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Channel Conflict at Samsung India
EXCERPTS
SAMSUNG’S DISTRIBUTION CHANNELS
India had a multi-layered distribution system which added to the costs of mobile phone companies. By 2014, there were more than 400,000 retail outlets for mobile handsets and around 25% of these outlets sold smartphones. Samsung understood quite early that if it wanted to compete with companies like Nokia in India, it had to have a strong distribution strategy. In 2008, it strengthened its position in the Indian market by appointing regional distributors. As a result, its sales doubled and it was able to corner 8% of the market share. The following year, the company revamped its sales and distribution structure in India again. As part of the restructuring, 17 sales offices were set up in smaller markets. The operations were decentralized till the branch level and efforts were made to rope in more distributors. .. |
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RISE OF E-COMMERCE IN INDIA
There were 173 million mobile internet users in India as of December 2014 and the total number of mobile internet users in the country was expected to reach 213 million by June 2015, according to Internet & Mobile Association of India (IAMAI) and market research firm IMRB International...
ONLINE-OFFLINE RETAIL CONFLICT
Online shopping had given rise to a concept called ‘showrooming’ in which the people physically checked the product’s features in the showroom but finally bought it online at a discounted price. Gagandeep Singh, owner of Lakshmi Electronics, a large-sized retail store in Delhi, said, “People won’t buy anything at all now, unless it’s on discount...
TURBULENT TIMES FOR SAMSUNG
Although Samsung was the largest handset vendor in India in 2013, it almost lost its position to Micromax in 2014 (See Exhibit VI). A combination of lackluster device launches combined with high pricing had led to a shift in the fortunes of the South Korean vendor...
SAMSUNG CHANGES CHANNEL STRATEGY
Responding to the threat, Samsung decided to stop selling 48 phone models online to focus on offline retail in September 2014. Looking at the growing complaints, Samsung was reported to have set up a ‘brand store’ on the websites of its e-retailers including Amazon, Snapdeal, and Flipkart, where only sellers authorized by the vendor could offer its products at prices mandated by the company, preventing predatory discounting...
THE REACTIONS
Samsung’s decision received mixed reactions from analysts. Experts also believed the move was risky. “It is indeed a very risky decision, especially because online shoppers tend to be composed of early adopters...
THE ROAD AHEAD
Analysts opined that the move did not mean that Samsung would cease to sell all products online, as it had stated that it would look to offer exclusive deals to e-commerce stores in selling select devices...
EXHIBITS
Exhibit I: Key Financials of Samsung Electronics Co., Ltd.
Exhibit II: Samsung’s Offerings and Pricelist in India
Exhibit III: A Screenshot of the Samsung eStore
Exhibit IV: Top 10 E-Commerce Websites in India 2015 based on Number of Daily Unique Visitors
Exhibit V: Reasons attributed by Consumers for preferring Online Shopping
Exhibit VI: Top Mobile Phone Companies Market Share in India for the 4th Quarter of 2014
Exhibit VII: Comparison between Samsung and Rival Brands Like Xioami and Motorola
