Can Samsung regain its lost market shares and climb to its earlier leadership position in the smartphone market in the coming quarters.
Circa 2012, Samsung became the leader in India’s mobile phone industry with the rollout of Galaxy S3 from its Noida facility. Today, as the Indian smartphone market witnessed a modest 8% year-on-year growth in 2019, Samsung registered declining shipments among the top five brands. It is not only feeling the heat from Chinese smartphone makers, but also from trade associations in India that are opposing Samsung’s online-exclusive selling strategy. Amidst these challenges, the question arises: Can Samsung regain its lost market shares and climb to its earlier leadership position in the smartphone market in the coming quarters.
Feeling the pinch from Chinese brands
From the very beginning, the South Korean giant was playing in the premium segment. It is only when the Chinese invasion in the smartphone segment started some half a decade ago and mobile phones became affordable by the day, Samsung started to feel the heat.
The Chinese brands captured 72% of the Indian market in 2019 with players such as Xiaomi and Vivo capturing the affordable to mid-premium segments. These brands constantly come up with top-notch features while selling at a much affordable rate.
Samsung has been facing stiff competition from Vivo since April-June 2019 as the Chinese handset maker adopted an aggressive online sales and marketing strategy, and introduced an array of attractive discounts and schemes.
In fact, for the first time in its history, Samsung lost its number two position to Vivo in the Indian smartphone market, growing 76% in 2019 and 134% in Q4 2019 driven by good performance of its budget segment series. In contrast, Samsung shipments remained almost flat in Q4, with a 5% drop in the same period.
The intense market competition forced the company to launch online exclusive M-series in the budget segment and revamping the ‘A’ series in the mid-segment. The Galaxy M Series, particularly M30s performed well online, giving it an online channel share of 16.6% in Q4 2019, an all-time high. As Upasana Joshi, associate research manager for client devices at IDC India said, “The online growth momentum continued through the year…due to deep discounts, cashback offers, buyback/exchange schemes, and complete protection offers clubbed with attractive financing schemes like no cost EMIs across major model line ups and brands.”
Time to strike back with Price, Innovation
IDC said it expects the India smartphone market to see modest single digit growth in 2020 as well. Navkendar Singh, research director of client devices and IPDS at IDC India, it is imperative for the smartphone ecosystem to focus on offering compelling propositions at the mid-premium segment to boost faster their profit.
For 2020, market competition is forecast to intensify as manufacturers increasingly adopt high-performance components, including application processors (APs), memory and cameras.
In response, Samsung plans to differentiate its premium smartphones by expanding 5G adoption and introducing new designs for foldable products. The cell phone maker has launched ‘Lite’ devices of its successful premium brands. The company also declared during its financial year 2019 and Q4 results on January 30 that it expects smartphone revenues to rise on improved product mix with the launch of new flagship models and foldable devices. For example, in India, the company has launched ‘Lite’ version of S10 and Note10 Lite in the range where OnePlus currently rules.
As Shilpi Jain, research analyst with Counterpoint Research said, “The company is trying hard to get back to growth path. To revive in 2020, it needs to build portfolio across price tiers. Launching the ‘Lite’ version of its flagship phones S10 and Note 10 is a good step in that direction.”
Overcoming Challenges from Offline Retailers
While on one hand, the key challenge is to counter the Chinese rivals, on the other, it is about making peace with offline retailers under the umbrella of India Mobile Retailers Association or AIMRA that have been campaigning to end exclusive deal between phone brands and e-commerce platforms, deep discounting and cashback offers.
The reasons are pretty obvious. Samsung launched the online-exclusive Galaxy M series earlier this year in India to counter similar offerings from brands like Redmi and Realme. However, after multiple grievances submitted to mobile manufacturers, Vivo, Oppo and Realme have assured their retail partners that they will simultaneously launch products, variants at the same price across channels.
As they were no communication from the Korean giant in this regard, brick-and-mortar mobile retailers have decided to boycott the sale of Samsung devices from February 11 to 13th pan-India. Arvinder Khurana, President of AIMRA told Economic Times, “We will be showing our protest through digital posts, covering Samsung branding with a black cloth on in our stores, and not doing business with Samsung distributors for three days.”
Such protests are bound to hurt the selling prospects of a prestigious brand like Samsung, especially in India, where offline still accounts for around 65% of total smartphone sales. And therefore this is a domain that Samsung should carefully think about. Good news is, Samsung recently said that its upcoming launch of Galaxy S10 Lite will be covered by the new strategy, where it will maintain an offline-online parity.
With more brutal competition between all the key smartphone players in the Indian market in 2020, it remains to be seen how Samsung will address concerns of its offline partners while also continuing to compete with Chinese rivals to revive its lost market shares.