This market is burning hot — 200-plus brands, 2,000-plus models and more being added quickly, even as existing models are looking at obsolescence every year and a half. The mobile handsets market is crowded, noisy and fast-paced as brands — international and Indian — slug it out.
As Naveen Mishra, lead analyst — telecom practices, CyberMedia Research, pointed out: “With a 900 million teledensity in India, 40-50% of the Indian market is still untapped. In the next three-four years, we will continue to see a clutter at the lower end. Some of the brands, though, are scaling up to smartphones already. But overall, the mobile phones market is going to remain cluttered till high penetration levels are achieved.”
Smartphone market growth (volume) Q2
He added that while the smartphone and apps segments would be highly competitive, all segments would grow till teledensity becomes high. “Technology will move very fast as consumers will first experience mobile usage at the lower end and move quickly to smartphones. At the upper end, consumers will ask for more. Brand consciousness will keep going up. It is an aspirational market.”
While newer brands at the lower end are chasing consumer numbers more than market share currently, the bigger, established brands are working hard on market share and competitive differentiation.
Nokia has internationally adopted its most disruptive strategy till now, the shift to the Windows operating system (OS) — it will gradually get out of its own Symbian OS. The new Windows phones have been consumer-tested in India too and according to D Shivkumar, Nokia India’s MD (to now head businesses in 90 countries across West Asia, Africa and India), consumers liked the phone and the apps. “We will target mid-to high-end consumers with our Windows phone and may price it at around Rs 20,000,” he said.
“We will continue with our 40 phones-a-year strategy and will have a good representation of models across segments,” said Shivkumar. Nokia will not vacate the Series 40 technology for its low end phones.
Samsung also talks high model numbers. “We have 40-45 models in the market at any point in time and launch four-five models every month. We have phones across our own OS technology, BADA, and independent OS technologies Android and Windows,” said Ranjit Yadav, country head — mobile & IT, Samsung India. Samsung’s handsets straddle a price spectrum of Rs 1,000-32,500. This year will see a strong focus on smartphones.
Going forward, Shivkumar believes that differentiation through innovation and consumer connect will hold the key to survival for brands. “The history of most markets shows that only the top five brands matter. There is no space for more brands. If a brand can manage innovation in a continuous stream, and scale, then only will it survive. That needs big investments in R&D.”
Sony Ericsson does not believe in straddling all segments. “Sony is seen as an entertainment brand. Our camera capabilities, Bravia on smartphones are all a part of that. We will bundle our smartphones with exciting content from Sony. Staying with Android, we won’t launch a slew of products that will dilute our energy. We will focus on a few launches that will enhance our positioning of an entertainment brand. Our sales significantly come from the 16-34-year-old consumers. Our handsets are priced in the Rs 5,000-27,000 range,” said P Balaji, MD, Sony Ericsson India.
Sony Ericsson’s focus on smartphones arises from the huge opportunity this product segment offers. “Last year saw smartphone sales of five million units in India. This year, the expected number is nine-10 million. The projection for 2013 is 80-100 million and by 2015, every second mobile phone in India will be a smartphone,” Balaji said.
Chinese brand G’Five, which features in the top 10 handsets list by revenue, has now tied up with the Chennai-based Munoth Group, to launch C’Four for touchscreen handsets. Vijay Menon, CEO, Munoth G’Five Group, predicted: “At the top end for smartphones, brand consciousness will be high and consumers will gravitate towards international brands. At the lower end, where value-consciousness is high, we will see Indian and Chinese brands doing business, as consumers look for more bang for their buck.”
Commenting on the brand clutter, Menon said: “There’s bound to be a bloodbath. Look at the challenges: consumer acceptance, squeezed margins due to intense competition, the fact that a retailer can only effectively keep and display only around 15-20 brands, and the need to constantly innovate. China experienced a bloodbath in 2007. India will likely see it by 2012-13.”
So will there be business and brand consolidation, mergers and acquisitions, going forward? “There will be no consolidations, mergers or acquisitions because there is no intellectual property (IP) to acquire — most new brands are just coming up with existing stuff and packaging them under their own names,” said Mishra.
Balaji asserted: “Only companies that have patents will have differentiation.”
Harbir Singh, vice dean — global initiatives, Wharton School, predicted: “In India, mobile phone brands with differentiation capabilities or low cost capabilities will survive. Those in the middle will get squeezed out. The low cost segment will see a brand variety. The smartphone space will see a shakeout.” Consumers at the top end will be aware of global brand developments.
With handset lifecycles at 18-24 months today, the pressure on innovation at high speed will continue to remain high. As Samsung’s Yadav said: “For a brand, the challenge will persistently be to bring the consumer back to itself for his next product purchase, as he goes up the ladder of experience.”