Samsung Electronics in India: Challenges of Multi-Channel Retailing

ASIAN CASE RESEARCH JOURNAL, VOL.
22, ISSUE 1, 81–111 (2018)
ACRJ
Samsung Electronics in India:
This case was prepared by
Associate Professor Abhishek Challenges of Multi-Channel
of Institute of Management
Technology, Ghaziabad, India Retailing
and Harshit Garg of Auctus
Advisors, Gurgaon, Haryana,
India, as a basis for discus- On 9 September 2014 Samsung Electronics made a launch
sion rather than to illustrate
either effective or ineffective announcement of Samsung Galaxy S5 Mini. The launch
handling of an administra- news announced availability of Samsung Galaxy S5 Mini, a
tive or business situation.
compact version of its popular model Samsung Galaxy S5 —
Please address all correspon- company’s flagship smartphone, for INR 26,499 in Indian
dence to Associate Professor
Abhishek, Institute of Man- markets. The Galaxy S5 Mini was available in four colour
agement Technology, Raj options — charcoal black, shimmery white, electric blue, and
Nagar, Post Box No. 137,
Ghaziabad, Uttar Pradesh – copper gold. The company announced that the model was to
201001, India. E-mail:
abhishek@imt.edu
be retailed exclusively through flipkart.com, India’s leading
online retailer, from 10 September 2014.1 Retailing experts
expected this announcement to further hurt Samsung Elec-
tronics’ relationship with brick and mortar retailers who were
not happy with company’s policy of selling through online
retailers.
HISTORY OF SAMSUNG ELECTRONICS
Samsung Electronics was part of Samsung Group, the largest

chaebol (family-controlled conglomerate) in South Korea. It
was established in 1988 when Samsung Electric Industries
merged with Samsung Semiconductor & Communications.
The company gradually expanded its operation to markets in
other countries. In the early days, Samsung Electronics prod-
ucts were plagued with quality issues. However, the Asian
© 2018 by World Scientific Publishing Co. DOI: 10.1142/S0218927518500049
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financial crisis of 1997 pushed the company towards change

and Samsung Electronics decided to transform its image from
a budget brand to a brand promising quality products. In
the next fifteen years, it touched new heights in excellence,
some of which have been summarized in Exhibit 1. Samsung
Electronics focus on consumer requirements and production,
along with its ability to identify the emerging opportunities,
led it to be a world leader in whichever category it entered.
Following the liberalisation of the Indian economy in
1991, India became a favoured destination for many foreign
multinational companies. Policy changes made India a lucra-
tive market for companies wanting to expand in newer
markets. Samsung Electronics (Samsung) decided to enter
India in 1994–95 to grab this opportunity. It followed other
South Korean chaebols — LG, Daewoo, and Hyundai who
were also entering India at the same time. In the mid-nineties,
refrigerator, colour televisions (CTVs), washing machines, and
air conditioners were the main items in Indian consumer’s
purchasing priorities. This was also the time when prolifera-
tion of channels, with the advent of cable television networks,
made CTV market poised for significant growth and hence
very lucrative. Samsung decided to start its India operations
with CTVs by setting up a manufacturing plant in NOIDA,
near New Delhi.2 It faced competition from Indian brands like
BPL, Onida, and Videocon who were market leaders.
Within a few years Samsung was able to establish itself
as a leading player in CTV segment. Reduction in import
duty on colour picture tubes brought CTVs within the reach
of large sections of the population. Samsung focused on
brand differentiation from the beginning and positioned itself
as a high-technology brand serving medium and premium
segments. The company provided products with better tech-
nology and excellent after-sales service for value-conscious
Indian consumers. Gradually, Samsung developed a very
strong and diverse portfolio in India consisting of TV and
video appliances, home appliances, and information tech-
nology (IT) products.
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SAMSUNG ELECTRONICS IN INDIA: CHALLENGES OF MULTI-CHANNEL RETAILING 83
SAMSUNG ELECTRONICS IN INDIA’S MOBILE

