Sunday, 5 October 2014

Illustration: Sreejith R. Kumar TOPICS consumer goods electronic commerce lifestyle and leisure gadgets (general) mobile phones PDAs and smartphones lifestyle and leisure What’s the reason for the sudden explosive growth of smartphones in the market…

Seventeen-year-old Yash Mehta knew the Chinese Xiaomi Mi3 smartphone was a winner, as soon as he read the product specifications and the price. “It’s worth Rs.30,000 and they are giving it for Rs.14,000, with a 2.3 GHz quadcom processor. Everything works perfectly. It’s the best phone you can get in its size,” says the Mumbai-based teenager, who uses his phone for the usual teenage mix of calls, e-mail, Snapchat, WhatsApp, Instagram and Facebook. He doesn’t really game, but the Mi3 is powerful enough to support gaming, he says.
The phone caught his attention when he was looking to upgrade his Micromax Canvas 2 smartphone; so he logged onto Flipkart on July 22, the day of the launch. The phones sold out in seconds that day, but Mehta was able to order his phone the day after. Noticing an ad for a cheaper version called Redmi — priced at Rs.5,999, the teenager realised it was a perfect upgrade for his father, who had been using a regular phone. So Mehta bought that as well and now his father can check his e-mail on his phone, use WhatsApp and check the value of his portfolio on Moneycontrol.com.
It is consumers like these, as well as many first-time phone users, who are the focus of Android One. Launched recently with a publicity blitzkrieg, this initiative from Google sees it collaborating with smartphone manufacturers, telecom providers and software developers to create a whole range of competitively priced smartphones.
Forty six million smartphones sold in India last year, and this year sales are expected to be about double that number at 85 million, says Tarun Pathak, Senior Analyst at Counterpoint Research, a market research firm. Smartphone penetration in India is still low, at 10 per cent in 2013-14. Yet, by the end of the year, this number will go up, as 33 per cent of the total phone sales are smartphones.
What then are the reasons for this sudden explosive growth? After all, smartphones are hardly a new category. Ever since the launch of the world’s first smartphones, the iPhone in 2008, they have been steadily proliferating. Smartphones now account for over 70 per cent of total cell phones in developed markets.
In India, however, a whole set of factors have come together for an accelerated development and growth in this category. “As people begin to understand the Internet and the power of data, the smartphone increasingly becomes a mass product,” says Nikolai Dobberstein, Partner at A.T. Kearney, the global management consulting firm. Indeed it is data and the Internet that drives much of the smartphone impetus. As Sandeep Menon, Marketing Director at Google, points out: “For many people, phones are the first gateway to the Internet.” Today 45 per cent of all railway tickets are bought online. There will be an estimated 160 million transactions online in India by 2017 and e-commerce of the value of an estimated 30 billion dollars, says a study by A.T. Kearney and Google.
For many consumers, the smartphone is also seen as a symbol of having arrived, as ownership of an Apple or a Samsung or Motorola or Nokia smartphone becomes irresistible arm candy. Little wonder then that there are as many as 70-plus smartphone brands in India. Online e-commerce site Flipkart, for instance, carries as many as 55 brands, ranging from a unit price of Rs.1,999 to models that cost over Rs.60,000.
“At Flipkart, the smartphone sales have grown over 600-700 per cent year on year,” says Kalyan Krishnamurthy, SVP – Retail, Flipkart. “Models like Moto E (Rs.6,999) and Moto G9 (Rs.12,999) are the best-selling phones on Flipkart. Asus Zenfone 5 (Rs.10,490 onwards) and Xiaomi products have been major hits too.” All these phones are priced between Rs.6,000 and Rs.13,000, clearly demonstrating the potential for growth in the sub-Rs.15,000 category.
And of course, this is exactly where the Android One phones are positioned. The first three devices in this initiative were launched recently on three ecommerce sites — the Spice ‘Dream’ at Rs.6,299 on Flipkart, the Karbonn ‘Sparkle’ on Snapdeal at Rs.6,399 and the Micromax A1 at Rs.6,499 on Amazon. All three phones run on the Android v4.4.4 (Kit Kat operating system) and include front and back cameras, a dual sim and the ability to store YouTube videos to be watched offline, which is a great selling point for consumers who watch cricket clips and Bollywood clips on their smartphones. The phones will get automatic software updates from Google, and will receive the new Android L release later this year as well as free downloads up to 200MB for the first six months for apps off the Google store including Chrome maps and YouTube, all without using their data plan. There will be other phones and other brands too, says Menon. The Android One launch has already been followed by other smartphone launches like the Jolla Sailfish at Rs.16,499.  Also expected to debut later this year are the Samsung Note 4, and the India launch of the iPhone 6 and 6 plus. All in all, it is raining smartphones in this market, as Indian handset makers like Micromax , Karbonn and Lava slug it out with big daddys like Samsung and Apple, as well as aggressive Chinese entrants like Xiaomi and Gionee.
“Going ahead, there will be a bifurcation in the market. At the high end there will be the iPhone/Galaxy Note customer who is not as price sensitive. Then there is the below Rs.7,000 segment where growth is really going to explode,” says Dobberstein, who feels the key ingredients for success here will be the linkages between apps and the operating systems, as well as the ability to customise interfaces like in the Xiaomi . “It’s a market where brands come and go, and often come back as well,” he says, pointing to Nokia, which made a comeback with Lumia; HTC, which tried to make a comeback with HTC 1; and Sony with Xperia. It’s also a market where specific handset models end up being more important than brands, where customers talk in terms of an iPhone 6, a Redmi or a Moto rather than Apple, Xiaomi or Motorola; so it is clearly the device that’s key as opposed to the phone brand,” says Dobberstein.
While the smartphone market at this point seems clearly big enough to accommodate a multiplicity of brands, some sort of shake-up or consolidation may happen, says Pathak. Key issues will not just be price and quality, but the ability to customise. “We can expect a rising trend towards creating app experiences tailored with localised content and language support.” Pathak feels a regional app store will be the next battleground and point of differentiation among the smartphone brands.
For the consumer, it will continue to get better and better, as prices of smartphones fall, even as the basket of digital goodies they offer — from high-density screens and cameras to faster processing — continues to increase.