Open in app

Sign in

Write

Sign in

Micromax Returns: A Bold Fight?

Razor3
9 min readOct 25, 2020

--

A look at the Indian smartphone manufacturer set to re-debut the market with a new and innovative feel

Image featuring Micromax announcement

Recently, I watched a short video on YouTube. In a typical warehouse setting, it features a young entrepreneur who talks about his humble beginnings and family, a group of enthusiastic friends who met and chased for a big dream, the tale of a company that became extremely famous globally but slowly tapered along the way down to the bottom, the mistakes and learnings that he experienced, a demoralized soul and a fightback with the launch of a bold and refreshed brand.

Any guesses?

Right. It is none other than Micromax, featuring Rahul Sharma, the iconic co-founder, and the ‘Young Entrepreneur’.

It is been quite a while since we heard from Micromax. Gone are the glory days when its highly popular Canvas Series made headlines in the markets and punched a clean jab to some of the Smartphone juggernauts like Samsung and Nokia. Riding among the waves of popularity and attractive propositions, soon the landscape turned sour and thus began its slow trickle to rocks.

If anything, that remains to be seen now is how well it does come back from its deep slumber with its relaunch strategy that aims to disrupt the market with a slew of home-made recipes and tastes.

But before we really understand why Micromax had to see this inverted U shape journey, let us do a little digging about its past.

The Birth and Peak (1999–2015)

The year was 1999. With the dot com boom in India, the country was witnessing a strong build-up and development in Information Technology Services. Fresh graduates, the group of four friends — Rahul Sharma, Rajesh Agarwal, Vikas Jain, and Sumeet Kumar hit the ground running by launching their new company called Micromax Software. It was directly involved with providing hardware components to Nokia as a Machine-to-Machine (M2M) partner which eventually introduced them to the concept of fixed wireless terminals. This was used to power payphones using SIM cards that had no landline connectivity.

The partnership flourished and turned into one of the top companies in the world with an estimated revenue of about 100 crores a year. Yet, Nokia soon sold it and closed the business. But the idea had grasped the minds of these young individuals who were determined to make it work further. After an eventful experience in Bangladesh, Rahul pitched the idea of entering the market by manufacturing and selling handsets. And so, began the real journey of Micromax into the mainstream business of phones.

The early 2000s were marked by a distinctive market for Nokia, Samsung, and Motorola phones that hawked every handset store in the country. Taking on these giants was indeed a tough task but unique. So, it set out profiling the rural consumers and identifying the gaps and unmet needs that they had. Through its studies, it uncovered the theme of ‘price sensitivity’ and ‘pocket-friendly’ products. Using these points as the core agenda, it introduced its first set of handsets — The ‘Xtreme’ series — that was a phenomenal success, although it took a lot of negotiations for distribution. The phones boasted of a battery backup period of 30 days with QWERTY keypads that were quite cheap to the consumers. Through the introduction of ‘feature phones’ that delivered value for money spent, they slowly started closing the gap to the top of the rung in the market competition.

The advent of smartphones in 2008 was a game-changer. The company had already set out to redefine the competition by introducing new and innovative features like the dual-sim capability, Bluetooth, and Call recording with good quality of dedicated and committed distribution channels which quickly raised a cult among its consumers. It also tapped the tablet market with its Funbook series in 2010.

Even though the market was cluttered with different brands, the company tactfully maneuvered the business by organizing its Research and Development strategy towards its customer-centric philosophy — something which its rivals duly lacked. Thus, in 2012, after having made waves, it snatched the crown from Nokia to become the No.1 feature phone manufacturer in India. Its new product — Canvas A100 — was a mass hit, priced at just INR 9999.

It gathered more steam and brought endorsements from Bollywood stars like Akshay Kumar and Twinkle Khanna and finally launching its Canvas Turbo and Silver Models with Hugh Jackman in 2013. Betting upon its new-found confidence and popularity, it soon overtook Samsung in the smartphone competition — with the launch of Android One OS-based handsets — as one of the dominant brands in 2014 with a share of more than 18%. Micromax also ventured into the Russian soil by launching the Canvas Knight A350 smartphone — the first Indian mobile company to do so. To cater through the online channel, it established a subsidiary — YU Televentures — by partnering up with Cyanogen Inc. which sold exclusively via e-commerce websites.

It took a dip but still managed to stay within the top 3 spots with a 16.22% share in 2015. Things were looking bright for the ‘Desi’ Business as it had already raised investments worth 43 million USD from Sequoia Capitals, Sandstone Capital LLC, and Madison Capital, India in 2010 and USD 45 million from TA Associates back in 2009. The time was ripe for it to move ahead by launching more innovative products. By heavily investing in advertising and promotions with a strong channel of distribution — 130000 outlets in 560 districts — it roped in huge profits.

