Job cuts and cash burn: LeEco's India journey not so smooth anymore

Burning its cash reserves too fast has been cited as a key reason for Le Eco's troubles

Chinese electronics major Le Eco’s journey in India has taken a hit. The firm’s top two executives here – Atul Jain and Debashish Ghosh –  left the company few weeks ago. And speculation is rife that LeEco is planning to exit the country as it recently fired a significant portion of its workforce here.

While the exact number of people Le Eco has fired in recent months is not yet clear, the company’s workforce now consists of 80 people in India. And its India operations are headed by Alex Li, after its chief operating officer Atul Jain was asked to leave due to poor performance.

Le Eco, which entered the domestic market with a handful of smartphone models last year, managed to capture more than one percent market share by September quarter despite the highly competitive nature of the Indian marketplace. While, its key offering in its home turf China for years remained smart television, the fast-growing nature of the market here led its start with mobile handsets. One year down the line, however, Le Eco has decided to step back and have a relook at its business strategy.

“Our recent moves were well thought out and planned as part of a longer-term strategy for the Indian market. To improve operation efficiency and to develop in a sustainable way, LeEco India has optimised its organisation, to emerge as a more flexible and efficient operation to cope with the tough competitive market scenario in India”, the company said in a statement, denying that it is exiting India. “We are gearing up for the launch of next generation TV scheduled the coming week. Premium models of smartphones too are to follow”, it added.

While, burning its cash reserves too fast has been cited as a key reason for the company’s recent troubles, globally as well as in India. Industry analysts point out that its trouble in India is rooted in its product and communication strategy. While the smartphone makers in India are heavily dependent on product features and hardware to attract buyers, Le Eco’s strategy to promote content driven ecosystem as its USP (unique selling proposition) is what failed it.

“The smartphone ecosystem in India is not ready yet. While consumers at large are not yet accustomed to the idea of paying for contents. It is premature to expect that one can manage to earn enough revenue from these avenues to subsidise hardware”, Faisal Kawoosa, analyst, CyberMedia Research said.

According to an industry executive, focusing on superior hardware and better features is a better bet than trying to attract consumers by pitching ecosystem and contents in India. Various companies who entered late in the market like Vivo and Oppo tasted huge success by promoting features and hardware rather than ecosystem, despite being big players in that front in their backwards at China. Xiaomi which managed to become the third largest player in December 2016, two and half years after entering India remains focused on sending out the message loud and clear: how good their handsets are in terms of hardware. Oppo’s key proposition still remain selfie camera which is an indispensable feature for the younger consumers in India.

“To support the new upcoming products, LeEco will also invest in marketing initiatives in India which will be in tandem with the sales objectives. The selection of marketing tools and tactics will also be guided towards making a sharp, well defined and targeted appeal to our core consumer groups”, the company statement read. 

While Le Eco held 0.9 percent market share in 2016 (according to CMR), analysts say, its decision to go back to the boardroom and taking stock of the situation is a correct one. Well, at times blessing do come in disguise.