Category: Editorial

Remember when big Bollywood names would advertise for Micromax and a great cricket catch would be known as Karbonn Kamal Catch? These names had become synonymous with smartphones in every household in India. But what happened to them? Why are these names not right next to Xiaomi or OnePlus in the sales records in India? With Micromax just having launched it’s first smartphone with a notch, almost a year behind other smartphone makers, we delve deep into what really happened. In this article we find out, from various reports, previous interviews, sales reports, online user feedback and everything else, how these companies went from being at the pinnacle of smartphone sales to losing everything.

How Did These Companies Come Into Existence?

Back in the day, the US market was starting to move towards smartphones from feature phones. In 2007, the first iPhone was introduced to the world, and it revolutionised the mobile phone industry. India was still largely a feature phone market with very few devices from Blackberry and Nokia’s Nseries phones that were called ‘multimedia smartphones’ being sold. These devices were expensive and were sold in high-end stores which almost always had a different section for the customers of such phones. Priced anywhere between Rs 25,000 to Rs 45,000, these phones were the envy of people who couldn’t afford them, and pride of people who could. Feature phones were still a large part of sales for players such as Nokia, Sony and Motorola.

The dealers could make huge profits selling these phones. Now at that point in time, the market was open to any risk taker who could afford to get into the business of making their own brand. And so they did. Companies such as Micromax, Lava, Karbonn etc were all either dealers for smartphones, software companies or telecommunication ventures who wanted to make a mark on the emerging trends of smartphones. They, however did not have the production capability or the funding to start a production unit in India. This brings us to our next point, white labelling.

What Went Right?

White Labelling

To understand white labelling, one needs to know what OEM and ODMs are. Original Equipment Manufacturers are companies that sell product made by other manufacturers under their own brand name. Original Design Manufacturers are companies that design and manufacture a product according to a different company’s needs who sell them under their own brand. Brands like Lava, Micromax and Karbonn saw this OEM and ODM relationship as a great scope for a business model for smartphone manufacturing.

Chinese phones were already available in the Indian market, but they were not well received. No one wanted to invest in a ‘Chinese phone’ because these phones had no warranty and no after sales service. What the Indian companies did was ask manufacturers in China to design and build smartphones according to their needs and these manufacturers would build it and dump it in India. The Indian companies would then add their own branding to these phones and sell them in Indian markets with warranty and an after sales service promise. This was a great business model and these Indian brans gained ground quick!

Cost Effective

One of the several reasons for the success of these phones were their cost effectiveness. They were providing feature rich phones, dirt cheap, compared to their more expensive counterparts like Nokia and Blackberry. iPhones were also seen from time to time, but were rare. Motorola was a big hit with their RAZR and ROKR series models but these were also getting sloppy. At the time, 2G phones were reigning the market and calling and texting were quite expensive for Indian consumers. But with the introduction of 3G in and around 2008, Internet users suddenly blew up.

WhatsApp’s introduction a year or two later was also a major shift. Most of the expensive international brand’s phones wouldn’t support WhatsApp, and many would not support 3G. A massive number of people had to shift and so a great opportunity opened up for all manufacturers. Indian companies cashed in on this by introducing smartphones with bright LED touchscreens, Android based OS and a host of other features. These were priced at around Rs 10,000 – Rs 15,000. There was also one more feature that these companies, along with the internet boom, made famous. Let’s talk about that next.

Dual Sim

When we say that the Indian companies were the talk of the town back then, we really mean it. From students in high schools and colleges to working professionals, everyone was a consumer of these Indian brands. Many shops even raised their prices at one point of time for the Micromax Canvas series of phones because of the high demand and low availability. These phones, among other things, introduced a feature that has stuck on even now. That feature is Dual sim cards.

When companies such as BSNL and MTNL started providing cheap internet options, people wanted to use two sim cards in one phone.This was because porting phone numbers wasn’t really something one could do easily. The Indian manufacturers went to the Chinese ODMs and asked for a phone that could use two SIM cards. Thus in 2010, Spice mobiles launched India’s first dual SIM ( 3G + 2G) phone. Although Dual SIM isn’t a technology the OEM or the ODM invented, it was definitely seen as a useful feature for a particular market and brought into use by these companies.