PHONE MARKET
Samsung’s entry in India also coincided with India’s telecom

revolution. The Indian government opened its telecom sector
in the mid-nineties and allowed private operators to set
up mobile and landline services on payment of license fees.
Telecom Regulatory Authority of India (TRAI), setup in 1995,
reduced Government of India’s interference in deciding tariff
and policy making.3 In India the first mobile phone was
launched in July 1995 and the first mobile call was made on
a Nokia mobile phone on 31 July 1995.4 In the initial days,
mobile handsets were very expensive and call rates were pro-
hibitive. With service providers charging exorbitant rates for
incoming calls, very few people could afford cellular services.
Nokia brought mobile handset revolution in India by
bringing newer, cheaper, and customised versions of hand-
sets. In 1998, the company introduced its first Indian ring-
tone — “Saare Jahan Se Accha” — on Nokia 5110 handset. It
introduced the first phone with user menu in Hindi for Nokia
3210 model in 2000 followed by Nokia 1100, the first made-
for-India phone in 2003.5 All these initiatives made Nokia
number one seller of handset in India and it was preferred
for its robustness in Indian conditions. Nokia’s mobile phones
worked on Global System for Mobile (GSM) technology
which was widely prevalent in India at that time.
In January 2003, Reliance Infocom (now known as Reli-
ance Communications) launched its mobile service using
Code Division Multiple Access (CDMA) technology. With its
objective to provide mobile service cheaper than postcard, it
tied up with Samsung to provide mobile handsets along with
service connections. Customers liked the Samsung handset
due to its looks and light weight though there were quality
issues. Samsung quickly realised the need to improve the
quality of their handset along with introduction of GSM com-
patible handset, which was preferred by Indian customers
and had larger market share. The company launched a series
of GSM-enabled phones over the next few years, but it was
not able to dislodge Nokia from the number one position.
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With Apple’s iPhone launch in 2007, the mobile handset

market went through a transformation as customer expe-
rienced touchscreen features and multi-touch interfacea for
the first time. Mobile handset customers started preferring
smartphones for their features and benefits. HTC’s Dream
smartphone, first to use Android Operating System (OS) in
a smartphone, was launched in 2008. The phone was able to
establish its superiority over Symbian OS used by Nokia in
its smartphones. This set the tone for the next stage of mass
proliferation of smartphones across the globe, especially with
the widespread usage of Android OS. Samsung made it big in
smartphone segment with the launch of its super-successful
Galaxy S handset in 2010. It went on to become the most suc-
cessful smartphone of 2010 with over 24 million units sold
globally. Galaxy S2, launched next year, outpaced its prede-
cessor by clocking over 40 million units sale in record time.6
Exhibit 2 provides a select list of smartphones launched by
Samsung in India.
These models helped in establishing Samsung as a
leading player in the mobile phone market, displacing Nokia
from its number one position in India. In 2013–14, the South
Korean giant sold mobile phones worth INR 27,912 crore
(1 crore = 10,000,000), about 60% of India’s INR 45,000 crore
mobile handset market.7 The growth in mobile handset sales
led to Samsung turning itself from consumer electronics
company to mobile handset company which also had a pres-
ence in consumer electronics in India. In the financial year of
2013–14, mobile handsets contributed INR 27,912 crore worth
of sales in the Samsung India’s total revenue of INR 40,392
crores.8 The share of mobile phone sales in Samsung Elec-
tronics (India) revenue was 69% which was almost double of
its share in 2009–10.9 A larger market share in mobile phone
market also helped Samsung to race ahead of its competitors
in India’s consumer electronics market. (Refer to Exhibit 3 for
Samsung’s revenue and profit with respect to its competitors.)
a
Multi-touch interface refers to ability of touchscreen surface to identify presence of
one or more point of contact with the touchscreen surface. This ability enables the
mobile touchscreen to zoom in or zoom out images and text.
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REACHING THE CUSTOMERS
One of the reasons for Samsung’s success was the manner

