Four years ago, the Mumbai operations of Samsung called an activation agency to discuss plans for their premium touchscreen phone range — the term 'smartphone' was yet to gain popularity. Samsung wanted the phones to be showcased around office complexes, believing anyone who had a firsthand experience would immediately opt for them. Such optimism was easy to dismiss as the fancies of a team too much in love with their own range.
After all, Samsung was just one of the many companies with an impressive pedigree in consumer durables, attempting to crack a market dominated by Nokia. Sony had acquired a certain amount of credibility in mobile via its partnership with Ericsson and was at the time considered the brand most likely to succeed.
Come 2012, and Samsung by many accounts is the leading value player in the approximately Rs 48,000 crore Indian mobile handset market. According to GfK data sourced from the industry, its overall share in value terms is 39%. It's carved out close to 49% of the lucrative smartphone segment. Rival Nokia's share in value terms is down to 31%, with a 19% presence in the smartphone category. A recent report from Gartner states, "Samsung's share has risen from 15% in the first quarter of 2011 to 49.8% in the second quarter of 2012. If Samsung continues this strong growth, it could end 2012 with more than 60% — exactly where Nokia was at the start of 2011." Nokia and Samsung declined to comment on these numbers.
Like so many success stories, Samsung Mobile has many things going for it. Impressive budgets, an even more impressive speed to market, lots of hard work and yes, more than just a smidgen of luck. Samsung strapped on its running shoes in 2007 after an initial dalliance with the premium segment. Besides launching Omnia at the upper end and Guru for the mass market, it decided its mobile business needed a face.
Asim Warsi, vice president, Samsung Mobile says, "We brought in Aamir Khan and the 'Next Is What?' campaign in 2008. He has a massive appeal across different consumers, is iconic and innovative and those were attributes that Samsung wanted to communicate." The Bollywood star was part of the draw at Delhi in June 2010 when Samsung launched its first Galaxy phone built on Google's Android OS and Wave powered by its proprietary BADA OS. With terms like 'iPhone killer' being bandied about, the Galaxy S was the phone to have. Or at least the phone to hanker after, given its steep price tag of Rs 29,990. Budget conscious customers at the time typically postponed their purchase till the next big thing came along, making the former flagship more affordable.
Except what came first was not the next big thing but a series of small things. If you were willing to skimp on a super AMOLED screen and didn't need a very powerful processor, Samsung had a phone waiting in the wings, at a more reasonable price tag. It breached the Rs 10,000 mark with the Android powered Galaxy 5 before 2010 was over. Its eyes and ears were firmly on the Indian market, modifying the native Android OS to support FM radio; a feature that was ubiquitous in even the most basic models in the country. By comparison, BlackBerry launched its first model with FM radio earlier this year.
As it turns out, 2010 was the perfect time to start selling smartphones. Hype around the iPhone built the category even if the actual gadget was mostly inaccessible. Indian consumers who wanted to move beyond calls and SMS, quickly took to smartphones. With its wide range, Samsung was an obvious choice. Says Anshul Gupta, principal research analyst at Gartner, "People were going in for their second or third mobile. They'd become mature users, aware it could provide quick access to information, mail and social networking. Attractive data plans from carriers and finally availability at affordable prices, were other factors."
Faisal Kawoosa, lead telecom analyst at CMR adds, "Earlier, there was a category of enterprise and business phones that began to vanish with BYOD (bring your own device) becoming a global trend. Smartphones were seamlessly integrated by many businesses into their processes." Today Samsung claims to have the widest portfolio at price tags ranging from Rs 1,000 to over Rs 40,000. Production was ramped up in 2010, with an additional $70 million added to its manufacturing complex in Noida. At present, the facility churns out 2.5 million to 3.0 million units a month. It's been accompanied by a huge push in distribution.
The brand is currently available across over 100,000 multi brand outlets, with the bulk of sales coming from standalone mom and pop stores. Aware that a lot of the battles between brands are fought at this leg, Samsung's been gearing up for the challenge by "creating a little world within the stores that's experientially richer," says Warsi. Samsung provides manpower to these stores and live devices as opposed to mock ups, hoping the better consumer experience will win the day. For the more premium consumer, Samsung's started Smartphone Cafes and has a presence at over 300 Samsung Digital Plazas. According to Warsi, the cafes draw an entirely different sort of crowd.
"The clock starts right before the customer enters the store. Everything in these cafes can be tested firsthand. They have our best store associates and exclusive products. We don't want people to just come in, buy and leave, but to walk out of the store totally activated," he says. While many of its competitors like Sony focus entirely on the premium side of the market, Samsung is still pushing its feature phones aggressively. It has chosen to ignore critics who claim the space has been irrecoverably commoditised. These phones contribute around 75% of Samsung's volumes, operating in the sub Rs 4000 price bracket. Warsi says, "Even though feature phones do not have an open operating system, they are being given more smartphone like features."
These include touchscreens and social apps besides features beloved of the value buyer like dual SIM card slots. Warsi argues that the need for customisation is greater in these phones since consumers have come to expect regional language input and display, an Indian calendar and prayers, as basic features. He explains, "It's clearly a sum total of a rational and emotional decision. The proof is our cheapest models are not the largest selling even in the feature phone segment."
According to Gartner, the mobile handset industry will reach 251 million units in 2013, and Samsung with a portfolio that straddles both the most pricey and the most inexpensive seems poised to reap a large chunk of this. In many ways, it's in a similar position to Nokia in the mid 2000s. And yet, it's too early to get complacent. Distribution is a key challenge on the feature phone side. In the case of smartphones, according to Kawoosa, "The issue is to convince the intended buyer that it makes sense to spend that much on a phone. For some users the decision is made difficult by tablets being available in the same range."
Smartphones are notoriously underutilised with many consumers buying devices equipped with maps, voice-led assistants and multimegapixel cameras and using them for pretty much the basics of messaging, calls and gaming. Kawoosa believes, "The biggest challenge is to find an evolved user rather than one who can merely afford a device. They have to address localisation not just for feature phones but the higher end. An enhanced experience can only be achieved by personalising the product. Vendors might need to explore options like mobile parlours where phones can be customised."
Around the launch of the iPhone 5, several consumer technology magazines attributed the relatively muted response to feature fatigue. How much faster, bigger and capacious can phones get before consumers stop queuing up and just shrug and move on? What is the next killer app on the product front to get them excited about the category? Perhaps its time for Samsung to ask 'Next Is What?' all over again.
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