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How Online-Only Mobile Brands Are Redefining Retail

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How Online-Only Mobile Brands Are Redefining Retail specialfeature MOBILITY How Online-only Mobile Brands are RedefiningRetail Increasingly, retailers are adopting an online-only strategy to give their products unprecedented visibility in tier 1 and tier 2 cities right from day one, and at much lower costs – Suresh Sharma, Founder and Director, iSpyPrice.com n the last 12 months or so, a number of mobile brands Reaching target market in smaller cities have adopted the online-only sales strategy and One very plausible reason why mobile brands such as results indicate that consumers have taken a liking to Xiaomi and OnePlus have successfully entered the market Ithis new approach. through their online-only strategy is the reach that an In India, the online-only strategy was first embraced online platform like Flipkart offers their product. By by Motorola with their then flagship product Moto G in adopting an online-only strategy, these brands are able to partnership with India’s largest e-commerce marketplace, reach consumers in smaller cities where the retail sector Flipkart. When Motorola first announced this approach, isn’t organised as well as it is in bigger cities. An online-only few market analysts would have expected the Moto G to strategy actually allows these brands to give their products sell out within 15 minutes of its first opening. While this unprecedented visibility in Tier 1 and Tier 2 cities right event has been eclipsed by rival brands such as Xiaomi and from day one. Another important factor why the online- OnePlus, in hindsight, it will forever be remembered as the only approach has worked is that with time, consumers beginning of a consumer trend that nobody had previously have grown more comfortable with online buying. anticipated. Consumer awareness of products has increased manifold Now that this model has stood the test of time and has compared to what it was a few years ago. been adopted by a number of brands, reasons for its suc- cess are slowly coming to the fore. Offline buying is overrated Consumer awareness and improved online buying experiences have also led mobile brands into believing that offline buying is overrated. These days, when consumers want to buy a new phone; they often resort to comparing “Huge brands like Apple the prices and specifications on offer from various brands aren’t likely to switch before arriving at a decision. This process can be best to this sales channel executed online with a wide variety of brands for them to full-time anytime in the choose from when compared to the limited variety they near future. Their sales might find at a retail store. Also, the process of price and spec comparison is made are built upon brand all the more simpler online thanks to price comparison value and standing in websites, so consumers don’t have to visit multiple physical queue to buy an Apple retail outlets before they can finally zero in on their choice. iPhone is still very Suresh Sharma Founder and Director, much a fan thing.” The ability to control prices iSpyPrice.com Perhaps the most important reason why brands like 32 PCQUEST MAY 2015 pcquest.com twitter.com/pcquest facebook.com/pcquest linkd.in/pcquest [email protected] Xiaomi, OnePlus, and even new entrants like InFocus are entered into a deal with e-commerce giants Amazon for the using an online-only strategy is that this allows them to online sale of this device. control the pricing strategy of their products. Brands such as Lenovo and Xolo have also decided to Just like other consumer electronics goods, mobile adopt this strategy. Lenovo has already announced its plans brands have always had to go through the cumber- to take on the likes of Xiaomi with its online-only brand some distributor-retailer cycle to make their product Shenqi. Brands like vivo are making a foray into the market accessible to the consumer. In the traditional offline taking advantage of this method. model, mobile brands either build their own distribution Lava International’s smartphone brand Xolo has been in network or strike a deal with one or more established the news for building its own e-commerce platform which it distributors. And if you are a foreign brand looking to intends to use for the purpose of reaching a wider consumer make inroads into a local market, this cycle gets further base for an online-only sub-brand it is building. complicated. In a market that changes every few months and has This still isn’t the right choice for everybody an incredible number of competitors, building one’s own While the online-only strategy may have many ups, it also distribution network is a hassle most foreign brands would offers no immediate reasons for bigger players to join the ideally want to avoid. This is mainly because this is a time bandwagon. Huge brands like Apple Inc. aren’t likely to consuming process. switch to this sales channel full-time anytime in the near The other option for these brands is to opt for a future. They have no reason to do so. Apple’s sales are built national distributor. These national distributors will end up upon brand value and standing in queue to buy an Apple making a margin on the sale of each device, pushing the iPhone is still very much a fan thing. Apple’s marketing price of the device up. Then come the regional distributors, makes the brand and its products desirable and that is why they also need to make a margin on the sale of each switching to an online-only model seems highly unlikely. device, pushing the device’s price further up. Finally, it’s Then there is the South Korean behemoth Samsung. the turn of the retailers to make a margin on the sale of Samsung currently sells a large majority of its smartphones each device. By this time, the price of the device goes up through the traditional model. It does offer select e-tailers by a fair notch. exclusive deals where they can sell a particular Samsung If you think Xiaomi’s current flagship the Mi4′s 16 mobile through their online marketplace, but by and large GB version is a steal deal at Rs. 19,999 consider adding Samsung is a supporter of the traditional method and another Rs. 3,000-5,000, or maybe more, to that price believes in this sales channel. and it doesn’t sound like a steal deal anymore, does it? Some would argue that’s only two brands to take into That’s what the distributor-retailer cycle can do to the consideration but the fact is these two are the current flag- price of a device. Xiaomi and the likes can afford to give bearers of the mobile industry, the top two smartphone the consumer a favorable price because the online-only makers in the world. And as long as they, and others like strategy allows them to do so. them, are convinced, the offline distributor-retailer cycle is This is also why you get to see different prices for likely to remain healthy in the foreseeable future. the same devices on various e-commerce marketplaces. Mobile brands are able to pass the benefit of price saving Future prospects for the online-only strategy to the consumer. The e-commerce brands also don’t need While a number of these brands have taken to this approach, to save a margin from a sub-retailer. It’s a win-win situation it is undeniable that there are other factors that have led for all parties involved. to the success of this sales channel. The first is the growing Internet penetration. India’s Internet penetration has grown A high success ratio to 300 million+ and is on the rise all the time. Although Motorola’s online-only strategy for the various versions of e-commerce is said to account for only about 1% of total the Moto G and later the Moto E was such an incredible retail sales, this 1% accounted for sales worth $5.3 billion. success that they ended up selling more than a million of It is a given that as this online-only strategy by smartphone these devices. Xiaomi followed suit and has done well with brands takes shape, these figures will see a surge in sales. the sale of its Mi3, Mi4, and Redmi 1s devices. This strategy The growing penetration of Internet is allowing has paid rich dividends for Xiaomi as they are now among e-commerce brands to reach a critical mass of potential the top 3 smartphone brands in the world, third only to customers and there is no doubt that in time, as more and Apple and Samsung. more mobile brands opt for an online-only strategy, e-tailing Earlier this year, the Micromax-owned Yu Televentures would begin to rival traditional sales channels. Perhaps not brand launched its first flagship product- the Yureka. They immediately, but definitely! pcquest.com twitter.com/pcquest facebook.com/pcquest linkd.in/pcquest [email protected] MAY 2015 PCQUEST 33.
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