in which it made efforts to reach to customers. Samsung’s
entered India with a strategy of focusing on creating a
premium brand image by showcasing its superior design
and technological aspects of the higher-priced products
build for the affluent customer base. The company used two
types of distribution structures namely ‘one-level’ channel
and ‘two-level’ channel for showcasing its products. (Refer
Exhibit 4 for the diagrammatic presentation of distribution
structure.) One-level channel had company warehouse or
production unit as the starting point from where the product
reached customers with one intermediary in between —
either company brand shop or direct dealer. In the two-level
channel, there was an additional intermediary, namely
‘sub-dealer’, in between distributor and customer. Samsung
organized its showrooms adopting dual showroom strategy.
The larger (>2500 square feet) outlets were called ‘Samsung
Digitall Home’ which focused on demonstration whereas the
smaller ones, called ‘Samsung Plaza’, focused on showcasing
the products.10 Apart from reaching to customers, Samsung
ensured quick and reliable customer service. Its service vans,
painted in the company’s colours, were employed in major
cities to service the complaints.11
As Samsung realized the challenges of achieving high
growth based on premium positioning, it turned its focus on
India’s voluminous price sensitive mass market. It understood
the need to capture larger customer base also to achieve lead-
ership in large-volume categories. Consequently, the company
started reaching out to the price-sensitive customer base by
offering larger range of affordable and customized products.
In order to broaden its presence across non-metro and semi-
urban towns and reach out to customers in tier-II and tier-III
cities, it decided to rebrand all the stores as Samsung Plaza in
2008.12 It also conducted a number of road shows distributing
pamphlets and promotional literature in local languages.
The push to smaller towns further intensified with
Samsung focusing on mobile handset markets. This was also
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necessitated due to post-2008 crisis wherein the company saw

focus on smaller towns as a way to cope with the expected
slow-down.13 In order to increase its presence and reach in
smaller towns, Samsung opened 17 sales offices in smaller
key markets in early 2009.14 It also roped in more distribu-
tors for providing better services to dealers. For example,
Samsung increased the number of distributors from four
to nine in the northern region.15 Similar steps were taken in
2013 when the company decided to increase the distribution
network by adding another 380 outlets, mainly in tier-II and
tier-III cities, taking the total outlets to 700.16
However, in recent years a new trend emerged where
customers started online shopping with the intention to buy.
This was noticed by manufacturers of consumer electronics
and durable products also and they joined the online retailing
bandwagon. Samsung also started with its e-store for mobile
phones named Samsung Smart Phone Café to reach out to
customers who preferred shopping online.
ONLINE RETAILING IN INDIA
Over the last few years, India showed remarkable growth

in e-commerce especially in the business to customer (B2C)
segment as e-commerce companies offered a greater choice
of products and services to customers at a much more com-
petitive price. The online B2C segment saw service offerings
ranging from travel, movies tickets, hotel reservations to start
with, and included products ranging from electronic gadgets,
fashion accessories, home furnishing to groceries. In India,
online travel portals like irctc.co.in, makemytrip.com were
pioneers who facilitated and encouraged Indians to transact
over the internet. One of the factors fuelling e-commerce had
been internet penetration which raised from 21 million active
internet users in 2006 to 243 million users by June 2014.17
Ever-changing lifestyles and higher disposal incomes, com-
bined with enhanced aspirational levels, especially amongst the
demographically youthful population also drove e-commerce.
However, in spite of rapid strides made by e-commerce, it
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was still a small part (with estimates ranging from 0.1% to

0.4%) of overall retail in India. However, according to Tech-
nopack, India’s leading management consultancy firm in
retail sector, e-commerce was projected to grow at a rapid
pace to reach 7–8% of the total Indian retail market by 2020.18
In value terms, the report stated, it had the potential to grow
to as much as $76 billion (INR 456,000 crore) by 2021.19
Retail e-commerce (also known as e-tailing) started
picking up in 2004 with eBay’s entry into India by acquiring
bazee.com, which was India’s largest auction portal in those
days. Over the next few years, a number of players started
e-tailing operations. While many online retailers (also known
as e-tailers) closed down or merged, some survived and grew
over the years. These companies struggled for a long time to
build trust and confidence in Indian buyers to shop online.
Finally Cash on Delivery (COD) model proved to the game-
changer which led to growth of e-tailing in India. While a
number of e-tailers prospered, few firms like flipkart.com,
myntra.com, and snapdeal.com, led the growth of e-tailing
in India. Flipkart, started in 2007 by Sachin Bansal and Binny
Bansal as online retailer of books, grew to become the leading
e-tailing site in India. In the same year, Mukesh Bansal, along
with Ashutosh Lawania and Vineet Saxena, started Myntra
currently the largest online fashion portal in India. Snapdeal
was started by Kunal Bahl in 2010 as a deal site, but later
metamorphosed into an e-commerce company using the
marketplace model.b Major offline retailers like Future Group
and Reliance Retail, realising the importance of online pres-
ence, launched their e-tailing website. Future Group launched
online e-tailing of its popular formats Big Bazaar (specializing
into grocery retailing) and ezone (specializing into electronics
b
In the marketplace model, (sometimes also referred as consignment based model),
online retailers tie up with a number of vendors to procure the merchandise. Once
the product is ordered by the customer on the e-tailer’s website, a notification is sent
to the vendor for fulfilment of the order. The vendor then ships the product to the
customer and financial statement is made for the transaction done between vendor
and online retailer. This model is advantageous to the online retailers as it allows
them to offer large number of choices to customers while the product gets directly
shipped from vendor and there is no need for investment in warehouse and logistics
by e-tailer.
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retailing).20 Reliance Retail also launched its e-tailing websites

