Flipkart-Karbonn: Smart Calls

Flipkart marks it latest tie-up with a mobile phone maker by launching two new TV campaigns.

Continuing with its newfound signature trend of tying up with mobile phone manufacturers and retailing their handsets exclusively, Flipkart.com has struck a deal with Karbonn Mobiles. It is specially targeted at Tier II and Tier III cities for four Android-based models - Karbonn Smart A52+, Smart A12, Smart A11 and Smart A50S - priced in the range of Rs 2,699 to Rs 4,499.

The online platform has also rolled out two television campaigns promoting - a first for Flipkart - the handsets covered under the exclusive partnership. Executed by Happy Creative Services, both campaigns highlight a different Karbonn smartphone and its value for money nature.

The first film 'Couple' features a couple unpacking the husband's suitcase. The husband hands a new mobile phone as a gift to his wife. Pleasantly surprised, the wife says that even a cheaper one would have been okay. The husband, in turn, asks, "Who will I spend on, if not on my wife?" At this point, their young son reveals that the phone costs only Rs 2,699 on Flipkart.com.

Titled 'Father and Son', the second film shows a young son gifting his father a new Karbonn mobile on the latter's birthday. Touched, his father asks, "This must be expensive, right?" The son says, "Anything for you, dad." Also, sitting on the table is the boy's sister who scornfully tells her father that the phone is worth only Rs 4,099 on Flipkart.com.

"We ensured that while we are promoting a low value product, the communication must be done aesthetically," says Kartik Iyer, chief executive officer, Happy Creative Services, adding these films subtly challenge the need to spend more to gain your loved one's adoration and unconditional joy.

The films have been directed by Abhijit Sudhakar and executed by Jamic Films. Apart from TV, this deal is being promoted via independent promotional print ads. Karbonn has been testing an online-only retail model for some time now - it had tied-up with Amazon.in, in May this year, to sell its Titanium Hexa smartphone priced at Rs 16,990. According to sources, the handset maker is all set to announce an exclusive partnership with SnapDeal soon.

Set up in 2009, Karbonn is a joint venture between New Delhi-based Jaina Group and Bangalore-based UTL Group. It offers mobile devices under the Titanium series of smartphones, K series of feature phones and a mobile ecosystem Karbonn Smart. Media reports say that Karbonn is aiming to achieve revenues of Rs 80 billion by 2014-15.

The 'online-exclusive' game

Many e-commerce companies are going the exclusive route by tying up with brands. However, Flipkart has been the most successful player so far with popular, sell-out tie-ups with Motorola, Asus, and Xiaomi.

Chinese vendor Xiaomi, which has forged an exclusive agreement with Flipkart to sell the Mi 3 devices, recently concluded its fifth flash sale selling 20,000 devices. The next sale will begin August 26, for which registrations have already started.

Similarly, Motorola chose to go online with Flipkart for its second innings in India. The company has launched three models - Moto G, Moto X and Moto E - in the last six months, all exclusively on Flipkart. With its competitive pricing and performance, the brand has overtaken Nokia to reach the No. 4 position in the smartphone category in April-June 2014.

Motorola shipped 955,650 smartphones compared to Nokia that shipped 633,720 units of smartphones. Global e-commerce giant, and Flipkart's staunch rival Amazon, also entered an exclusive deal with Microsoft to sell its Xbox gaming consoles. This includes the entire range of its Interactive Entertainment Business (IEB) portfolio including Xbox One, Xbox 360, Kinect, Xbox Live, Xbox Accessories and all Microsoft-published Xbox game titles.

With such partnerships, handset brands cut costs of distribution and promotion on offline retail channels. Besides, they also save on the costs of promotions during the launch.

Expert speak

Telecom expert, Mahesh Uppal believes that the success of the low cost handsets depends on the scale, since the margins are usually small. Without scale, low-cost products benefit neither the manufacturer nor the seller. "Flipkart provides scale to low-cost manufacturers. It may also want to leverage that and ensure that these products will not be sold to its competitors," he points out.

Although the TV campaign clearly targets Tier II and Tier III cities, Uppal says low income or budget conscious people don't live only in these cities. "Twenty five per cent of the population of some big cities lives in slums," he asserts stating while the proportion of the demand for such low cost phones is higher in Tier II and Tier III cities, a large section of the big city population also need cheap handsets.

Stating that Flipkart, like any supermarket, would bank on impulse-buying Uppal notes that these ads also promote the online platform and help Flipkart to expand its reach. "Brands want to associate with phones since they are considered 'sexy'. From Flipkart's perspective, ads like this promote the product as well the brand 'Flipkart', as it attempts to reach low-income customers. The reach of TV helps too," he explains.

While currently market dominance is not a concern, Uppal warns that in the long term these deals may hurt competition. "The same handset manufacturer might feel trapped if a competitor of Flipkart say, Snapdeal offers it a better deal," he argues.

The market

Basic and feature phones still dominate handset sales in India. But smartphones sales are growing owing to an influx of low-cost smartphone devices manufactured by a host of Indian brands including Micromax and Karbonn.

The latest International Data Corporation (IDC) Report states that the overall mobile market, by volume, in India stood at 61.1 million units in April-June 2014. The share of feature phones slipped to 71 per cent in the first quarter of 2014 from 90 per cent in the corresponding period in 2013. The Indian smartphone market grew by whopping 186 per cent during the same period. The report highlighted that around 81 per cent of 18.4 million smartphones shipped in this financial year were sub-$200.

"As more vendors continue to launch low-priced smartphone models, the price gap between feature phones and smartphones will narrow, driving rampant user migration," notes the report. Samsung continued its leadership in the Indian smartphone market with a 35 per cent share. Micromax has 15 per cent share, Karbonn 10 per cent, Lava 6 per cent and Nokia, just 4 per cent.