Yet, the real problem was approaching now.

The Fall (2015–2016)

With the Smartphone wars brewing up to the peak in late 2015, many new players thronged the market. For starters, deep pocket Chinese brands like Xiaomi, Oppo, Vivo, OnePlus, etc. started their onslaught. After studying the landscape for years, these brands had finally found a way to cater to the middle and low strata income population by offering cheaper products that boasted of many new features — something which Micromax wasn’t able to offer with its focus on low-cost feature phones.

Image showing Micromax market share

To add to the woes, the time had also come for 4G. With the launch of Jio and its revolutionary free tariff plans for users, it took the competition by storm. In fact, one of the key reasons that Micromax failed to handle was the transition from 3G handsets to 4G compatible ones. Most of its components were sourced and imported from China and were then assembled in India. Through a swift changeover to 4G by the consumers, it had tons of 3G inventory lying as waste. Moreover, the demonetization was another blowback that was enough to derail Micromax from the race. According to the reports, the company witnessed a steep decline in its market share from 11% at the early to only 6% by the end of 2016. By the time it finally retaliated back with a product, the market was already flooded with Chinese and Taiwanese brands — cementing its fall to the bottom.

From a revenue of over 10000 crores in FY16 to only 2369 crores in FY19 was something more of a nightmare. Critics also blamed it for having a diversified portfolio consisting of AC, TV, Refrigerators, and Washing Machines that ultimately made it lose track of its smartphone aura. Investors were in fact looked and frantically offloaded their shares for an early exit with whatever little valuation the company had (between 515–1400 crores, 2018).

Although the company took to tie-ups with several US-based telecom providers for selling its feature phones, little was to happen to counteract this erosion in profits and revenues.

The Present

As of now, the company is looking for a bold comeback with its new IN-series Smartphones scheduled to be launched on November 3, 2020 that will be priced in the range INR 7000 — 25000.

The idea is to bring a change and disruption as it once did back in 2010 by introducing products that provide premium features at affordable prices. It hopes to build a strong foundation on the anti-China sentiments owing to the border clashes, and the ‘Atmanirbhar Campaign’ by bringing in-house manufactured products that boast of the same features as that of Chinese rivals.

The Indian Smartphone market, growing at a rapid pace of 7% y-o-y is heavily contested within the mid-range segments — a segment that is being targeted by Micromax. The top 5 brands consisting of Xiaomi, Oppo, Vivo, Samsung, and Realme capture more than 92% of the share. Going by the reports as published by Counterpoint Research, the price bracket range of Rs 7000–15000 are stiffly competed with very less scope to enter; Rs 15000–25000 are run by popular brands; Premium category catered by OnePlus, Samsung and Apple who have their own lair of the loyal customer base.

For more details, click here.

These brands are already dominant and have huge cash reserves to aggressively promote and launch price wars through offline and online presence, that can easily eliminate newcomers, signaling a very high entry barrier. Moreover, with hardcore expertise in hardware design, supplier network, and maximum exposure and adaptability to changing market trends and tastes, the dominant brands have built a solid network and grasp of more than 90% of the 134 million handsets sold in India. Xiaomi’s unique business model centered exclusively on Online Retail Presence has pumped a rampant growth that allowed it to have very low distribution costs, deliver phones that offered happy-to-use features with every buck invested and is now already looking big with its Offline show as well.

If Micromax is to gain a foothold, its target areas lie in looking for Tier 3 and Tier 4 cities that have still not been awash with these Brands presence. Although the low-range phones are prevalent, yet, a continuous study and appeal can effectively land them within the target base. In fact, with its hyper-penetrative distribution channel, a clear focus on Research and Development and enticing product service that strikes the chord with the Indian Consumers can reap huge benefits. Although it is a late mover into the demanding market, it needs to act on aggressive brand positioning that emphasizes premium value-for-money worth.

The problem lies in determining that price and the niche segment one wants to deal with as to date, better alternatives to Smartphones from wholly Indian Manufacturers are still at zero points. The advent of Government initiated Make in India target to promote incentives and bonuses to Indian based manufacturers can be a good point for Micromax to start from, yet, the rest depends on how well it implements and executes its comeback strategy.

Conclusion

The road is rough and uneven. Disruption marking the landscape provides a very tumultuous journey for Micromax amidst the Covid-19 pandemic. Catering to one of the largest customer bases in the world for Smartphones is no joke. Only time remains to be seen if the Micromax’s play is indeed packed with a power-punch or just a bag of words and ornate displays that ultimately fail to keep their promises.

References

Smartphones
Business
India
Marketing
Customer

--

--

Razor3

Written by Razor3

17 Followers

Business | Analytics | Technology

Help

Status

About

Careers

Press

Blog

Privacy

Terms

Text to speech

Teams