Micromax Mobile Advantage
The seemingly obvious solution — handsets that accept two SIM cards simultaneously — became Micromax’s second killer category.
Micromax neither had the brand awareness of a Nokia that would lead to customers asking for its phones from retailers, nor the clout to force massive volumes through distributors. Yet it also saw that commissions given by phone manufacturers to their channel partners were often very low, leading to a lot of dissatisfaction. This is what they decided to capitalise on. “Nokia usually gives a channel margin of 2 percent, of which 1 percent is usually given away as discounts. The remaining 1 percent cannot sustain any business,” says Agarwal. Nokia could not respond to Forbes India’s queries for this story within the stipulated deadline.
So Micromax decided to give a 5 percent commission to each of its distribution chain partners — the 34 “super-distributors”, the 450 distributors and the 55,000 retailers. But there was a catch — it would not offer any credit. Instead distributors are expected to complete an online bank transfer to Micromax before getting any of its phones to sell further on.
“As a result we are not plagued with dead inventory, periodic schemes or issues around “price protection”. The retailer only picks up what he sees demand for. And because their money is involved, partners tend to work harder,” says Jain.
But having a lean, cash-based supply chain means Micromax has to be much more accurate and faster in its forecasting as compared to its bigger competitors.
Naveen Wadhera, a director with the $16 billion private equity firm TA Associates, finds Micromax’s supply chain one of its real strengths. “Their time-to-market from the design to production stage is around three months as compared to the 18 months taken by larger guys,” he says. TA Associates recently acquired an undisclosed stake (though less than 20 percent) in Micromax for $45 million, valuing it upwards of $225 million.
Still there are more sceptics than believers in the company.
Disproving the Disbelievers
Its sceptics say Micromax’ rise has been fuelled to a large extent by the Indian government’s decision to bar illegally-imported Chinese phones that lacked an identifying IMEI number. As consumers rushed to replace their cheap Chinese phones, many opted for the relatively cheap Micromax ones.
Others say without a strong consumer brand or control over its own distribution, it has no competitive advantage in the long term.
One way Micromax is responding is by committing to invest Rs.100 crore on marketing over the next two years. It has also signed up Hindi movie star Akshay Kumar as its brand ambassador. There will be a new tagline — “Boring is out” with advertising designed by ad agency Lowe.
And to the charge that Micromax is a maker of cheap phones, Jain replies, “We are not even present in the sub-$30 phone market, as our cheapest phone is Rs.1,400.” That segment is dominated by Nokia with a market share of close to 80 percent.
But better responses can be found inside the buzzing Micromax office in Gurgaon. A 35-person research and development team churns out designs and prototype of new mobile phones — some radically different, some only slightly so.
There’s a sleek and shiny white square studded with Swarovski crystals which slides open to reveal a QWERTY keypad. Another sports a small clip on the bottom which is really a wireless Bluetooth earpiece which can be unplugged and used. A third bills itself as a remote control for your TV and DVD player, apart from its regular phone features.
But the most exciting of the prototypes is one called the “secret weapon”. Slated for a high profile launch during the upcoming IPL cricket tournament, it could define the next big category for the upstart company.
An excited Sharma holds the new phone in his hand, before suddenly swinging it at the laptop in front. On screen a tennis player serves the ball to his opponent. It acts like a wireless, motion-sensing controller for computer games like tennis or golf, like the Nintendo Wii.
“This phone can convert every PC and laptop from Hapur to Varanasi into a gaming device, especially for those who can’t afford to spend Rs. 20,000 on the Wii. And even if he is not into games, his kids will ask for his phone the moment he comes home in the evening,” says Sharma.
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