From all accounts, India's online juggernaut Flipkart has a smash hit on its hands. It released, for the first time ever, its own smartphone, the Billion Capture+, which apparently sold out in a flash. Moreover, this 10,999-rupee ($170) phone, which it developed along with Indian design and engineering partner Smartron, has been drawing admiration for its ability to be virtually indistinguishable from the popular Xiaomi Mi A1, which is priced at a whopping 4,000 rupees more than Flipkart's. (The Billion Capture+ also has an Octacore Snapdaragon 625 processor and a 3,500 mAh battery).
This comparison -- which Flipkart should be ecstatic about -- is poignant for a few reasons. One, three of the five highest selling smartphones in India between July and September were made by Xiaomi, according to Counterpoint Research.
The Indian consumer is notoriously price conscious and value-seeking, and so far, Xiaomi has made a name for itself as a giant-killer and a value king. Its phones give you an upmarket feel -- its user interface, people say, is an ardent impersonation of an iPhone -- at a bargain price. This has allowed the company to pillage market share from 6 percent three years ago to 24 percent today -- exactly that of smartphone heavyweight Samsung. So if Flipkart's phones are cheaper and as good as this new-era Chinese company, it has hit pay-dirt.
The second reason to be happy about this comparison is because Xiaomi has been able to draw neck-and-neck with Samsung via an online-only strategy, an almost unbelievable accomplishment if you consider how much effort and money the South Korean company puts into its retail operations in India, which involves making sure that all of its branding, distribution, supply chain, and inventory management across this far-flung, infrastructure-poor country goes smoothly.
Of course, this is not that surprising considering as much as 30 percent of India's smartphones are now sold via the internet, a number that is only destined to rise and thereby boost the fortunes of an online retailer such as Flipkart. And 35 percent of all online sales happen to be smartphones, a cozy, symbiotic relationship -- smartphones need online retailers and online retailers need smartphones -- that will again boost Flipkart. That fact that Xiaomi needs Flipkart to hawk its products -- it has done so until now in numerous record-breaking flash sales -- has probably not gone unnoticed by both companies.
Flipkart well-wishers may have shuddered reading this news. Many a business strategist will suggest sticking to your core competence. In Flipkart's case, that means focus on doing what you were made to do: hone your front-end consumer experience and back-end supply chain into a lethal sales machine and avoid all other distractions. Like, say, making your own phones. Look to what happened to Amazon and its Fire, they will undoubtedly add. Fire had cold water thrown over it by an exceedingly high price when it lacked differentiation from the iPhone and other Android flagships. VCCircle suggests that reports on the phone's disastrous performance point to a $170 million loss on the device, and an idle inventory bill of $83 million.
Decline of Indian smartphones
The real worry for Flipkart will lie in the annihilation of Indian brands such as Micromax, Karbonn, and Lava, so promising not so long ago for their low-cost smartphones and their plans to tap into the other billion people who haven't yet owned one of these devices.
Micromax even had the hubris of adopting a fist for their brand identity, further bolstered by no other than Hugh "Wolverine" Jackman. Yet it, along with its brethren, have been smashed by the Chinese -- Oppo, Vivo, Gionee along with Xiaomi -- who have almost effortlessly seized 54 percent of the market in a handful of years.
One industry insider had his finger on the problem: "Chinese guys were energetically building differentiations through design ... In India, we are very good at scaling things. We copy and then we continue to make them cheaper. Through shared distribution, advertising, we quickly scale a product. But if you look at the success of all the Chinese players, they don't really sell cheap phones, they actually sell differentiated expensive smartphones." The resulting higher margins are ploughed back into marketing and it becomes a very successful spin cycle.
In other words, it is widely accepted now that Indian players have yet to show any chops in original design and have therefore suffered. Until, of course, Flipkart came along. That said, one phone seldom makes a company its fortunes in the long-term -- caveat emptor: unless, of course, it's an iPhone -- so Flipkart will have to keep an eye on how it provides a differentiated and valuable experience to its consumers other than its price points.
Not everyone thinks that Flipkart has gone in the right direction. The Economic Times reports that a majority of Twitter users polled by its sister publication ET Tech didn't think that launching its own phone was a good idea. Yet, the public seems to be deaf to these naysayers and have scarfed them up at record pace via two online sales. Flipkart will hope to continue surfing this wave of popularity so it can boost its ecommerce battle with big-spending Amazon.
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