Chinese smartphone companies Oppo and Vivo are scaling down the distributors and retailers selling their phones in a turnaround of their strategy of reaching even the smallest towns and cities as both cut spending and focus on generating returns.
According to Economic Times, Navkendar Singh, research director at International Data Corporation India said “They have reduced channel margins and retail spends and now they’re going for more depth than width of distribution. They have also rationalised distribution and are choosing to be available on fewer counters than earlier where they have strong visibility and sales.”
Industry experts said in New Delhi alone, the number of stores selling both brands has come down by almost a fifth to about 8,000. Vivo confirmed the change in strategy. An Oppo India spokesperson said it’s business as usual.
“We would like to reiterate that our business operations are normal at present stage,” the spokesperson said in response to ET’s queries on whether its retail strategy had changed.
A leading retailer in the capital, who did not want to be identified, said the two companies would earlier pay shop owners hefty amounts to put glow-signs even if they sold one or two units a month and now they’re asking retailers not to offer discounts and they have increased targets.
The initial impact of the pullback appears to be have been negative. Oppo has moved out of the top five rankings in the smartphone segment with a 4% share in January from 9% a year ago, while Vivo’s market share halved to 7% in the same time.
Industry experts and analysts said the companies will benefit from the strategy change in the medium to long term.
“This will certainly help, since going for wider distribution requires huge investments in terms of managing shelf space, marketing and channel management. Depth allows for more focused investments and spends. Also, channel is happier because of volumes from specific retail shops,” said IDC’s Singh.
Experts said Oppo and Vivo are now going the way of their Chinese rival Xiaomi, which dislodged Samsung from the No. 1 position for two quarters in a row by being extremely aggressive online and choosing select stores – including ones called Mi Preferred Partners – to sell its phones, even though it offers very narrow margins.
According to Prabhu Ram, head-industry intelligence group at CyberMedia Research, Oppo and Vivo, both backed by BBK Electronics, need to differentiate between their products.
“Oppo and Vivo have been catering to the same customer segment, with more or less the same product specs and similar market approach. It also does not help that both the brands have had a singular focus on selfie smartphones,” said Ram.