Mobile retailers and analysts suggest that with record sales of the premium Galaxy S7 and Galaxy S7 Edge models in India, Samsung could trounce the current leader Apple in the premium segment. However, this may not happen anytime too soon and the reason for this is not the ‘death of Note 7’
The Indian smartphone market scene is hotter, richer and varied than ever before. As the fastest growing smartphone market in the world, India now exercises considerable influence on manufacturers who are betting on it for increasing their bottom lines. In all likelihood, in your family, perhaps you will be using a Samsung (like I do) and/or your partner could be using an iPhone (mine is a staunch Apple loyalist). My father uses lenovo, my mother is still happily grappling with a feature phone, and my brother plays with a Microsoft Windows device. This is what I see in all homes within my social circle.
India perhaps is the most heterogeneous of all markets, what with its multiple languages, multiple Socio Economic Classes (SECs), diverse demographics, and psychographics. It is also not uncommon to find an SEC A in a village and SEC B or C in a Metro, making it challenging for brands to sell here. Understandably, companies bring out different models of phones at different price points and adopt audience and market-specific marketing strategies in different territories. Choices for customers, therefore, abound and keep growing even as the influx of new phones at cheaper prices and new feature sets continues.
STORY WITHIN NUMBERS
If reports and data by the International Data Corporation (IDC) and Morgan Stanley are anything to go by, India will overtake the US to become the second largest smartphone market by 2017. Morgan Stanley’s report further predicts “a 23 per cent compounded annual growth rate for Indian smartphones through 2018 and the country should account for 30 per cent of the global unit growth over the next two years and become the second largest market next year in terms of units”.
In Q2 2016, Android OS captured 97 per cent of the Indian smartphone market, while Apple iOS owns only 2.4 per cent of the market share. “A record 35 million smartphone units are expected to be shipped to India in Q3 2016, registering a staggering 23 per cent YoY growth and about 21 per cent QoQ growth,” according to a recent report by research firm Counterpoint.
Coming to specific brands, Samsung continues to lead with 22.6 per cent smartphone shipment market share, followed by Micromax with 9.9 per cent share at the second place; lenovo-Motorola group, with 9.2 per cent share, is a close third. Reliance lyf mobiles, which start as low as Rs3,000 and come bundled with Reliance Jio and a host of other apps, are at the fourth spot with 6.9 per cent of the total market share.
However, upcoming Chinese brands like Xiaomi, Vivo, and Oppo are giving stiff competition to not only Samsung but also home-grown brands like Micromax, lava, and Intex. Xiaomi has in its kitty an impressive 6.4 per cent of the market share, while others collectively account for nearly 30 per cent of the market share, even though every three in four smartphones shipped during the quarter were ‘made in India’.
Established international brands Microsoft, BlackBerry, Sony, and lG are the biggest losers this year, as the market shifted towards low-cost and value-for-money handsets made by Chinese and Indian original equipment manufacturers (OEMs).
Apple has had an interesting year in India in 2016. While iPhone sales slowed down globally for the first time in a decade since its launch, the last quarter of 2015 and Q1 2016 were Apple’s best ever time in India in terms of sales. Firmly positioned as a premium, aspirational buy, Apple doesn’t cater to below Rs8,000 segment category (the highest selling smartphones fall within this price bracket in India), but a spike in sales of iPhone 5s despite smaller screen and outdated hardware owing to price reduction has shown that the brand has wonderful growth potential in the otherwise price-sensitive but brand-conscious market.
iPads or tablets, that had become a rage a couple of years ago, seem to be increasingly losing out to lighter or smarter laptops like MacBook Air or Microsoft Surface Pro series, and on the other hand, to mobile phones which are growing larger in screen size. Apple, however, continues to dominate the market with iPad sales despite sluggish growth in this product category.
FEATURE PHONE TAKERS
While the smartphone juggernaut is here to stay, the real deal apparently is that the feature phone story is not quiet completely dead. After many years, suddenly this year has again seen the return or the upsurge of feature phones with the slowdown in the rate of transition from feature phones to smartphones. According to the IDC, “33.7 million units of feature phones were shipped in Q2 2016, with 2.6 per cent growth over last year.” And as per research firm Counterpoint, “Feature phone shipments grew 2 per cent YoY and 23 per cent QoQ as feature phone to smartphone transition slowed down in recent quarters.”
IDC analysts attribute this growth to the fact that “entry-level smartphone ecosystem has mostly upgraded to higher specifications, making lower memory and low-end processor technology obsolete. And with the difference between an entry level feature phone versus smartphone being Rs1,000 approximately, vendors find it difficult to match up to feature phone prices”.
