Alarm bells for Samsung amid falling sales, retail issues as Chinese rivals increase smartphone market share

Samsung's JB Park

Samsung's grip on India's smartphone market is slipping, with its market share falling to the lowest in a decade as Chinese rivals Xiaomi and Vivo capitalise on the South Korean giant's frayed ties with offline retailers, reduced presence in the sub-Rs 10,000 handset market and intensified competition in the premium segment.

Data shows that in the June quarter, Samsung, India’s smartphone market leader till last year, not only reported a drop in volume but also a significant decline in its value market share.

Traditionally, Samsung enjoyed an edge over its Chinese rivals with its pricier smartphones, while Xiaomi and Vivo dominated the low-cost smartphone segment.

Why is Samsung slipping up?

Analysts attributed the decline in value market share to brand fatigue, inventory issues, intense competition from Chinese brands and challenges related to its offline retailers.

Samsung's differential pricing model for the online segment, where phones tend to cost less, has often been a pet peeve of offline retailers.

Analysts maintained that Vivo has gained significant market share with competitive high-end smartphones. Xiaomi — known for its affordable phones — is also making efforts to strengthen its presence in the premium handset market, which has been largely dominated by Samsung and Apple.

Vivo's presence in the premium segment continues to grow, driven by its V and X series of smartphones, which now include its first foldable phone. Xiaomi is also making strides in the premium market segment with its high-end phones, which have been developed in partnership with German camera maker Leica.

Samsung dominated the country’s smartphone market in 2023 after replacing Xiaomi as the top brand in the December quarter of 2022.

However, according to market research firms IDC, Counterpoint, and Canalys, Samsung fell to the third spot in volume in the April-June quarter of 2024. Samsung's smartphone shipments decreased by 15.4 percent in the April-June period — its third consecutive quarterly decline — resulting in its volume market share dropping to 12.9 percent.

This decline also extended to its value market share, which slipped to 16 percent from 23 percent in the previous quarter and 21 percent a year earlier, as per IDC data obtained by Moneycontrol.

Tough times ahead

Experts said the company has been losing ground not only because of aggressive strategies by such as Xiaomi and Vivo but also due to conflicts with offline retailers and the departure of key sales and marketing executives.

“One of the major reasons for Samsung's decline in Q2 2024 [calendar year] was the higher pricing of its new models in the low-mid and mid-range segments as compared to previous generations. Besides, clearing the older inventory took longer than expected,” said Navkendar Singh, Associate Vice President of IDC.

Tarun Pathak, Research Director at market research Counterpoint, explained that Samsung’s reduced presence in the sub-Rs 10,000 price segment has further impacted its sales. “Samsung has only 6 percent of its portfolio in the sub-Rs 10,000 range, as compared to Xiaomi that corners three-fold of the market share at 18 percent. The yawning gap explains the loss of Samsung’s volume,” he said.

Similarly, Samsung’s M and F series in the sub-Rs 30,000 segment have also underperformed, leading to a significant inventory build-up.

Consumers increasingly prioritise CMF (colour, material, and finish) when choosing smartphones and Samsung has glossed over this aspect in budget-friendly models, where the Chinese brands have excelled.

"Despite Samsung having a jittery ride on the volume shares, I think Samsung should be concerned about Apple's rise in India and Google's increasing focus in India with India-made Pixel smartphones in the premium segment," Faisal Kawoosa, analyst at TechArc said.

Since the start of the year, Samsung has lost up to 30 senior executives in retail, marketing, and business development roles, many of whom have moved to its main rival, Xiaomi.

Samsung has also been facing challenges with offline retailers over issues such as differential pricing between online and large-format stores, lower margins as compared to Chinese competitors, and uncertainty in stock availability of popular models.

These issues have resulted in an inventory build-up just ahead of the upcoming festive season.

Pet peeve for offline retailers

Offline retailers, too, expressed their concerns.

"We continue to express our dissatisfaction with margins and discrepancies in pricing and offers. Despite our previous attempts to highlight these concerns, they remain unresolved," said Kailash Lakhyani, founder and chairman of the All-India Mobile Retailer Association (AIMRA).

Lakhyani said Samsung appears disinterested in engaging with either retailers or AIMRA.

“Mainline sales contribute a significant share in India. Consumers prefer to buy from stores where they can experience the product firsthand. Samsung's disregard for mainline market retailers has dropped their market share below 14 percent [according to IDC], and if they persist with similar strategies, they will fall below 10 percent,” Lakhyani added. "Samsung is no longer a retailer-friendly brand. In comparison, Oppo and Vivo offer better margins."

AIMRA, in multiple letters to Samsung president and Chief Executive Officer of South-west Asia, JB Park, and Corporate Executive Vice President of Mobile Division, Soon Choi, has demanded that the handset maker increase margins, maintain consistent pricing, offer parity across channels, withdraw selective upgrades, provide sales support, or reduce prices to facilitate easier business operations.

According to IDC’s Singh, Samsung needs to refocus on balancing its online strategy with Xiaomi or Realme and take a closer look at its offline channel offerings. It should maintain consistent pricing and channel management and continue supporting retailers and distributors.

Analysts predict that Vivo will likely continue to dominate the offline channel this year and retain its position among the top two brands in the market.

According to IDC, Vivo maintained its lead for the second consecutive quarter. However, Counterpoint Research reported that Vivo was slightly behind Xiaomi in the second quarter.

A detailed questionnaire sent to Samsung India in this regard remained unanswered till the publication of this piece. The article will be updated if the South Korean consumer electronics giant responds.