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    Indian companies like Micromax follow Xiaomi & Motorola's success by launching smartphones for online market

    Synopsis

    Micromax, which launched Yureka brand of smartphones through a subsidiary recently, sold 25,000 devices in seconds over two flash sales on Amazon.

    ET Bureau
    NEW DELHI: Indian handset makers are increasingly selling their new smartphones through online channels, hoping to mimic the robust sales that Xiaomi and Motorola have reported in India by tapping the cost advantage and direct consumer connect that the medium offers.

    The country’s No. 2 player, Micromax, which launched Yureka brand of smartphones through a subsidiary recently, sold 25,000 devices in seconds over two flash sales on Amazon. No. 3 Lava recently said it will introduce a sub-brand under Xolo to be sold through its own ecommerce channel.

    Chinese smartphone makers Huawei and ZTE, which haven’t tasted as much success in India so far, recently launched online-only models, Honor and Nubia, respectively. Nubia is expected to be launched in India this year, while Honor is available through Flipkart.

    Analysts said the share of online sales in the total volume of smartphones sales in India is set to grow to 22%-25% this year from about 15% in 2014, as the online route offer better margins, tighter control on distribution channels as well as product differentiation.

    India is the world’s thirdlargest smartphone market. Leaks during delivery offer a challenge for the model though.

    “Selling online only helps handset companies keep greater control on channel, distribution and supply chain, while keeping marketing and pricing policies separate,"said Faisal Kawoosa, lead analyst at CyberMedia Research. “It also helps to cover the main brand in terms of any exposure to unseen risks. You can easily kill the category without impacting the brand,” he added.

    Image article boday
    Having adopted the online-only selling models, China’s Xiaomi and US-based Motorola have already managed to grab about 1% and 5% market shares, respectively, within months of entering a complex geography like India where building a solid offline distribution network takes time and is costly.

    Tarun Pathak, senior market analyst at Hong Kong-based Counterpoint Technology, said that an “online only” strategy help brands stay lean and at the same time target millions in urban and suburban Indian markets.

    Although the offline channel has more coverage and reach, it takes time for a brand to grow, said Karan Thakkar, senior market analyst at International Data Corporation. “The best part of online is you launch a product today and from day one your reach is pan-India. Hence, often an exponential growth is witnessed.”

    Hence, vendors prefer to create an entirely new smartphone brand or company, analysts added.

    According to analysts, brands want to differentiate their products in some price bands from the crowd by launching sub-brands through online-only models, as it offers the buyer something new. Although the potential for online sales channel for brands and subbrands keeps rising, sector watchers warn of a downside if there are quality leaks in the channel or the delivery system is not robust.

    “You have to be 100% sure that all the products being delivered are up and running and the buyer doesn’t get a shocker wrapped in a parcel. As long as this is taken care of, the potential is undoubtedly going upwards,” CyberMedia’s Kawoosa added.


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