Even as Samsung has promptly recalled its flagship Galaxy Note 7 just two week after reports emerged that the phone’s batteries were fire-prone, the bigger question now is how this would impact the South Korean consumer electronics conglomerate, both in terms of brand and business as sales are halted in 10 markets. As Samsung has set out to mass recall all Note 7s, (approximately more than 1.5 million units) since the launch on August 19, analysts said it could potentially cost Samsung billions in dollars, but is unlikely to have much impact on the brand reputation. “As of September 1, 35 cases have been reported globally and we are currently conducting a thorough inspection with our suppliers to identify possible affected batteries in the market,” said Samsung in a statement as it delayed the India launch.
The official launch in India was scheduled on September 2. According to sources, close to 20,000 people have pre-booked the phone and Samsung is now expected to launch the phablet in India within 2-3 weeks with first priority towards pre-booking customers. “Postponing a launch always generates negative reviews and Samsung’s loss is someone else’s gain. The loss of volume to an extent is irrecoverable. But overall at the brand imagery level, I don’t think Samsung will suffer too much. Because no mobile phone company has been devoid of problems of these kinds,” said Harish Bijoor, chief executive officer of brand and business strategy firm, Harish Bijoor Consults. “For Samsung, it is not much a brand hit, as it is a commercial/financial hit in terms of volume,” he added.
Samsung Galaxy Note 7 had raving reviews and was considered the king of phablets with pre-orders far exceeding estimates. “There is growth momentum that Galaxy S7 and S7 edge have handed over to Samsung. The S7 has been globally very successful and Note 7 is expected to further boost the momentum in Samsung’s favour. But the battery issue can now give competitors a leg-up,” said Tarun Pathak, senior analyst, Counterpoint Research.
There is no doubt that Samsung has lost the critical window of opportunity given that most of the premium launches are scheduled in the second half. Also, second half of the year is the peak season for telecom in terms of equipment purchase and handset purchases.
“The timing of the recall from competition perspective is crucial as iPhone 7 is set to debut this week. The competition can try to take advantage of it like we saw in the case of iPhone 6 Plus bendgate,” said Pathak. “The best Samsung can do in this situation is to be very transparent in their communication and marketing,” he added.
Suhel Seth, managing partner, Counselage India, a strategic brand marketing advisory, said, “The recall is due to the faulty battery and neither the operating system or design. Battery in any smartphone is the most commoditised feature of that phone. It won’t have any impact on the brand as it has taken proactive measure which sends out a very positive signal.”
With iPhone 7 expected to reach India in October, Samsung India still has a month’s time to change the perception. But the premium consumer is very finicky and is driven by perception. “Galaxy Note 7’s battery issue can make a consumer re-examine her purchase decision. However, Samsung’s integrity of communication and quick pullout would give them a positive stroke,” said Bijoor.
According to Gartner, market leader Samsung had 22.3% market share in second quarter of 2016, nearly 10% more market share than Apple.