Changes in the distribution channels of Samsung mobiles in India

Launch and initial growth

Samsung entered India in December 1995 as a joint venture with Reasonable Computer Solutions Pvt Ltd., and later it became a wholly-owned subsidiary of its parent company. In 2002, it established manufacturing facilities for consumer electronics, information technology products, and home appliances. It was in 2007 it started selling mobile phones in India.

To compete with players like Nokia, it had to have a strong distribution channel. In 2008, Samsung appointed regional distributors to enhance its market position. Samsung’s approach had boosted the sales, and it had an 8% market share that year. The next year Samsung restructured its sales and distribution channels and came up with 17 new sales offices in smaller markets. To acquire more distributors, operations were decentralized till the branch level.

The offline distribution channel

Some strategies used by Samsung:

A bidding system was used in dealer selection, but only those dealers who had a strong balance sheet and good reputation were authorized.

The company followed a zero-credit policy with the dealers and distributors. At times the distributor may follow a 7-day credit period based on the strength of the balance sheet.

The company rarely gave any offers except for the scratch cards and trips. The offers were provided by the retailers to boost sales during festive seasons, which in turn helped Samsung.

In a few years, Samsung became a significant player in the mobile handsets market.Samsung’s mobiles played a vital role in the organization’s success. Out of the Rs 45,000 crore Indian mobile handset market, the sales revenue of Samsung was Rs 27,912 crore in 2013–14.

The total sales revenue of Samsung in the same year was Rs 40,392 crore. This displays the sheer dominance of mobile sales, which made Samsung the leader in the mobile handset market.

Samsung wisely invested in the development of mobile technology, which led to the transition of handsets from the CDMA to high featured galaxy phones. While Apple came up with touch screen innovation, its high price and availability in the Indian market did not give it a market share.

Samsung, in 2010 adopted the android technology and launched the Galaxy S handset, which gave rise to the smartphone revolution in the country. Samsung could read the requirements of the Indian audience and released new models of phones in quick succession to reach a broader range of consumers. It had a phone to cater to anyone in any market segment. Due to its variety of models in different price ranges, which provides high quality and abundant features makes it a market leader in the Indian mobile and smartphone market.

Samsung used one-level and two-level channels to get as close as possible to the customers. As compared to the addition of 17 sales offices in 2009, it came up with 380 new outlets primarily in tier 2 and tier 3 cities, which made a total of 700 outlets by 2013.

Samsung also understood the pulse of the Indian customers who are price-sensitive and service focused. Samsung gave an excellent after-sales service through its service centers as well, which provided a perfect word of mouth.

Adoption of online Channel

From the points above, we understand the contribution of the offline distribution channel in the success story of Samsung.

Though Samsung was a leader in 2013, it had a terrible impact on its sales in 2014 because of fierce competition from Micromax. It almost lost its position as the competitor’s phones were cheaper and offered nearly similar features.

In addition to this, internet users increased rapidly post 2010, and with more smartphones, there were even more users. That is when the rise of the e-commerce sites took place, and people started using their sites to order things online. Flipkart, Amazon, Snapdeal, and many other websites offered considerable discounts to acquire customers and increase the user base.

The online platforms were an advantage for the companies, too, because of the reach they create and reducing the cost of operating any outlet. The sales of mobile handsets saw a spike with a boom in e-commerce.

On the one hand, the company saw a new distribution channel contributing to more sales, but on the other many long term retailers went against the online approach as the predatory discounting cannibalized offline sales. Though online sales were only 5% of total sales at that point, the offline channel partners feared of loss in sales, which might happen later.

With the advent of exclusivity on the online platforms, there was even more agitation in the offline channels. Many mobile manufacturers launched their products only online and not offline.

Amidst this offline online channel conflict, Samsung had to take a step forward to retain its existing partners yet not compromising on the online presence, and that is when it has decided to stop selling 48 phone models online to focus on offline retail during September 2014.

To curb the predatory discounting, Samsung had to set up a brand store on the e-tailer’s websites where only the vendor-authorized sellers could sell the products at the prices mandated by the company.

Maintaining a balance between online and the offline channels

Samsung cannot afford to lose out on the online market as there are new players who have emerged with competitive pricing. Online channel is a level ground and abstaining from it only leads to loss of huge customer base. Hence Samsung came up with products exclusive to online as well as offline channels. In addition to that Samsung launched its online shopping platform too.

At present, Samsung has different channels that cater to online as well as offline buyers.