While Xiaomi remained focused on selling mobile phones under
$120, Indian consumers were willing to pay up for better looking models with
richer features. South Korea’s Samsung launched products to meet those
aspirations and offered innovative financing schemes that made them affordable
to most.
Those moves have helped Samsung wrest leadership of India’s
competitive mobile phones market from Xiaomi , with data from Hong Kong-based
Counterpoint Research showing it had a 20% market share for the last quarter of
2022 compared to the Chinese company’s 18%.
“The Indian market is witnessing a ‘premiumisation’ trend.
(But) Xiaomi has been caught underprepared for the shift with a budget
phones-heavy portfolio,” said Tarun Pathak, a research director at
Counterpoint.
The loosening of Xiaomi’s vice-like grip on the 626 million Indian smartphone users – the second biggest after China – shows how companies that fail to cater to changing consumer preferences in a fast-growing economy with rising disposable incomes are being punished.
Most famously in India, Tata Motors’ $1,200 Nano, billed as
the world’s cheapest car, was shunned by consumers who associated the low price
tag with inferior quality.
Indians’ push for more expensive mobile phones to consume
videos and other content will also benefit social media app providers such as
Meta, and iPhone maker Apple Inc , which so far has a tiny market share in the
country due to its sole focus on high-end phones, priced from $605 to as high
as $2,304, according to its website.
According to Counterpoint, the market share of the sub-$120
phones in India fell to 26% in 2022 from 41% two years ago. And premium phones
– priced above 30,000 ($360) – saw their share double to 11% in the same
period.
Xiaomi and Samsung both count India as a key growth market,
with smartphones their top selling electronic device. The Chinese company
recorded total revenue of $4.8 billion in 2021-22 in India, while Samsung
registered $10.3 billion in sales, of which $6.7 billion came from smartphones.
Xiaomi, though, is already facing heat in India due to the
departures of at least five senior executives, and increased government scrutiny
amid frosty relations with neighbouring China. The company has $674 million of
its funds frozen by the country’s financial crime agency for alleged illegal
remittances to foreign entities, which Xiaomi denies.
A Reuters check on product listings on Xiaomi’s website
showed the mismatch between consumer needs and the products the company has
been offering. Xiaomi showed six smartphones priced above $360, compared with
Samsung’s 16. Under $120, Samsung had seven models, while Xiaomi listed 39 –
most of which were shown to be out-of-stock.
And premium phones accounted for only 0%-1% of Xiaomi’s
total India phone shipments in the last two years, when Samsung’s higher-end
phones more than doubled their share to 13%, Counterpoint data showed.
But Xiaomi, which has acknowledged it introduced “too many”
models in the past, is revamping its product line-up to focus on premium
smartphones.
It launched in January the Redmi Note 12 whose top-end
variant is priced above 30,000 rupees, and more recently the Xiaomi 13 Pro at
79,999 rupees ($970) – its highest priced phone in India. The strategic shift
seems to have paid immediate dividends, with the Redmi Note 12 clocking sales
of $61 million within two weeks of its launch.
“We have laid out a streamlined and cleaner portfolio with a
focused approach to building expertise in the premium segment, and the launch
of our latest flagship, Xiaomi 13 Pro, is a step in that direction,” said its
India President Muralikrishnan B.
“We understand that we have a long way to go in this
journey, and therefore are bringing in much stronger products.”
Loans for phones
A Samsung scheme, run with its financing partners that says
it offers “convenient and assured” loans, played a significant part in its
recent success in India, helping generate $1 billion in device sales last year.
A poster of Samsung’s offering that Reuters spotted on a
dusty street used by fruit sellers in Uttar Pradesh state said that even those
with no loan history, low credit scores or without salary slips could get a
phone.
Sanjeev Kumar Verma, owner of a nearby multi-brand phone
shop, has benefitted from the company’s loan scheme. Speaking to Reuters in his
shop, where hundreds of phones are stacked on shelves, Verma said he used to
sell five Samsung phones each month, but has quadrupled that to 20 now, 18 of
which are via the loan scheme.
Verma, and another smartphone vendor in Mumbai, said that
unlike rivals, Samsung required no local address proof, making it easier for
migrant workers or those working outside their home state to acquire phones on
loans. Samsung did not comment on the remarks by the vendors.
The growth in premium segment phones was much higher in
small towns than in big cities, Samsung’s India mobile unit head Raju Pullan
told Reuters in February, adding almost half the consumers who opted for its
financing scheme were first-time loan seekers.
Samsung says its financing app installed on smartphones can
lock the device and block outgoing calls for missing loan payments.
Xiaomi has also tapped partnerships to offer loans, calling
them a key growth driver for sales of phones priced above 15,000 rupees ($183)
and adding it will explore more such offerings.
Muralikrishnan said the company will also open more stores
beyond its current network of 20,000 retail partners, and boost local
procurement of mobile phone parts, likely reducing costs.
Some industry analysts said the new strategy could help the
Chinese company return to solid growth in India.
“Xiaomi has historically enjoyed a strong brand equity, has
a robust online and offline channel presence, and can spring a comeback with a
potentially strong premium and value-for-money product mix,” said Prabhu Ram,
head of industry intelligence at CyberMedia Research.
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