for Reliance Digital (specializing into electronics retailing) and
Reliance Fresh (specializing into grocery retailing) to target
new age generation seeking convenience through online
shopping.
The e-tailing competition in India intensified with
entry of amazon.com which launched its marketplace model
in June 2013.21 Amazon, which did not provide COD service
anywhere else in world, started providing COD option in
India, keeping up with the market norms. Flipkart responded
to the competition by acquiring Myntra in May 2014 and
raising $1 billion (INR 6,000 crore) to take on competition. It
also changed its business model from inventory-based model
to marketplace model. Other online retailers like Snapdeal
also raised fresh round of funding to deal with competition.
However, undifferentiated offerings by multiple retailers,
who were competing for the same set of customers, led to
competition becoming intense.
While the competition heated up in online space,
Indian customers continued to show preference for physical
stores. Online retailers always faced the challenge of repli-
cating touch and feel of physical stores during online shop-
ping interphase. In order to break this impasse, these players
often ended up spending significant amount per customer for
acquiring customers. It was reported that majority of Indian
online retailing websites spent between INR 800–1,500 to
acquire a customer.22 With a large supply chain and logis-
tics network in place which did not require middlemen,
online shopping sites enticed customers with aggressive dis-
counts, putting market share ahead of profitability.23 Most
of the present e-commerce players saw deep discounts as
an effective way to grab a larger market share.24 The online
players stated that discounts were aimed to attract customers
and gain market share and change buying behaviour of cus-
tomers. While discounts reduced profitability, e-commerce
companies thought that such discounts could be amortized
over a longer time frame. E-tailers also saw deep discount
sales as means for getting first time users hooked. 25
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The splurge of discounts led to customers taking up

‘showrooming’c for their purchase decisions. By checking
the product in a physical store, and then availing the dis-
counted price available online, customers could get the best
of both worlds. This technique gained popularity with around
33% population in major metros of the country regularly
showrooming for products categories like books, perfumes,
and shoes.26 Gagandeep Singh, the owner of Lakshmi Elec-
tronics — a large-sized retail store in Delhi that sells con-
sumer electronics — talked about showrooming, “People
come to the shop, and ask to see a dozen different products.
They ask my staff hundreds of questions. They take the best
advice, try out the latest products, and when the time comes
to finally buy, they say, ‘this is cheaper online’.” Gagandeep
felt that that the extra value that his shop had added — in
terms of the ability to touch and feel the product, and the
advice of his staff — was simply being used to further sales
on sites like Flipkart and Amazon.27
PROBLEMS DUE TO ONLINE RETAILING OF

CONSUMER ELECTRONICS PRODUCTS
The phenomenon of showrooming and practice of deep dis-

counts resulted into emergence of electronics as the fastest
growing segment in the Indian online shopping space. While
the customers benefitted from reduced pricing and increased
convenience, it also created problems and conflicts between
the consumer electronics companies and offline retailers.
Offline retailers were concerned because online shopping had
started affecting their business. Consumer electronics compa-
nies feared that their brand image would get hurt due to low-
ering of prices. Till the time e-tailing was small, brands were
not concerned about these issues. However, as e-tailing grew,
brands realized that prices and demand may be dictated by
the online channel. 28
c
‘Showrooming’ refers to the phenomenon exhibited by customers whereby they visit
a brick and mortar shop to view and select the product they like before checking it
online and buying at the discounted price.
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Many consumer electronics companies saw sales slip-

