From 2 percent as the combined share of the Indian smartphone market to 18 percent in flat 12 months, two Chinese handset makers have evenly beaten hollow the Indian smartphone brands and are on the cusp of challenging market leader Samsung. Such rapid rise wouldn’t have been possible without the two, Vivo and Oppo, completely disrupting the business structure of smartphone distribution in the country in a way never done before, industry executives said.
While Vivo Mobile India and Oppo Mobiles India are main holding companies in India monitoring the businesses, the actual operations — right from import of handsets to local distribution, marketing, sales and after-sales service — are handled by independent companies, or 'agents' as they prefer to be called, with one each for a state or a region.
These agents function as independent companies, with separate profit and loss accounts, sales targets, three senior industry executives said. These agents are all owned by the same Chinese distribution companies who have already done the disruption back home where Oppo and Vivo are among the top three handset makers. They want to mirror the same strategy here.
These companies have their own management teams led by Chinese expats, with Indian employees handling the business at the ground level.
As per industry executives, Oppo has 13 companies in India while Vivo has two dozen, to manage distribution and sales in India. These entities undertake all the investments jointly with the holding company and appoint local distributors to cover the entire market.
Subhashish Mohanty, Director, Cellphone retailer Hotspot, said, "Oppo and Vivo want to make rapid rise in India and hence have laid out the same disruption strategy in India like in China."
He said, "While every other brand has national, state and local distributors who are responsible for taking the products to the local level, Oppo and Vivo control this activity almost till the last mile and hence have far greater control which is leading to such rapid rise in market share."
Emails sent to Oppo and Vivo did not elicit any response. As per market tracker Counterpoint Research, Vivo had a 10 percent market share in India in the October-December quarter, while Oppo held 8 percent. They had a 1 percent share each in the same period of 2015.
Samsung had 24 percent share in last quarter.
Shobhit Srivastava, Analyst, Counterpoint, said, "Oppo and Vivo have grown exponentially over the past few quarters and are in a good position to increase market share at the expense of Samsung and Indian brands."
Srivastava said, "By having decentralised operation, the brands have better control over distribution, are efficient in estimating demand from specific areas and in controlling inventory in an optimised way. This also results in quicker decisionmaking and reduces time to market for newly released models."
Last quarter, Indian smartphone vendors were pushed out of the top five by the Chinese brigade, who now controls almost half the local market.
Of these brands, Xiaomi and Lenovo-Motorola are still majorly online focussed though are now taking smaller steps into offline, which still accounts for 70 percent of the market. Oppo and Vivo are targeting offline, since global experience suggests that online sales rarely move beyond 30 percent.