pace of innovation in technology industry & ease of imitation has ensured falling prices for existing technologies. Tier-II vendors find it easy to match up (if not exceed) the product specifications to that of the big-boys. But developing consumer confidence will be crucial. Vendors will have to find innovative avenues to serve the customer – be it improved after-sales service network & quality, provide interesting financing offerings & exchange offers (a step already being acted upon by Samsung & Apple in India). Investment in developing a strong service network is essential. There is potential for innovation to achieve economies-of-scale in deploying an efficient & effective after-sales service network. Will multiple tier-II vendors partner to provide joint after-sales? Will a new entrant cater to this need independently?
This has to be complimented with a focus on simplicity in design and usability. Leveraging the open OS platform, tier II vendors have the ability to pre-install several features peculiar to the Indian Smartphone user – which emerge through investment in consumer research.
Other stakeholders in the value-chain, especially the telecom operators are also experimenting with other revenue sources and alternate business models. India presents immense opportunities in areas of education, healthcare & payments. Telcos are investing in these to find more profitable revenue sources. Partnering with these will help tier-II vendors get off the beaten track of price-competition and develop a sustainable brand recall in the broader in Indian consumer’s mindset.
Will big players like Samsung sustain their lead?
Product innovation is critical to maintain brand stickiness. Yet another differentiating factor is ‘Service Innovation’. A robust balance sheet helps the big names leverage geographic reach to deliver strong service. While the internet is a greater leveler in improving distribution, brick-and-mortar stores instill confidence among customers seeking after-sales service. While tier-II vendors focus on pricing for a commoditized product range, the biggies must strongly communicate their ability to ‘serve’!
In conclusion, while I would say the industry has reached that of a mature stage, I believe that service innovation is crucial to avoid receding into a decline phase. Someone will reinvent the Smartphone – again!
Touching once again on the aspect of being spoilt for choices – finally, with a desire to try a local vendor with cheap yet powerful (enough) offering. With some word-of-mouth and a basic research of specifications – I settled for a Xolo Q700i. How did it pan out for me? You’ll know soon. (Update: And here it is!)
By Amir Efrati and Jessica E. Lessin
UPDATED: This story has been updated to reflect a comment from Amazon, saying if it were to launch a phone in the future, it would not be free.
Which technology giant will be the first to offer a free smartphone? Amazon.com Inc. is making a play.
In a previously unreported move, the online retailer and Kindle maker is considering introducing its long-planned smartphone for free to consumers, according to people familiar with Amazon’s effort.
There are many unanswered questions about the plan and what strings will be attached for customers. One of them is whether Amazon would require its smartphone owners to pay for services such as Amazon Prime, the company’s loyalty program. But the people familiar with the matter said that Amazon wants the device to be free whether or not people sign up for a new wireless plan at the same time. (Wireless…
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Here are a few key takeaways from the report:
- Total Smartphone market grew 51% YoY
- Smartphones based on Windows Phone registered highest YoY growth in shipments (77.6%), followed by those based on Android (73.5%) & iOS (20%)
- Nokia registered a 73.2% YoY growth in Windows Phone shipments; while Samsung registered a 233% growth in the same category (perhaps due to the very low base figure)
I’ve been contemplating this for over a year..! Not sure what stopped me from doing this. Want to start now. Don’t ask why, but.. its an unusual day for me to start but its 1/11/11 today, guess not bad for a 1st blog.
Am just confused about what I should write about… I guess I would blog about varied things.. sometimes about the tech world, sometimes something about photography, sometimes (more often for now I guess) about my preparations towards moving to HEC Paris for a 16 month MBA (believe me, anyone who’s been through this already, knows there’s a lot one can share, yet leave out much to be desired)
So the next one might have anything among these…