India is fast emerging as a tech-enabled nation in the global landscape with unprecedented activity in the digital realm. But as the nation continues to move towards a digital-first approach for everything from social network to shopping and from banking services to information seeking, is it safe to say that the online medium offers better prospects to mobile phone brands in India? They don’t, if the market data is anything to go by. Close to 70% transactions in India take place through offline sales channels, underlining that offline is still the medium of choice for the country’s consumers.
The major reason why offline channels continue to enjoy such significant lead over the online medium is their greater penetration and reach. With consumer markets in tier-1 geographies approaching saturation, brands and businesses across industry verticals are now looking at meeting the demand in rural, semi-urban, and tier-2/tier-3 markets. Offline networks rule the roost in these geographies as the most preferred mode of distribution despite the growing influence of online channels, and account for nearly 75% of the overall market share in India. This is what makes it essential for mobile brands in the country to leverage more conventional channels in order to gain a larger market share.
Mobile phone penetration has gradually been increasing in India, and, with it, the number of internet users. Yet, this phenomenon is observed more prominently in urban areas as compared to non-urban geographies. The rural areas, which house close to 70% of the Indian population, have lagged a lot in terms of infrastructural and service penetration. This has left a large chunk of population wary about digital exchange of services. A survey by Boston Consultancy Group revealed that 40% rural consumers believe that internet is a threat to their personal information, 30% believe online channels have poor product quality, and 25% believe that e-commerce websites and applications have interfaces which are hard to use. With e-commerce companies also cutting down on their heavy discounts in order to minimise their burn rate, online shoppers are no longer looking exclusively at the online medium to fulfil their mobile phone ownership requirements.
A major advantage that offline retail stores have over the online channel is that they offer prospective customers a rich experiential interaction with the product in question. Consumers can touch and feel the product, which helps in building trust and confidence with the brand and is known to play a major role in influencing the final purchase decision. Offline stores also offer prospective customers a chance to conveniently compare different products and brands. In-store demonstrators and branding also help in the generation more queries by providing product-related information and building brand awareness. Furthermore, offline channels have much lower rates of product return and replacement, with the rare offline replacement/return requiring significantly lower capital expenditure on the part of the mobile brand and its retail partners.
Another key operational aspect for any mobile phone brand is the strength of its channel network. Channel partners are the first and most pivotal intermediaries between the brand and the end-user. Their customer relationship, service quality, and overall goodwill are the key influencing factors in the end-customer’s decision. They can greatly amplify the brand visibility, making it imperative for a business to align its channel partners with its core brand messaging. Not only does it stimulate demand by conveying the brand’s Unique Selling Points to its target audience more effectively, but also directly results in an increase in its business outreach and bolsters the overall market position. Keeping their channel partners satisfied and content, therefore, is vital for mobile brands in India. Offline operations once again steal a march on online channels in this regard. With better margins and higher sales volume, the offline model adequately addresses the major channel pain points and is therefore more advantageous for mobile brands looking to generate greater output from the market.
A few recent entrants in the Indian mobile phone industry have adopted an aggressive channel expansion strategy with offline channel as their primary focus area. This approach has allowed them to successfully bring strong disruptions within the highly cluttered market segment thanks to robust offline sales and marketing networks, underlining why any mobile brand looking for success in India must place offline operations at the heart of its operations.