Android One Can't Afford To Ignore Offline Stores

by CXOtoday News Desk    Nov 21, 2014


When Google’s ambitious project Android One was launched in India in mid-September it took only the online route, completely ignoring the thousands of brick-and-mortar stores in the country. The company is paying the price for this now, as many of the leading brick and mortar mobile phone retailers are refusing to stock Android One handsets.

According to an ET report, Tata-owned Croma, Future Group, Planet M Retail and Next Retail, BigC, Lot Mobiles, Reliance Retail and Sangeetha Mobiles — which together operate more than 1,800 stores — have not stocked any of the three Android One smartphones until now.

Android One handsets, aimed at accelerating the adoption of smartphones in emerging markets are currently priced between Rs 5,885 and Rs 6,499, co-developed with the three Indian vendors - Micromax, Karbonn and Spice - were launched through online retailers Flipkart, Amazon and Snapdeal. But later the Android One makers decided to tap the brick-and-mortar stores as sales were poor - which was too late and of course irated the offline retail majors. Like, Sangeetha Mobiles MD Subhash Chandra said in an interview, “Since Android One decided not to sell in physical stores during its launch, we as part of modern trade, have decided not to stock Android One either.”

Soon after the launch in September, smaller retailers - which are mostly offline store owners - started protesting on this move, which had taken an ugly turn. 

While there has always been a tussle between online retailers and brick-and-mortar stores in India and perhaps one of the biggest challenges of smartphone makers today is selecting the right channel to sell their products, Android One’s fate can be an eye-opener to smartphone companies that plan to tap only digital channel and ignore offline completely, believe experts. 

Online-Offline: A healthy mix

One of the obvious problems with Android One which experts point out was that the margin offered was much lesser than the industry average. For example, a source said it was just around 3-4% against the industry average of 9-10%, leaving retailers demotivated. However, IDC’s lead telecom analyst Karan Thakkar suggests, “The vendors should have sold Android One hand sets at both online and offline trade simultaneously, since general trade still accounts for a large part of smartphone sales in India.

“The price band at which the phones were launched has a huge offline acceptance,” Thakkar told the newspaper.

According to eMarketer, despite the buzz over digital commerce, 94% of total retail sales are still generated at brick-and-mortar stores, according to data from market research firm eMarketer.

Another A.T. Kearney study also notes that “The buzz given to Amazon, eBay and Alibaba far outweighs their true sway in the marketplace,” Moriarty said. “Particularly when you consider that Amazon increased their retail revenue from 2009 to 2013 by $50 billion, but their profits went up zero.”

That doesn’t mean, of course, that online shopping has not reshaped consumer-buying habits. It’s just that physical stores still dominate shoppers’ purchasing decisions and patterns more than media reports suggest, says a retail analyst.

A recent blog also suggests, India’s fast-growing online retailers could potentially buy make offline acquisitions as the momentum is with them right now, which in turn will increase consolidation in the market. Such an outcome would be a logical step, believes Arvind Singhal, chairman of retail advisory firm Technopak, as he notes that. “A big chunk of customers still buy offline and acquiring a brick-and-mortar chain could be a powerful customer acquisition tool for online sites in certain categories.”

He suggests that the selling model would be such that a customer could check out a mobile phone in a brick-and-mortar store, buy it online and then come for servicing again to the offline store. According to Technopak, the Indian retail industry is valued at $525 billions, with online’s share at about 1%. By 2020, the retail industry is estimated to double in size while online will grow more than six-fold.

Android One, which is facing a tough competition from Motorola and Xiaomi, certainly needs a rethink. As some believe these smartphones are expected to improve with offline sales, and will get better if there’s a price reduction and more number of devices coming in the market. Researchers also  estimate with the right strategy, the cumulative Android One shipments may hit One million-mark in the next 3-4 months.