Decreasing footprint of CDMA service providers, opening up of the rural market for new mobile GSM subscriptions, the likelihood of first-time buyers with lower per capita income to go for feature phones are some of the other reasons for this growth.
lOOKING BEYOND NUMBERS
What do these numbers and rapid changes mean for the goliaths of the mobile phone industry — Apple and SamsungIJ It is easy for us to talk about the lukewarm response to Apple iPhone 7 or the debacle of Samsung’s much-hyped Note 7, but just because these models are most talked about in the world or within a particular segment, it doesn’t mean that these premium models make the most money for these brands in India.
Not in the case of Samsung at least. The Samsung vs iPhone debate is myopic if one doesn’t consider the different positioning of the two brands in the Indian context. Barring the Note 7 global fiasco, Samsung has dominated the world android smartphones market in the first half of 2016 with “Galaxy S7 Edge, Samsung J2 and Samsung S7 respectively positioned as the three top selling handset models in android smartphones,” as per research firm, Strategy Analytics.
Mobile retailers and analysts suggest that with record sales of the premium Galaxy S7 and Galaxy S7 Edge models in India, Samsung could trounce the current leader Apple in the premium segment. However, this may not happen anytime too soon and the reason for this is not the ‘death of Note 7’.
There is no doubt that the Note’s ‘S-Pen’ has not been replicated by anyone else, but Samsung has not been able to sell a compelling story to the upmarket segment vis- à-vis its competitor Apple.
The future probably still looks better for iPhone than it does for Samsung as far as the premium segment is concerned. The reason being that Samsung, despite all its efforts, has come to be viewed in the same bracket that Nokia once occupied — that of a dependable, stable phone with all modern features one can get in the Rs10,000-15,000 segment.
Apple can in no way enter this mid-segment as it does not have a model here, nor does it aspire to bring out new devices for this segment anytime soon. But what it does aspire for is that anybody who is going beyond this segment should seek an iPhone which promises quality, superiority and exclusive brand association for the price charged. It is worth noting that post price cuts for iPhone 5s and two tweaks in the price of iPhone 6, the phones have sold well in the Indian market.
Notably, iPhone existed at the time when Nokia was around; it exists now as well and continues to occupy this premium brand space irrespective of whether its feature sets remain the same or do not grow to become significantly better over the years. Needless to say, an iPhone user becomes a brand loyalist with her first buy — such is the hold of the brand on its customers.
TOWARDS 2017
Samsung continues to lead the smartphone story but not without firm competition. It is already seeing other brands like Xiaomi, Gionee, Oppo, One Plus etc eating into its mid-segment share by offering phones with superior specs at lower prices, mainly selling through e-commerce websites. Even in the premium segment, the launch of Google Pixel will up the ante for Samsung.
The South Korean company may also have to spend more marketing monies each year in the same market to hold on to a slimmer audience space or they may have to consider bringing a game changer in the mid segment and offer better phones at competitive price points which are otherwise generally higher than their competition.
For Apple, India acquires the position of a critical market amidst a global sales slump. “Of the 30.7 million handsets shipped to India in Q2 2016, Apple accounted for only about 8,00,000, a staggering 33 per cent drop from a year earlier; however, its overall market increased 19 per cent,” as per Strategy Analytics.
The challenge for the Cupertino giant is immense — India has weaker spending power than China, and Apple’s phones are more expensive than the competitors’, with only limited versions of its popular services on offer, be it maps or apps or iTunes. Meanwhile, the company’s request to sell refurbished, used phones has not met with an encouraging response from the Indian Government.
Not keen to compromise on the ‘premiumness’ of its brand, whether opening up maps development centre, design and apps accelerator for India iOS developers help change the company’s fortune is something that can only unfold with time.
With all eyes set on Galaxy S8 and iPhone 8, both Samsung and Apple seem better positioned in the long run when compared to others. But when it comes to building and retaining that ‘aspirational perception’, in all likelihood, Apple has again somehow struck the right note this time in its launch of iPhone 7 by rediscovering the old game Mario.
Irrespective of whether Mario gains the same kind of popularity as that of Pokémon GO, it is important because until now, technology space or devices had no emotional history. We have moved enough in time for society to have emotional history of technological symbols. iPhone, instead of focussing on technical feature sets as Samsung, has stayed human by taking the ‘retro-rehash’ route. We have seen the success of this route in Pokémon GO already this year and we may see the same happening more often.
The interesting thing to see in 2017 is not who will sell more, for selling more is rarely a result of one or two functionally superior features but more a function of whether your brand is perceived to be the ‘brand to have’ for that segment of population. Pitted against each other in the premium segment, their success in India largely depends on how they wish to evolve their brands in the eyes of the customers.