ping at their brick-and-mortar stores due to the gap between
prices quoted by popular online shopping and their offline
counterparts.29 Some manufacturers of electronic goods
alleged that while few offline traders and distributors listed
products on online marketplaces and sold them at lower
margins, others listed products at the manufacturer recom-
mended price, but the host website ended up offering deep
discounts by way of coupons and cashback schemes, creating
a wide gap in pricing between products available online and
offline.30 Manufacturers also claimed that e-tailers did not pay
value added tax (VAT)d on sales, as they claimed to be just
shipping the goods from source (factory) to end-user.31
The brick-and-mortar retailers, across the country, who
were hit by the online sales, took desperate steps. All Delhi
Computer Traders Association (ADCTA), a traders’ associa-
tion of IT and telecom products, asked its 25,000 members
across country to stop supplying goods to e-commerce portals
and e-tailers if they sold any product below the price at
which e-tailers had originally purchased it.32 Offline mobile
phone retailers, who were facing heavy discounts offered by
e-tailers, decided to come together to form All India Mobile
Retailers Association (AIMRA), a body which aimed to work
for the mutual benefits of brick-and-mortar retailers and
maintain price hygiene across trade channels.33 Delhi Mobile
Association (DMA), a trade body representing mobile phone
dealers of Delhi state wrote letter to Samsung highlighting
the problems faced by offline retailers.34
Similar set of problems were faced by offline retailers in
South India also. A survey conducted by Assocham (Associ-
ated Chambers of Commerce & Industry) found that small-
time dealers in Bengaluru and Mysore saw 30–40% decline
in sales of IT hardware and electronic products due to cus-
tomers switching over to e-tailers.35 Many dealers and traders
appealed to the state government to bring e-tailers under
VAT to ensure a level-playing field for their survival in the
d
VAT is taxation system employed in India for collecting indirect tax.
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long-term.36 More than 4,000 small offline retailers selling

books, electronics, and apparel came together and formed
an industry body called ‘We Will Act’ to lobby against
e-commerce firms.37 The body also launched a website
‘wewillact.com’ which highlighted its mission of ‘right to
survive and grow’.38
RESPONSE BY SAMSUNG ELECTRONICS
Samsung initially did not provide an active response to

the complaints posed by offline retailers. In March 2014, a
spokesperson from Samsung India said, “Samsung keeps the
overall interest of the end-users of its products and services
in mind. We respect the right of consumers to make informed
choices.”39 However, as the situation did not change, hun-
dreds of Samsung dealers, across the country, threatened to
boycott the company’s products over pricing concerns.40 The
dealers said that they would stop stocking Samsung phones
unless the company took steps to narrow the wide gap in
pricing between its phones sold at offline outlets and on
e-commerce sites.
Sanjay Sahni, Samsung phone dealer, captured the
problem by stating, “Forced by stiff targets set by Samsung,
some distributors used to offload their stocks in the whole-
sale market at big discounts and the same phones used
to find their way online. Samsung committed the biggest
blunder by slashing the price of its flagship device by around
20% just after two months of its launch. We were caught in
the lurch with unsold stocks and now loyal Samsung cus-
tomers don’t want to buy them because they are scared that
the prices might fall further.”41 Sunil Arora, another dealer of
Samsung mobiles in New Delhi, said, “How can the company
expect us to meet targets when customers can buy its phones
online at huge discounts? Samsung gives us a 5.5% margin,
while the same phones are being sold online at 20–30% dis-
count. Samsung executives have requested us not to take any
drastic steps and have promised to change things. We have
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given them time till 15 August. If we don’t see any positive

