Tablet market, Small companies versus Micromax, HCL

Even a year ago, companies such as Micromax and Lava were thought of as upstarts challenging mighty global corporations such as Nokia. With cut-price mobile phone models packed with features, they redefined the rules of the game and snatched market share from established players. But now, they are established players and little-known companies in the tablet space are doing unto them what they did unto Nokia and others. 


Aiding the new upstarts of mobility - among them Kolkata-based Chirag, Bangalore's Lacs, WishTel from Mumbai and Noida-headquartered Zync Global - are India's smaller towns and cities. Places such as Ludhiana, Wardha, Hubli and Vijayawada are lapping up theirtablets that cost around Rs 6,000 apiece while the bigger brands concentrate on larger towns with products priced at around twice that amount. 

According to technology market researcher CyberMedia, India's tablet market has become hyper-competitive with the entry of new vendors. About 90 of them are estimated to have launched tablets till the end of the second quarter of the current fiscal year. 

The likes of Chirag, Lacs and WishTel have opened hundreds of exclusive stores in India's tier III and IV towns to improve market share and catch up with homegrown incumbents such as Micromax and HCL. 

Relying on endorsements
Some of them are also relying on celebrity endorsements, much like Micromax and Karbonn did to break the stranglehold of MNCs. 

Zync started selling tablets in November 2011, but has already spent over Rs 20 crore on advertising, according to its director Ashish Garg. The firm, with revenues of about Rs 150 crore, launched an Android-based tablet priced at Rs 5,500 earlier this month. 

Garg told ET that his company is setting up service centres in over a hundred small towns, besides getting ready to export tablets to Latin America and Africa by the year-end. For now, Zync sells about 30,000 tablets a month. 

In the three months to June, Indian consumers bought about 5.5 lakh tablets, a 673% jump over the year-ago period, according to data from CyberMedia. The average selling price of tablets dropped to Rs 13,000 from about Rs 26,000 at the beginning of the year. 

The Rs 700-crore Intex Technologies is in talks with pharmaceutical firm Ranbaxy for supplying some 10,000 tablets for its field sales staff. "Our focus markets are places such as Ludhiana, Meerut, Jaipur, Hubli, Mysore and Vijayawada, where people are not afraid to buy small brands.

Urban buyers still prefer big brands," said Sanjay Kumar, head of the mobile business for Intex, which has a sales partnership with retail chain Croma. Intex, which recently introduced its i-Buddy tablets priced at Rs 6,500, expects to sell 50,000 units during the October-December festive season. 

Lacs Magnum plans to increase the number of its exclusive stores from 60 to 1,000 across the country over the next year while rival Chirag will set up 50 franchisee stores by November-end. Lakhshya Verma, Chirag's head of business development, said the firm has managed to sell "a decent 25,000 units" in the past 14 months. 

Having played the price game once, the Indian incumbents are not sitting idle. They are willing to go where the demand is and sell at a price point that meets the demand. Micromax, for instance, launched its Funbook priced at Rs 6000, although its high-end tablets sell for up to Rs 10,000. 

"We were surprised to see that about 35% of our initial orders were from small towns," said Micromax Chief Executive Deepak Mehrotra. During the April-June quarter, Micromax was India's top tablet vendor, beating Samsung and Apple. 

Micromax had an 18% market share during the quarter, compared to Samsung's 13% and Apple's 12%. Incumbents see a parallel between the flurry of new entrants in the tablet space and developments in India's mobile phone market. 

"We can draw an analogy with the evolution of the feature-phone market in India," said SN Rai, co-founder and director at Lava Mobile. "We suddenly saw a huge number of players coming in, but many were also exiting at the same pace." 

Analysts agree the new entrants will not have staying power if they compromise on quality to bring down prices. "These companies procure white-label products from China. These are relatively cheaper because they follow the basic design and specifications," said Faisal Kawoosa, lead telecom analyst for CyberMedia Research. That is not very different from how Micromax, Lava and Karbon started out. But once they gained scale and managed high volumes, they invested in quality.