Oppo, Vivo hit rough patch in India
Misreading of ‘polarized’ consumer market hits sales: experts
Despite a head start, the expansion of some Chinese handset-makers including Oppo and Vivo into the Indian market has been slowing in recent months, a reversal that experts attribute to the vendors’ unclear launch strategies in India.
It also shows that the aggressive marketing-driven strategy, which yielded success at home for Oppo and Vivo, can’t be replicated in the world’s second-largest smartphone market because consumers in the two countries are different, experts noted.
In the latest sign, Oppo and Vivo in January cut their profit margins for Indian mobile phone retailers by over 40 percent over profitable concerns, which “leads to a backlash by neighborhood stores and mobile phone retail chains” and results in the two vendors losing about 10,000 local sales outlets each, India’s Economic Times newspaper reported on January 9.
A source close to Oppo, speaking on condition of anonymity, confirmed the reported profit cut and loss of physical sales channels in an interview with the Global Times on Monday, while saying the reported number was “inaccurate.”
As for the reason behind the move, “it’s normal to adjust strategy after a company has built up a stable market,” the source said, stressing that the market should not over-interpret the cut. “Rapid expansion only happens in the early stage of entering a new market,” he noted.
Vivo did not respond to an interview request by the Global Times as of press time.
Li Yi, a senior research fellow at the Internet Research Center of the Shanghai Academy of Social Sciences, said that the decision “comes amid Oppo and Vivo’s lower-than-expected sales performance in India and its profit-centered philosophy.”
India is the fastest-growing smartphone market in the world thanks to its huge population and a low mobile phone penetration rate. In the third quarter of 2017, Vivo and Oppo – which posted brisk sales in China – ranked No.4 and No.5 in India, with market shares of 8.5 percent and 7.9 percent respectively, research firm IDG said earlier this month.
But their domestic rival Xiaomi, which entered India at the same time in 2015 as Oppo and Vivo, now holds the biggest share at 23.5 percent, IDG said.
In the first half of 2017, Vivo and Oppo’s shares in the Indian market stood at 11.21 percent and 9.5 percent, separately, according to another IDG report.
Experts pointed out that Oppo’s and Vivo’s lackluster sales in India were partly due to the two companies’ misreading of the local market.
Most of the models Vivo and Oppo rolled out in India cost the equivalent of 1,500 yuan ($249.80), targeting the mid- dle market. In contrast, Xiaomi’s major product line in India – Redmi – appeals to the low-end market, Zhu Dalin, an analyst with IT research firm Analysys International,
“Indian consumers are not buying into such ‘cool’ tactics… What they care about are things like whether the handset is sturdy, not whether it can take good pictures.” Li Yi, Senior research fellow at the Shanghai Academy of Social Sciences
told the Global Times on Monday.
“India’s smartphone market is like [that of] China a decade ago, highly polarized. This means that both the high-end and low-end smartphone producers can precisely identify target consumers, leaving only a niche market for middle-end mobile phones,” Li said.
Besides, Indian consumers’ limited disposable incomes and preference for practical products also makes it difficult to translate the two companies’ aggressive marketing muscle at home into advantages in India, Zhu pointed out.
“In China, Oppo’s and Vivo’s success is fueled by marketing campaigns, celebrity effects and brute force visibility, which have helped them to claim a stable market share and then become profitable,” Li noted.
“But Indian consumers are not buying into such ‘cool’ tactics… What they care about are things like if the handset is sturdy, not whether it can take good pictures.”
In 2017, the two vendors had a marketing budget of 22 billion rupees ($345 million), the Economic Times reported in May. Experts said that huge expense was a reason that the two companies are struggling to make a profit in India.
As smartphone sales in India still largely rely on physical stores, Li said a contraction in these channels and the profit cut would further hamper the two vendors’ revenues this year.
Prior to the profit reduction, the two companies had about 70,000 sales outlets each in India, according to the Economic Times report.