On the Plus side

On a sultry Monday afternoon in May 2018, hundreds of Bengalureans made a beeline for OnePlus showroom in Brigade Road to get their hands on the new OnePlus 6 model.

The Shenzhen-headquartered company was holding pop-up sales in 26 cities globally, including six in India. Six months later, another flash sale of OnePlus 6T in eight Indian cities saw people lining up in the dead of the night. Neither the pitch darkness nor the withering heat could stop the OnePlus fiends. Simply put, OnePlus has arrived.

In 2017, India accounted for one third of its global revenue of USD 1.4 billion. OnePlus’ profit grew over three-fold in 2017-18 with the second-largest market share in the Rs 30,000-plus segment in the last two quarters.

Cut back to April, 2014. The smartphone maker had just launched its first device, OnePlus One, in 18 countries except India. However, over the next six months, India rose to the seventh place in OnePlus One purchases in the country-wise breakup. Taking the cue, OnePlus released the device exclusively on Amazon India in December 2014.

OnePlus has since become one of the most-sought-after premium smartphones in India. The Chinese company - present in 36 countries- toppled the California-giant, Apple, and Korean conglomerate, Samsung, in the last three quarters to emerge as the market leader in the premium segment. OnePlus claims to command two-thirds of online (half of the total category) premium smartphone market in India.

Over the years, the definition of premium smartphone has changed. Earlier, only smartphones priced beyond Rs 50,000 were considered upmarket. Now, the bar has been set down at Rs 30,000 plus. Meanwhile, OnePlus has carved a niche for itself as the only brand focused on Rs 30,000 - Rs 50,000 price range. The smartphone manufacturer is all set to take the India playbook to global markets such as the US and China.

Go glocal

OnePlus India head, Vikas Agarwal, joined as the first employee in the country in 2013.

“We are an online-first brand because online is much more convenient and cost-efficient channel and helps us in pricing the product much better,” he says. “We chose online over offline to launch in India even though online was a very small segment of the overall market.”

In one of many firsts, OnePlus launched in India through Amazon rather than own website—unlike how it does in other countries.

“This was because logistics and supply chain in India are not as good as it is outside. India is a lot more complex market,” Agarwal says.

“Our successful partnership with Amazon has really helped us create similar model outside India. We exclusively partnered with JD.com and today it is one of the most successful partnerships in China in the premium segment,” he says.

Similarly, it has partnered with Elisa in Finland, where OnePlus claims to be the number one brand for ten quarters in a row. In the UK, it has tied up with telecom carrier EE and has partnered exclusively with Amazon in six countries.

Track change

In another first, OnePlus decided to go offline in India in 2017, marking a departure from its global online-only strategy.

“While online is growing, the future potential in terms of the growth may be slowed because we have almost maxed out the share possible in online,” says Agarwal. “Thus, we decided to enter offline in India.”

When OnePlus entered the Indian market, its online sales accounted for less than 5% of the overall premium segment. In just four years, online sales contribution shot up to 50%.

People waiting in queue to buy OnePlus 6 in Bengaluru. (Picture: Ruiyao Luo)

OnePlus has over 500 outlets in collaboration with multi-retail chain stores such as Reliance and Chroma in 25 cities. Besides, the Chinese firm runs 23 multi-format stores including experience stores, authorised stores, and retail counters in India.

“Though the operating cost for offline stores is high, we are not losing anything because sales from these stores is higher,” says Pete Lau, founder and CEO, OnePlus. Lau claimed the Bengaluru store has sold 8,000 OnePlus 6 units one month into its launch.

“In smaller cities, there are a lot of rich people, but they don’t know much about premium smartphones. Those users are now being educated,” Lau says. “People now come from nearby cities to our experience stores with their families because buying a Rs 40,000 phone is a big event for many.”

OnePlus’ offline strategy targets markets beyond metros and tier 1 cities.

At present, Apple, Samsung and Xiaomi, as well as OnePlus’s sister brands Oppo and Vivo, have an extensive offline presence. While Samsung leads offline sales in India, Xiaomi is catching up fast. It has infused Rs 35 billion in FY 2019 so far. Curently, Xiaomi has more than 500 Mi Stores across the country and over 4,000 preferred partner stores in 50 cities.

Agarwal said the offline strategy has worked pretty well for the company in India and is a model worth replicating in other markets. Last October, the company launched OnePlus 6T in an exclusive partnership with the third-largest US carrier, T-Mobile. The deal gave OnePlus access to the latter’s 5,000 stores across the US.

Prep school

As per regulatory disclosures to the registrar of companies (RoC), OnePlus’ India revenue rose to Rs 150 crore in FY18 from Rs 37.9 crore in 2016-17. Net profit for the year stood at Rs 2.8 crore compared with Rs 90.1 lakh in FY17. The numbers have fostered OnePlus’ faith in Indian market.

The Chinese firm looks at India as a testing ground for fresh initiatives. OnePlus’ student ambassador program in 12 colleges in India including IITs might get implemented in other countries provided it proves a success here.

Agarwal also expects OnePlus’ six months old R&D centre in Hyderabad to become its largest R&D centre globally in the next three years.

“The R&D team will work on future technologies as well as customisation that we may bring to our devices for Indian users,” he says. “The Hyderabad facility will work in tandem with the R&D centres in Taiwan and the US and offer up to 1,000 jobs in India.

“We have made a couple of organisational changes while decentralising the decision making to empower the local team and reduce our dependency on global headquarters,” Agarwal says.

2019 may prove challenging for OnePlus, believes Faisal Kawoosa, founder and chief analyst at research firm Techarc and former general manager, research & consulting at CyberMedia Research (CMR).

“Oppo, Vivo, Huawei and Asus are now eyeing the segment that had been the virgin territory for OnePlus. And these brands are very aggressive in whatever segment they enter in,” Kawoosa says. “To say that OnePlus’ market share may go below 30% — a drop of about 10%, would not be aggressive. For Vivo and Oppo, in terms of number of units, it is not a big volume to push into the market.”

The premium smartphone sales are poised to clock 16 million units by 2021 from the current five million. “If OnePlus can have 25% (4 million units sold), it still amounts to the entire market of 2017,” Agarwal says.

According to Tarun Pathak, associate director with Counterpoint Research, One Plus’s high growth in India would continue until it reaches 35-40% in the USD 400-600 segment.

In terms of Innovation, Kawoosa thinks “all the new features which are expected to come in premium devices have arrived through other brands. It’s going to be challenging for OnePlus to come up with new, unique features for its upcoming releases.”

The company, however, is not too worried about its growth in India.

“India is a simple market. If you have a good product, it will respond to it. OnePlus chooses to focus on that,” says Lau.

Apple’s share is likely to decline further with the entry of Android premium offerings from Chinese brands like Huawei. Even the aggressive marketing and distribution strategy from OnePlus, Samsung, Huawei and Google will hamper Apple’s growth, says Pathak. At a time when Apple is losing its grip on Indian market due to high prices, Samsung has touched off a price war.

“Samsung, being present across all the segments, isn’t perceived as a premium brand in consumers’ mind,” Lau says. “We don’t bother about our competitors. They are doing a lot many things and have lost focus.”

Lau pulled a Lao Tzu and offered his pearl of wisdom: “The secret of success is to not make mistakes.”