The latest retrenchment exercise is part of a broad-based plan to bring its business on track amid fierce competition that it has been facing from all corners for over two years now, this time from Chinese competitors.
Samsung’s strive back to the top began a year ago, when D J Koh, the global president and chief executive of its IT and mobile communications business, set out a game plan to counter the heightening competition in the India market. Since then the firm has undertaken a complete overhaul of its local portfolio, ramped up manufacturing capacity, expanded offline retail reach and shifted its market focus. Koh had warned that there was no room for status quo in a market that was fast changing.
To counter the growing challenge from Chinese rivals, namely Xiaomi, Vivo and Oppo, Samsung
retired two of its key smartphone series — Galaxy J and On — and focused on both offline and online channels last year. Replacing them is the all-new Galaxy A and Galaxy M series, respectively.
The electronics major, already the largest in-house manufacturer of handsets in India, expanded its Noida facility; once finished, Samsung
claims it will be the largest manufacturing hub for handsets in the world. It claims to have hired over a 1,000 people at the new plant and lined up investments to the tune of Rs 4,950 crore.
The firm’s offline retail reach grew to 1,80,000 in 2019, from 1,50,000 earlier. And is now focused on introducing innovations in the mid-segment — deviating from its previous stand of introducing them at the top tier of the market.
According to Ranjivjit Singh, chief marketing officer at Samsung India, both the M and A series have reaped rich dividends for the firm in 2019. While between March and May, two million M series phones have been sold, Samsung has already raked in over $1 billion (Rs 7,000 crore) in sales from A series, the company claims.
“We took some bets, launched some initiatives that played out very well for us. This gives us the confidence that 2019 will be a record year”, Singh said. Samsung’s latest success, he claimed, is due to its renewed approach. The company now has its ears to the ground. In today’s market, listening, understanding and quickly delivering the consumers’ needs are crucial, he added.
Before launching the A and M series, Samsung conducted an all-round study to understand the needs of the consumers. “With both our employees and agencies, we extensively studied the market”, he said. Through ethnographic studies, focus groups, channel feedbacks, hearing online conversations and home visits — Samsung did not leave any source untapped.
Shifting away from its long serving — focus-on-all-groups strategy — Samsung has now identified the millennials as its core target consumers. Its studies revealed, millennials not only own 70 per cent of the smart devices, they also consume over 84 per cent of the data.
According to Asim Warsi, senior vice-president at Samsung India, who has been deeply involved in product planning, catering to the online consumers is way different than consumers buying from physical outlets. “Online consumers are very discerning. And we are constantly learning about them”, he said.
The concern about online buyers is not without a rationale. In the past six quarters, share of online purchases in the smartphone market has surged significantly — from close to 30 per cent in early 2018 to 40 per cent in March, 2019. And it is a place where Chinese players have always had an edge.
Since the entry of aggressive Chinese electronics players — Xiaomi, Vivo, Oppo and OnePlus, among others — Samsung’s handset business has been under pressure. And one of the key reasons has been its loose grip on online market. Xiaomi — the long-standing leader in the online space — now holds over 43 per cent share, followed by Samsung (15 per cent) and Realme (from Oppo) at 11 per cent.
The falter not only cost Samsung the long-held top spot in the local smartphones market in mid-2017, its profitability suffered. In 2017-18, Samsung’s net profit dipped 10.7 per cent to Rs 3,713 crore from Rs 4,156 crore the previous year. And its net profit margin slid to 6.08 per cent in 2017-18 from 7.49 per cent the year before.
Its volume share in the second largest smartphone market slipped further in January-March, 2019 quarter to 22.3 per cent from 25.1 per cent in the corresponding quarter previous year. And now stands nearly six percentage points lower than January-March, 2017, when it used to be the top seeded player.
The scenario is little different in the television market either. According to industry estimates, Samsung has lost the top spot to its rival Xiaomi in the smart TV market. According to Xiaomi, IDC data suggests it holds 39 per cent market share in the fast growing smart TV market that now comprises over a third of new TVs in India.
Warsi, however, is optimistic about this year. Together, the Galaxy A and M series, he says, may fetch well over $5 billion (Rs 35,000 crore) in sales in 2019. That is almost the entire sales of its mobile business in 2017-18 (at Rs 37,300 crore).
In the premium market, Samsung has already bounced back and in March, it re-captured the top spot, after three quarters, by replacing OnePlus.