Faster Turnaround Time

White labelling also worked for these companies because of another reason. These phone manufacturers had a faster turnaround time, compared to Nokia, Sony or Samsung. They did not have to do their own research and development, neither did they have to design the phone, they could just bring a new model to a market much faster. A company like Nokia had to design, manufacture, market and sell these phones. These took at least a few months to achieve, from scratch. The ODMs meanwhile, did not have to worry about marketing and selling their products while an OEM did not have to worry about the design and manufacturing. This symbiotic relationship helped them bring newer models with the latest features to the market faster than many other established phone makers.

What Went Wrong?

Chinese ODMs Started Their Own Branding

Many ODMs in China understood the fact that the real money was to be made in the distribution and marketing of phones in markets like India. Working with the Indian companies, they had already learnt a lot about the market and the distribution channels. Many other established Chinese companies like Xiaomi also set their eyes on India at the time. These ODMs and other smaller Chinese brands started shipping their own branded smartphones to the country with a promise of better after sales service. But in order to compete with the already established brands, they needed o keep the pricing to a bare minimum. This is where the next turning point in the market comes.

Online Sales

Flipkart had already set up a good service channel and delivery channel owing to it’s online model of selling books and then later selling other items. Amazon entered the Indian market in 2013 when they realised the scope this market had. They also started with books and movies and slowly gained the customer’s trust. Indians were sceptical of using online channels to buy expensive products, specially electronics. But as the online revolution progressed, Indians started to slowly indulge in online shopping.

One of the other factors for this was the introduction of 4G in 2012. This made internet services considerably faster and cheaper. These Chinese manufacturers saw the opportunity of cutting costs. Costs for establishment, delivery and distribution as well as a lot of other smaller expenses that the companies would’ve incurred if  they sold through offline channels such as retail stores. Online selling allowed the Chinese players to bring phone prices down a lot.

Lack Of Vision

The Indian companies were heavily invested in marketing and advertising their products and failed to realise that time and technology was moving at a rapid pace. They did not expect that the Indian market would shift so drastically. India, at that time, had come out of recession and the industrial production was growing instead of slowing down. People were slowly getting back their jobs and many started earning more than they were spending. This caused online sales to grow as well. The introduction of 4G was a huge change, and it rolled out in a matter of just a few months. Reliance Jio rolled out 4G phones and 4G connectivity and 3G suddenly became a backdated technology.

Most Indian companies had a huge order booked for a lot of smartphone units. These suddenly became extremely hard to sell to the new customers who were looking to buy 4G phones. With 4G being extremely cheap, the Chinese manufacturers were ready for the 4G wave and they jumped in to sell their phones. This lack of vision for the future affected many companies and brought many more to their knees before their ultimate shut down.

No Or Very Little R&D

The Indian smartphone companies were headed by strong businessmen but not technical or product people. They knew how to conduct a business with a given set of rules. But the smartphone market changes extremely rapidly and they couldn’t catch up. The Indian companies had no proper R&D department put in place. They had no or very few factories and relied mostly on ODMs for their products. With ODMs going their own separate ways to create new models of 4G phones, all the while, marketing and selling their own smartphones. Meanwhile the Indian manufacturers were left stranded with a huge number of smartphones to clear. This was one of the many reasons why a huge corporation like Nokia also fell short. R&D is an integral part of smartphone manufacturing and big companies such as Samsung, Apple and Huawei have a lot of manpower as well as capital dedicated to this sphere.

Bad After Sales Service

There were several reasons for Indian consumers to buy Indian smartphones. But one of the top reasons was the guarantee of repair in case of any manufacturing issues. Most Indian companies failed on this promise. If you do a quick online google search, you will see that a majority of consumers were extremely unhappy with the after sales service. There are complaints of these companies taking the phone for months and not repairing or replacing it. Moreover, bad behaviour from the staff and a rampant complaint of overcharging were pushing customers away. This was the final nail in the coffin. Almost all smartphone users shifted to the newly launched Motorola, Xiaomi and OnePlus phones.

While the Indian companies are slowly dusting off their archaic ways and slowly investing in R&D, they have a long way to go. It would be best if they skipped a few of the popular trends right now.  Instead, they should try to predict what trends are to come in the near future and work on that. We surely hope these companies get to play on a level playing field in the years to come, so that the Indian smartphone manufacturing market flourishes as a whole.