There is competitive turbulence today and in the last couple of quarters there has been huge pressure on pricing. But we have been able to sail through and make good decisions
Chinese mobile phone maker Gionee has been doing really well in India and having entered the market two years back, it has already acquired a 4% market share. It collected revenue of R2,750 crore in FY2014-15 compared to R500 crore a year back, registering a growth of around 550%.
The company is now targeting a turnover of R6,000 crore in the current fiscal. “India is big market with a lot of potential after China,” says Arvind Vohra, CEO & MD, Gionee India. Recently, the firm launched its new phone Elife S7, claimed to be the slimmest phone in the world.
“We are now looking at working on how fast we can manufacture in India. We aim to leverage and make India a manufacturing hub outside China to cater to demand in African and SAARC countries including Bangladesh, Nepal, Sri Lanka and Pakistan,” he tells Sudhir Chowdhary in a recent interaction. Excerpts:
Chinese handset majors seem to have taken the Indian market by storm. What are the key attributes for their success in the country?
Gionee entered the market two years back in 2013 and there was a belief between William Lu (Gionee president) and myself that the market was divided in two halves. There was an ultra low-end market being catered to by Indian brands and ultra high-end market getting catered to by MNC brands. We realised there was a huge gap and the idea was to fill in that void. In my opinion the gap was 2.5% to 3% which was a R2,000 crore proposition. It is that belief we got into the market and got a set of partners who believed in us that set the ball rolling and has got us to the position we are in today. As an example, my first purchase order was R16.5 crore and now our purchase order is R200 crore which itself speaks for the company.
Secondly, my belief is that Indians are not price conscious rather they are value conscious. If you offer them value for the price they are paying they will come to you. Today everyone is looking for feature rich phones at affordable prices but no one is looking at the sustainability of the features. Features are not software-driven but ecosystem-driven, that software and ecosystem is something that your R&D gives you. Not every company will be able to evolve and give features from an R&D standpoint. We have a very strong and efficient R&D team which has helped us innovate and produce technologically superior phones.
Give us a sense of the big story emerging out of Gionee. Where is it headed?
We want to be a global brand. We have been successful in making inroads into the industry and build a niche for ourselves amidst all the other existing players. We don’t want to just be a home company but expand our operations globally. We have had a brilliant head start and have already reached a 4% market share. We collected revenue of R2,750 crore in FY2014-15 compared to R500 crore a year back, registering a growth of around 550%. The company is targeting a turnover of R6,000 crore in the current fiscal and in order to achieve this, the company plans to invest R225 crore on marketing this year.
How is Gionee performing in India? What is your go-to-market strategy for the India market?
Gionee has been doing really well in India and having entered the market two years back we have already acquired a 4% market share. As a brand strategy, we do not believe in taking the online route for selling our products. We have from the start only followed the offline route. Our strategy was simple to get distribution partners who believe in us and would work with us in a dedicated manner. As a company, to give them a sense of security and in a way fulfill their dreams we revamped all our contracts with distributors from three years to 10 years.
So, today we have a factory, a R&D system, an ecosystem which is giving you futuristic products and a set of people who promise to stay with you till the end.
As an organisation we are a small team of under 80 employees but we are large on the distribution side and we believe in complimenting each other.
How important is India market for you and how is it different from other markets that you are present in?
India is big market with a lot of potential after China. India is a 250 million market and the growth in the smartphone market makes it the second influential market in the world after China-based industries. Smartphone penetration in India is increasing rapidly and is gradually spreading its roots in the regional areas as well. With more people accessing the Internet through their mobile phones, Internet penetration in India has also increased which has paved the way to major migration from feature phone users to smartphone users. It won’t be long when India stands as the most important market and brands should seize the opportunities the Indian market holds and explore the changing trends.
The government is aggressively trying to promote local manufacturing in India. Any plans to set up a local assembly unit in the near term?
After studying the Indian market William and I were convinced that manufacturing in India is necessary and we have already started the initial process. We have appointed E&Y to advise us on setting up a manufacturing facility and are now looking at working on how fast we can manufacture in India.
Second aspect of study is when you look at India, Nigeria and other SAARC countries we are about a couple of years behind China. The gap is obviously closing so the product similarity would be very high in these countries so there will be a situation when certain set of products will be manufactured in India itself which are high-end. We aim to leverage and make India a manufacturing hub outside China to cater to demand in African and SAARC countries including Bangladesh, Nepal, Sri Lanka and Pakistan.
The government plans and budget to boost local manufacturing definitely comes as a added advantage and all these put together gives you a bigger heart to start.
Talk to us about some key market trends in the mobile space and how Gionee is aligned with them to address the requirements of the industry?
The next revolution of Internet is actually going to come soon and user experience becomes far more informed. This is an area that will be played by and dominated by only manufacturers who can do there own supply which is extremely clear. In the life cycle of the industry today from a high growth point you are coming to a competitive and turbulent stage and at this stage the signals get a little confusing. You need to make tough decisions on pricing and quality because you have imitation coming in.
This is the time you will realise that you have to build your brand. If your brand goes up, your demand and pricing will eventually go up and then you will move to a maturity stage when everything settles down and you get your true value.
Basic management decisions are very tough to take and that is the call we have been able to take. There is competitive turbulence today and in the last couple of quarters there has been huge pressure on pricing and the market dynamics are also changing. But we have been able to sail through and make good decisions.
There are numerous mobile brands present in the market, including Chinese ones. What is the technology differentiator that Gionee brings to the table?
The differentiator is simple—ownership versus surrogacy. At Gionee, we own everything starting from the manufacturing capabilities to design and R&D. It may not be India now but it will soon be. Most of the other players do not have all the facilities with them are dependent on others to get the work done.