How Lenovo has transformed to excel in the PC space

Lenovo has morphed itself over a period of time from being pure play PC Company to what we refer as being present across the personal technology space.
Lenovo – from LES to SCD

In 2005, Lenovo entered the Indian PC market. At that time it was largely seen as a very commercial brand because of the forward focused approach and IBM was a much bigger brand in India. Over the last years, as the PC market has evolved. Lenovo has seen the market going quite flattish, whether it is in India or worldwide. It has morphed itself over a period of time from being pure play PC Company to being present across the personal technology space. So for all the consumers who use a PC for personal space, personal computing etc Lenovo is right there.

Concept of Smart Connected Devices (SCD) stores

The movement into tablets was very important part of that transition where a PC company moved into devices as well. In terms of devices, the distribution, marketing, consumer base, specification, influencing factors all are very different from those in PC industry.

As the brand did that over a period of time, it is important that the brand stores i.e. LES (Lenovo Exclusive Stores) reflect the ambition of the company. From business perspective, Lenovo sells more tablets and phones in terms of units than PCs worldwide. Given that context, it was very important that the brand stores reflect that. Thus, Lenovo made sure that the front facing point of sale - the consumer reflects this and hence, came the whole concept of SCD as a name for the stores. Main part was to convert this notion at the retail store. Earlier, one could walk in to a store and identify if that was a PC store or one for Smartphone. Today, almost 40 per cent of the Real Estate space is for phones followed by tablets. Then the entire space is dedicated to PC section.

The breakthrough innovations

Lenovo was the leader who took initiative to provide a breakthrough amidst similar designs of all notebooks and PCs. It did certain innovations and lots of investments to make the PCs little more edgy and we got multi-mode devices, 2-in-1 devices which offer the charm of PC but at the same time, can be converted to tablets. The 2-in-1 device can be used as full-fledged productivity device, but it can also be flipped and would function as a tablet.

The company has almost 50 per cent of market share in multi-mode devices. That’s because it has invested a lot in making its core product line a lot more innovative and not just in terms of simple upgradation. These things, even on the pC side, are making the store stand out from what the earlier stores were.

The war of online vs. offline

From a PC market perspective, online business is around 12-13 per cent today. It went up during October ’14 as these guys pumped a lot of money into the channel, but the consistent level is not going to be more that 11 to 12 per cent. There is a massive market for Brick & Mortar and a lot of business which happen online actually gets sold offline. The trading does take place online, but the final sale to the customer happens offline. From perspective of PC, the Brick & Mortar market is here to stay.

Even in the most mature markets, online is merely 30 per cent and rest is physical stores. The contribution of online would go up in India, but no dramatic change is seen in the market for PCs.

Online market for tablets and mobiles

When it comes to tablets, there is a different story, according to Lenovo. Share was much higher from online perspective, but what is happening is the flattening out of online market for tablets because a lot of smaller brands are moving out of regulatory reason, the not-so-great quality online. Even in tablets, the commoditised part of market, which is more content heavy and at the entry level is a logic to the online market, but higher level where lot of productivity is involved is all about going Brick & Mortar way.

Smart phones is one category, where significant traction is online. At the same time, the market is so huge, that all can accommodate. Brick & Mortar market and business from store are definitely here to stay.

Role of SCD stores

Lenovo is into hardware market and it believes in not doing anything just for fun or just for experience. These points clearly showcase the company’s changing image and what it stands for, to the consumers. These are absolutely strict selling points for Lenovo and it sees very credible results coming out of these stores in terms of business growth, conversions and mix of the business.

Currently, Lenovo has 26 stores in SCD format right now across the country. It started with Pune about a year and a half back. The number is less because it is extremely choosy about where to put these stores as these stores require higher investment.

Profitability of SCD stores over LES

For Lenovo, in general SCD retail is about 25 to 30 per cent business per month per quarter over what Lenovo’s normal LES is able to generate. The numbers are much higher in case of mobile and tabs. Its premium mix is around 34-35 per cent in case of LES, while it is 35-45 per cent in SCD stores.

Preferred Real Estate choices

Malls are definitely the priority for Lenovo, followed by high-streets, but again it is quite choosy about the malls because there have been horror stories even in malls. It makes sure that it has some tie-ups with some agencies and has flanking strategy of going and looking at anchor tenants. Its preference is A1 malls in key cities. It avoids going to the shopping hubs or old destinations of a city, but prefers the locations where new consumer is going.

Special input from Dinesh Nair, GM, Lenovo

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