Lava International plans to double its market share to 20% by 2018, from around 10% now. In conversation with BrandWagon’s Ankita Rai, Hari Om Rai of Lava talks about the company’s retail and marketing strategy, impact of demonetisation, and why increasing competition from Chinese players doesn’t worry him. Excerpts:
At Lava, do you see demonetisation impacting sales in the fourth quarter? Other players have been hit too…
We have halted the production of mobile phones for 10 days. We are monitoring the situation closely and hoping for it to improve — which is primarily dependent on the government’s strategic plan to infuse sufficient cash in the system or make the country digitally enabled. We are watching it closely and will plan our next course of action based on whether the situation improves or deteriorates.
Chinese brands like Oppo and Vivo are focussing aggressively on the traditional offline market and even paying higher channel commission. Is there a shift in your distribution and retail strategy?
Our single-layer distribution model is quite unique in this industry and it is one of our biggest strengths. We are going to focus on it for now. This not only helps us control the market pricing of our products, but also prevents any kind of infiltration. It also allows us to ensure that there is one Lava brand which is available at one price across the country — both in offline and online channels.
We are looking at expanding our retail footprint. We currently have 1,25,000 outlets and are working towards having 1,65,000 outlets with full control on material, inventory and branding by end of this FY. About 10% of our sales come from online channels. Xolo is sold exclusively online because of our focus on a specific set of tech savvy consumers. But in the long-term, the customer segment will b e the same for both Lava and Xolo. The bigger focus will be on Lava.
The share of Chinese brands in the Indian smartphone market has been growing from 21% during the January-March quarter to 32% at the end of the September quarter (Counterpoint research). At the same time, Indian brands like Micromax, Lava and Intex are losing market share. Does this worry you?
The Indian market is a hyper-competitive one with many players. We are committed to delivering reliable products and services to consumers at all times. Our exponential growth is the work of a carefully planned strategy, and that’s why despite immense competition, we have clocked the highest volume amongst all Indian mobile handset brands this quarter. We are the No. 1 Indian mobile handset brand in Tamil Nadu, Gujarat, Rajasthan and J&K.
Enterprise building is a long term process. Competition is very valuable. I believe in open competition. Today the world is not local; you have to compete globally. Chinese players are an opportunity, not a threat. The potential that Indian companies are able to bring on the table is that our labour cost is one-third that of China. But cost arbitration can last not for more than 10-15 years. Therefore, the biggest value a company is able to create is excellence. This is our focus.
In the third quarter ending September, Lava overtook Micromax to lead among local brands in the feature phone segment. What is the market share you are aiming for in the handset market?
We are aiming to double our overall market share to 20% by the end of FY 2018. As far as feature phones go, about 65% of India’s more than one billion mobile phone subscribers still uses feature phones and there is still huge potential in this segment, which will continue to remain stable at current volumes in the near future.
Going forward, we plan to move up the price ladder and cater to a higher segment in the sub-R20,000 category. Currently, we have been selling around the price tag of R10,000.
Do you plan to increase your marketing spends, given that players like Vivo, Oppo and LeEco are almost doubling up their ad spends?
We agree that today the category is very competitive where every player is striving for higher recall. However, our strategy is focussed on relevance. We deploy our marketing budgets across media keeping in mind the relevance of each medium amongst target consumers. Our strategy is to focus around brand imagery and taking the value proposition of ‘trust’ and ‘reliability’ to consumers.
We understand that new players in the industry will have to be aggressive with respect to their marketing spends to build salience. However, Lava is an established player in the mobile handset industry and has been around for the last seven years. As per industry reports, we are the challenger mobile handset brand across India and second only to Samsung in the overall category. Our marketing spends are aligned with our business objectives. We have recently signed Mahendra Singh Dhoni as our brand ambassador and invested in a flagship property, The Kapil Sharma Show. The focus on specs in communication will saturate. It is important to convey what you are bringing to the consumer as a brand.
With half of your sales coming from outside India, how do you see the Indian market? How is Make in India helping in achieving your goals?
Globally, the electronics market is a $2 trillion one, out of which mobile is about $450 billion. Indian consumption is hardly about 3.8% in terms of value. With costs in China moving up, India stands a great chance to take a large share in electronics manufacturing.
As a company, we cannot be an India-centric one only in the long-term. About 50% sales come from outside India, but right now we are selling out of China. It would be a happy moment when all exports start happening from India. Eventually all manufacturing and design in the long-term will shift here but China will still be there for at least the next 10 years and continue to supply parts and be a part of the ecosystem.
Make in India helps us to have better control on products, and to bring more efficiency and better quality. We want to control everything — design, supply-chain and assembling. All these things are required to build a quality experience product.
Ankita.Rai@expressindia.com
@rankita
