Will Galaxy Note 7 Debacle Ruin Samsung's Indian Dominance?

by Priyanka Pugaokar    Oct 17, 2016

Samsung

Make no mistake! Samsung is up the creek without a paddle. Barely two weeks after it launched its premium offering the Galaxy Note 7 on August 2, the Korean tech giant was running helter-skelter trying to douse the flames - quite literally as the phone’s batteries began exploding all over the place. Having now recalled the phone from the market, the company is now working on paring the losses in terms of eroding brand equity. More so in India, a country that had embraced its smartphones for close to a decade now. 

The company, which had launched its brand new Galaxy Note 7 in as many as 10 geographies around the world, might consider itself lucky that it decided to postpone the India launch to late September. And much before the first of its phones could land in India (via the channel route), the recurring battery blasts had virtually caused Samsung to recall the entire 1.9 million units it had sold in other markets. 

Close on the heels of this recall came the news that the Samsung had virtually shut down its Galaxy Note series, though there have been contrarian reports on the veracity of this statement. Some said that the exploding batteries had virtually demolished the Note series, even as  senior officials of the company did a volte face of sorts and claimed that the Note series was far from dead and buried. 

Playing Safe in India

As for the Indian markets, Samsung woke up a tad late and announced full refunds and replacements to those who had pre-booked the Galaxy Note 7 via channels or through online retail stores. They also threw in a couple of giveaways like the Samsung VR and some nifty speakers as part of their efforts to hold on to the Indian audience. 

Not surprising, given that the smartphones from Samsung had emerged as the most trusted brand in India, according to the Brand Trust Report India 2016 suggesting that consumers in this part of the world had the highest confidence levels. The survey was conducted across 61 cities in India during the first quarter of the year. 

Despite competition from Chinese players like Xiaomi and home-bred ones mid-market products from the likes of Vivo, Micromax and others in that group, Samsung has managed to corner a lion’s share of about one-fourth of the total Indian smartphone market. In fact, some research agencies suggested that Samsung could lose upto Rs.6,500 crore following their Note 7 debacle. 

However, the company was quick to jump to its own defense suggesting that the market survey wasn’t based on empirical data. In other words, they seemed to suggest that it was a figment of someone’s imagination, given that the Galaxy Note 7 wasn’t even launched in India and post-the-debacle, their other phones continued to sell at about the same pace. 

Of course, what surprised market watchers was the delay in announcing India specific exchange programs from Samsung’s side. The company, which was quick to address the US and other markets, took a couple more days to wake up to the Indian challenge. Maybe, it was a case of the good words that the company encountered in the media from its distributors and resellers. 

Also Read: Samsung Says Sorry To Indian Customers

Sansung’s Loss, Apple’s Gain?

Industry analysts have welcomed the Samsung’s quick response and appreciated company’s efforts of prioritizing customers safety over the business. However, they say that the ongoing controversy could badly hit Samsung’s market share, especially in the high range segment, paving the ways to Apple surge in the high end play. “Samsung could lose 20-25 percent of sales in the premium segment in the October-December quarter in India. We estimate Apple to reach a 60 percent share by volumes during this period,” said Tarun Pathak, a senior analyst at Counterpoint Technology Market Research.

Apple, who recently launched its two marquee offerings in India is very bullish over its smartphone business in the country. The company has already announced its ambitious plans to penetrate into the market by expanding its reach in the emerging regions. Analysts point out that the current damage would turn very expensive for Samsung ahead of the festive season as the company does not have a substitute product to back up the Note 7 in the premium segment when demand and purchases peak during the festive season. 

According to the Counterpoint Research, Samsung had a 62 percent share of the premium segment in the January-March quarter, while Apple was a distant second with a 37 percent share. In the following quarter ended June, Apple narrowed the gap with a 47 percent share, although Samsung still led with 49 percent. Analysts said customers in the `15,000-30,000 mid segment who typically look to upgrade to higher-end phones during the festive season around Diwali will now find their options limited to Apple’s iPhone 7 and older Samsung models – Galaxy S7and S7 Edge. On the other hand, rival smartphone vendors are gearing up to ramp up their sales with new launches and attractive schemes making the way tough for Samsung to leverage the business prospects the mid segment as well. 

Also Read: Samsung Reports Biggest Profits In Two Years

Samsung Refutes Loss 

Since the Note 7 fiasco has shaken up the smartphone business, different analyst firms are giving different estimates on the probable revenue loss of Samsung in India. One of the prominent research agency has claimed that the Note 7 crisis has resulted in 4 percent fall in the market share in the September quarter. However, Samsung has strongly denied the reports of loss in revenues by terming the report by an analyst firm ‘incorrect’.

“Samsung India is appalled by the incorrect reporting of company’s financials based on reports by various research agencies. The reports covered in some news articles quote different revenue loss estimates for Samsung India. These research reports are not based on empirical facts. Such projections by any research agency or analyst, therefore, is incorrect”, Samsung said in a statement. 

“Samsung has not sold Galaxy Note7 in India. However, we can confirm that contrary to these reports, we are headed for record sales of mobile phones this year. The festive season has started for Samsung on a high and we have strong support and trust of our customers”, the company said. 

It is clear that Samsung has taken the Note 7 debacle very seriously and has initiated steps to curb the damage to the brand. Therefore, it would be interesting to see that how the company frames its future go to market strategy to overcome the revenue loss and retain its market position.