India's gargantuan cell phone market is maturing, and leading smartphone makers sense an opportunity as the market readies for its next explosive growth phase.
Apple, Samsung, and Nokia are amongst the phone makers aggressively wooing consumers, offering cash discounts and luring customers with buybacks. Several makers have unleashed the equated monthly installment (EMI) strategy to attract customers. In India, EMIs drive sales of all kinds of products and services, from denim jeans to gym memberships, helping convert buyers otherwise reluctant to splurge.
The country is poised at a very exciting point for smartphone makers, said Ankur Bisen of the retail consultancy Technopak Advisors. After achieving impressive market penetration with low-priced phones, smartphones will drive the next growth spurt, he said.
India's cellular base has gone from about 10.5 million in 2002 to 867 million users, a huge jump in just over a decade. Its rise as the world's second largest cell phone market has been mostly fueled by cheap handsets and cut-price service plans. However, just about 6 percent of users have smartphones that are 3G high-speed data compliant.
"A sweet spot is opening up as many feature phone users convert to smartphones," said Bisen. India is mirroring a global trend, but what gets device makers excited is the sheer size of the market. More and more Indians are bypassing computer and laptop-driven Internet connectivity and have made their cell phones the sole device for Internet access.
But affordability is key, as India's telecom operators do not subsidize devices. Young Indians can be brand and technology crazy and yet very price conscious too. Device makers have to find the tricky balance between price sensitiveness of the market and its yearning for better devices. "Big growth awaits those phone makers who can hit that sweet spot," said Bisen.
The unfolding transition is too big an opportunity for device makers to miss.
"Smartphone sales will grow by 80-90 percent this year as consumers look to stay connected while on the move, personalizing and constantly doing more with their devices," said Vineet Taneja, country head, Mobile and Digital Imaging for Samsung India.
Samsung and Apple have been the most aggressive of smartphone makers, revising prices and innovating around existing premium products. Both are offering smartphones on EMI, and buyback discounts to consumers hankering after prestigious brands.
"It is a modular approach to pricing, designed to lure the consumer," said Bisen.
Apple's high-end devices held a sliver of India's market, but its recent aggressive tactics have roiled the marketplace. iPhone sales exploded off the charts after Apple launched a slew of discounts and zero interest payments on its older models to lure in budget-conscious buyers.
The EMI schemes have changed the pecking order, said Bisen. Apple has become India's second-highest selling smartphone maker since the new sales strategy and monthly iPhone sales jumped from 80,000 to 400,000 handsets, according to data put out by Credit Suisse.
Meanwhile, Samsung, which currently dominates the smartphone market, launched a sub-$100 smartphone to take on the low-priced devices of aggressive Indian brands such as Karbonn and Micromax. "We expect the smartphone market to double this year from 18 million to 36 million units," said Taneja of Samsung.
Nokia is a former leader in this space. Its market share has eroded despite launching its aggressive marketing for its Lumia range in India.
Until recently, India was never of strategic importance as a market for Apple. The Cupertino, CA-based device maker was content with selling its premium range of phones in small numbers.
On the other hand, Samsung has always had the opposite approach, offering a diverse range of products across price points and pricing its phone 10-20 percent cheaper in India. The strategy has paid off for Samsung, taking it to pole position in the smartphone market. Samsung will strive to retain its leadership position by offering consumers differentiated products across different price segments, Taneja said.Keep up with the top tech stories of the day by signing up for our free The Editor's Daily Picks newsletter.
Saritha Rai is an India-based journalist and commentator who covers technology, business and society from her ringside seat in Bangalore.