2014 was quite a year for handset companies, with the sector witnessing the entry of several new players, big acquisitions and new business models like online-only handset sales, weekly flash sales and invite-only sales. Here’s a look at some of the trends we noticed in the handset segment in 2014:
1. Online-only sales make their mark
Motorola re-entered the India market by partnering exclusively with Flipkart to sell Moto G in February this year, followed by other devices like Moto E and Moto X. This partnership seemed to have worked, since Motorola claimed to have sold more than one million phones in five months, to become one of the top five handset makers in the country.
This was later replicated by other handset makers like Samsung, Micromax, Karbonn, LG and Lenovo with Flipkart & other e-commerce players, much to the displeasure of offline retailers. Chinese smartphone maker Xiaomi also entered India in July this year and started selling its devices through weekly flash sales on Flipkart while another Chinese smartphone maker OnePlus started retailing on Amazon India through an invite-only system.
Sudhin Mathur, Director (Smartphones), Lenovo India told Medianama that E-commerce platforms allows them to launch its products across the country on Day 1, which is not possible through offline retail, particularly in tier-2, tier-3 and tier-4 towns, since it takes time for a product to physically reach out to a retail outlet. He also added that e-commerce platforms allow users to take an instant decision by actually comparing products based on what’s being offered at what prices, unlike in an retail outlet where consumers can get swayed by the retailer’s preferences.
They also get marketing support & accurate consumer data from these e-commerce players, while consumers get bundled offers ranging from discounts to cashbacks and freebies, along with the handset.
2. Better smartphones at lower prices
Motorola also somewhat changed the game for handset makers in India, by aggressively pricing its Moto G and Moto E handsets. This led to competing players like Micromax, Lava and Karbonn launch similar low-cost offerings to consumers. Xiaomi and OnePlus made the battle further intense by offering premium smartphones at lower than expected prices.
This was quite a change from last year wherein consumers had to shell out upwards of Rs 20,000 for a decent smartphone experience, since a majority of low-cost smartphones available then were lower-specced, thereby providing users with a sub-par experience.
Google’s Android One was also expected to offer similar entry-level smartphones to consumers, however the phones launched so far have been quite disappointing and it also doesn’t seem to have attracted much sales either.
3. Offline retailers cry foul
The effect of online-only sales and the allegedly disproportionate discounts offered by e-commerce platforms like Flipkart, Amazon India, Snapdeal was also evident on offline retailers, as they started threatening electronic brands that they’ll boycott these products in their stores. Several offline electronic chains like Croma, Future Group, Planet M, Next, Reliance Retail and Sangeetha Mobiles also reportedly refused to sell Android One handsets in protest of Google’s decision to initially launch the handsets through these e-commerce platforms.
Since traditional offline retail still accounts for a significant part of their sales, companies buckled under pressure and took a series of steps like asking e-commerce players to rein in discounts, stopping fresh sales until they get a price undertaking from these platforms, and launching offline exclusive phones among others. Several companies also issued consumer advisories against e-commerce players this year, warning users against buying its devices from these platforms.
4. Nokia ceases to exist as a phone brand, while Samsung struggles with declining sales
Microsoft closed the acquisition of Nokia’s devices & services business in April and rebranded it as Microsoft Mobile. Later, it killed Nokia’s feature phone business and laid off around 12,500 people from the company. Microsoft also sold Nokia’s MixRadio service to mobile messaging service LINE and is shutting down Nokia Store, migrating users to Opera Store.
On the other hand, market leader Samsung struggled with declining sales, with competitors offering better smartphones at lower prices, especially in the mid-range and high-end smartphone segment. The company also witnessed a number of changes at the top management with HyunChil Hong taking over from BD Park as Samsung India MD earlier this month, CFO Sunil Goel leaving the company after a 17 year stint in October, Samsung India’s mobile and IT head Vineet Taneja joining rival Micromax as CEO and deputy managing director Ravinder Zutshi retiring after a 19 year stint. In a sense, it is becoming the new Nokia.
Lenovo also completed the Motorola Mobility acquisition in October, nine months after acquiring parts of Motorola from Google for $2.9 billion. With this acquisition, Lenovo claimed to have become the third largest smartphone player globally.
5. Handset Disputes in 2014: court cases and taxes
Nokia India fought a tax dispute case with the Income tax department for majority of the year and was eventually forced to shut down its Chennai manufacturing plant, one of its biggest handset manufacturing plant worldwide. The plant was earlier reduced to a contract manufacturing unit with Microsoft as the sole customer, after Nokia was forced to exclude it from the Microsoft acquisition when the deal closed in April this year due to pending tax disputes with the Supreme Court as well as Madras High Court. This resulted in contract manufacturer Foxconn also suspending its India operations due to a steep fall in its orders.
Earlier this month, Xiaomi was also stopped by the Delhi High Court from importing & selling handsets in India that infringe on Ericsson’s standard essential patents (SEP). The company later got a reprieve, allowing them to sell Qualcomm-based handsets like Redmi 1S and Redmi Note 4G in the country.
OnePlus was also stopped from shipping or selling its smartphones in India, after Micromax complained that its exclusive rights had been infringed by OnePlus launching OnePlus One in the country, running a custom version of Cyanogenmod. The company however has been allowed to clear its existing stock in the market. (Also read: OnePlus vs Micromax in India: How Cyanogen repeatedly changed its stand)