Samsung takes a 'Make for India' call to take on Chinese firm Xiaomi

In 2018, the Korean major is focusing on localisation R&D to retain its leadership

Four years ago, market leader Samsung was facing stiff competition from a fleet of local brands like Micromax, Lava and Karbonn, who had grabbed over one-third of the market. With strong offline distribution network and cheaper offerings, the Indian players had their prime during 2013 and early 2014. Once their dominance began to fade, fresh attacks came from Chinese firms like Vivo, Oppo and Lenovo (and Moto). But never before had the Korean giant faced a position where its leadership was under threat. Come 2017, however, the game had turned harder. Not only did the next attack come from a completely different frontier, its position came under question as Xiaomi rattled the market with its strong online presence and growing influence in the offline retail space.

In fact, since its rise to prominence, following decline of the erstwhile market leader Nokia in 2012, analysts say, Samsung has never faced the kind of threat it did in 2017. In 2014, challenger Micromax got the closest with an 18 per cent share of the smartphone market, compared to Samsung’s 29 per cent. According to IDC, an American firm offering market intelligence and insights on telecommunications and consumer technology, in July-September, 2017, Xiaomi’s market share stood at 23.5 per cent – on a par with the Korean giant.

Although unrelated, Samsung’s plight may have begun in late 2016, when its much-hyped flagship model Galaxy Note 7 ran into the wall, after worldwide incidents of the device catching fire. Other products from the manufacturer such as washing machines, too, were reported to be malfunctioning. According to estimates from CyberMedia Research, the Note 7 episode led to sales losses worth Rs 65 billion in India alone. Although the firm reported a 27 per cent surge in its mobile business revenue during 2016-17, Asim Warsi, senior vice-president, Samsung, says had the Note 7 crisis not occurred, its numbers would have been higher.

Had the Note 7 crisis not occurred, our numbers would have been higher in 2016-17 Asim Warsi Senior vice-president, Samsung

It is the growing threat from several fronts in the market that is a matter of bigger concern for the firm that continues to draw 60 per cent of its total revenue in India from the handsets business. According to Tarun Pathak, associate director, Counterpoint Research, while Samsung started 2017 with momentum on its side with the J Series of smartphone that targets the mass segment of the market, the year turned out to be the worst for the firm as Xiaomi became active in the offline channel. “Xiaomi’s offline push impacted all major players in the market, including Samsung. It had faced stiff competition from the brand in the September quarter, but preliminary estimates suggest that the challenges remained during the October-December quarter,” he said.

To overcome growing challenges, Samsung is increasing its focus on the e-commerce channel. This makes sense since the share of online channel in the smartphone market has grown from 20 per cent in 2015 to 35 per cent at the end of 2017. “Going forward, Samsung would need to have a multi-channel strategy,” said Pathak.

Rationalising its portfolio to stay in touch with current market conditions could be an area of focus for the market leader as well. “It can cut a lot of SKUs (shelf keeping units) and need to heavily focus on the Rs 10,000 to Rs 15,000 price segment, which is the current sweet spot,” he added.

Aditya Babbar, general manager, mobile business, Samsung India, however, says that the firm is selling more phones than ever. Citing data from market research firm GfK, Babbar said during January-November, 2017, Samsung held a 37 per cent share of the smartphone market by volume and 42 per cent by value. Data from IDC is based on shipment of devices and components, Babbar said the firm prefers to consider offtake data that GfK offers.

To stay ahead of the curve, Samsung is increasingly focusing on the localisation of its research and development, apart from manufacturing, he said. India-specific features like Ultra Data Saving (UDS) mode, S bike mode and Turbo Speed Technology, among others, have been developed in its R&D facility, which is Samsung’s biggest research centre outside Korea. “A ‘Make for India Task Force’ was formed, comprising employees from Samsung’s R&D, innovation, products and marketing divisions. These teams spent hours to understand the needs of the average Indian user. Following days of brainstorming and pouring over customer insights, surveys and research reports, the task force drew up a list of India-specific features that could appeal to young users, the potential customers of the Galaxy J series,” he said.

To strengthen its presence in the online space, where Xiaomi has been the undisputed leader for over a year now, Samsung is also gearing up to launch an online-only brand. With products ranging between Rs 5,000 and Rs 15,000, where Xiaomi’s Redmi series of phones dominate, the brand is targeted at young consumers. Samsung, incidentally, already have such a brand called the On Series.

In the months ahead, Samsung’s response time to emerging competition could be crucial, say experts. “Although its vast retail network continues to be an asset, it would have to compete on a model-to-model basis. Thus, time-to-market should be fast,” said Pathak. “Overall the brand Samsung was not impacted (due to the Note 7 fiasco) and its brand recall is still very high among consumers.” But retaining its existing customers would be crucial now.