Micromax at Crossroads: Can it beat Chinese brands like Xiaomi, Vivo and regain market share?
Micromax is currently at the 9th spot, with just 2.74% market share in the first quarter of 2017.
As everyone knows, Micromax is one Indian mobile phone manufacturer to have remained in the reckoning in the Indian market while fighting it out with all the overseas brands. In terms of sheer volume of handsets sold, the company has remained the top Indian brand and second only to Samsung (and Nokia in its earlier avatar when it was the dominant brand). But, as things stand, the company has been pushed way down in the pecking order by Chinese brands like Vivo, Oppo and Xiaomi. To be precise, Micromax is at the 9th spot, with a 2.74% market share in the first quarter of 2017. A huge fall from the 16.22% share it held in 2015. So, what went wrong with the company and how does it come out of this dark hole?
The 4G Effect (Read the Jio Launch)
Analysts have come up with many explanations for this poor performance by Micromax mobiles, but the one that seems to stand out is the advent of 4G in India, largely represented by the high-pitch campaign by Reliance Jio. Micromax suffered and the Chinese brands gained because, the Indian company did not have an immediate low priced 4G enabled phone to offer. More than three-fourths of their phones were 2G and 3G. More than the necessity to upgrade to a 4G phone, the customers were really keen to enjoy the freebies offered by Reliance, like free data and STD calls. To use the Jio SIM, you had to have a 4G phone.
The Impact of Demonetization
The other major setback was the massive drop in sales of their phones during the Diwali festival season in the last quarter of 2016, due to the sudden withdrawal of the Rs.500 and Rs.1000 notes from circulation in early November 2016. It is a fact that a large part of Micromax sales came from the cash market and not online or through digital payments. The cash crunch definitely impacted sales in the last quarter of 2016.
Micromax claims it took a calibrated response
The promoters of Micromax, led by Rahul Sharma, however, claim that they deliberately allowed the grass to grow under their feet. They claim that developing a 4G phone is not a major challenge, but beating the Chinese in the advertisement and promotional space would have left the company in a worse state. In an interview, Sharma claims that the only alternative for them was to have matched the Chinese with their high decibel brand promotion campaign. That would have meant a big hole in their pocket and the company might not even have been able to survive. These scenarios were fully analyzed and a calculated move was made to lie low for some time and to keep a close watch on the market.
On the way forward
The way Rahul Sharma, the co-founder of Micromax wants the analysts to look at his company is to consider this phase as Micromax 3.0. According to him, the first battle in the market the company fought and came out successful was the Nokia dominated years of 2010-11. The second major challenge was the launch of smartphones and this time it was Micromax versus Samsung. Sharma feels Micromax weathered it out and remained the second largest mobile phone player in the country. At each stage, the company has had to overcome a perception battle; first that they cannot stand up to the Nokia brand and then again that the company is incapable of manufacturing smartphones.
In the very same manner, he is confident that the company will re-emerge and regain last ground sooner than later. An elaborate marketing strategy is already being worked on and the rollout may begin soon. To be fair to the company, the market is still there. There are perhaps some 350 million feature phone users still out there who would want to switch to smartphones and Micromax aims to tap this huge number through a combination of product mix and market strategies and the coming months may reveal how far they succeed.
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