steps, we will black out Samsung hoardings at our shops.”
Asim Warsi, VP (marketing, mobiles and IT), Samsung India,
responded to dealers demand by stating that dialogue with
channel partners was an ongoing process.42
The issue was picked up by Adarsh Shastri, a leader of
Aam Adami Party (AAP)e, who sought to mediate between
offline retailers and Samsung. Adarsh, who had earlier
worked with Samsung and Apple, was the secretary of Indian
Cellular Association, a group which represented manufac-
turers, distributors, and trade partners of the cell phone
industry. He said, “Boycotting products of a particular brand
is not the right approach. Banning threats are counterproduc-
tive for the traders and a better solution can be found which
is beneficial to both parties. We feel it’s not right because it
doesn’t help the retailer, the brand and the consumer. Brands
and retail need to work together. Brands are waking up to the
issue since almost 95% of their sales are still dependent on
the offline trade.”43
The agitation by offline retailers brought fore the issue
and helped in reducing the price differences between brick
and mortar stores and e-tailers. Table 1 captures the price
data in August 2014 for three models of mobile phones at
offline and online retailers.
Table 1. Price Comparison between Offline and Online Retailers
S. No. Brand and Models Online Price Offline Price

(INR)* (INR)
1 Samsung Galaxy Core 2 11,550–12,490 11,500–11,900
2 Samsung Galaxy S4 Mini 17,450–18,888 18,500–18,900
3 Sony Xperia C 16,300–17,990 17,500–17,990
*
Online Price for Flipkart and Amazon
Source: http://articles.economictimes.indiatimes.com/2014-08-06/news/
52514332_1_lenovo-india-offline-canon-india, accessed on 22 November, 2014.
e
Aam Adami Party (AAP) is a political party with substantial support base in state
of Delhi.
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RESPONSE OF OTHER CONSUMER ELECTRONICS

COMPANIES
The rising channel conflict was handled by other consumer

electronics companies in various ways. Sony, Lenovo, and
Canon issued trade advisories banning brick and mortar
stores from selling, either directly or indirectly via e-commerce
companies, their brand of cell phones and other items.44
Amar Babu, Managing Director of Lenovo India, said, “We
are trying to weed out unhygienic practices to create a
healthy environment between online and offline markets.
The company has asked retailers to comply with the trade
agreement, which maps out a certain geographical territory
where the retailer can sell.”45 Some companies like Lenovo,
Nikon, and Toshiba issued public notice to customers dis-
couraging them from buying online. Lenovo warned its
buyers that Amazon, Flipkart and Snapdeal were not autho-
rised resellers, while Nikon made a blog post which read:
“Please note that Flipkart (Flipkart Internet Private Limited)
and Snapdeal (Jasper Infotech Private Limited) are not our
authorised partner/dealer in India for Nikon Products.”46
(Refer to Exhibit 5 for blog post by Nikon.) Canon stopped
selling its products online by pulling them out from a few
e-commerce sites. Alok Bharadwaj, executive vice-president
at Canon India Pvt. Ltd said, “We are not doing direct busi-
ness with online sites where price disruptions are the core
proposition.”47 The company also started the practice of
giving longer warranty of 15 months instead of more stan-
dard 12-month warranty, if the cameras were purchased
from offline stores.48 LG India Pvt. Ltd pacified its dealers by
sending a letter which specified that the company had not
authorised any e-commerce company/web portal to sell LG
product(s) — TV, audio products, home appliances, air con-
ditioners, and mobiles in India. The letter also stated that the
firm did not take any responsibility for the genuineness of
any LG product(s) sold through e-commerce companies/web
portals in India, and retained the right of not extending addi-
tional services/warranties to such products.49
Panasonic India adopted a slightly different strategy to
complaints from physical stores. After the announcement by
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Arun Jaitley, India’s Finance Minister, in the July 2014 budget

which allowed manufacturers in India with foreign invest-
ments to sell directly to consumers online; Panasonic India
decided to sell its products directly to customers through
its e-commerce portal ‘Panasonic E-Store’. The company
announced that it would appoint a ‘re-seller’ to maintain
the portal which will showcase Panasonic products such as
kitchen and home appliances, washing machines, and air con-
ditioners which were manufactured in India.50
The strong response by consumer electronics brands
was not seen as a sound strategy by some. Radhika Ghai
Aggarwal, Co-founder and Corporate Vice President (Mar-
keting and Merchandising) of ShopClues, another leading
marketplace e-tailer in India, criticized the move. She stated,
“The statements from brands urging customers to shop
offline are completely irrational behaviour. You can’t just
kill a channel. Not everyone wants to shop offline, and the
brands will need to find ways to work with all channels.”51
Rajan Malhotra, CEO at Future Group-owned electronics and
gadgets retailer ezone, stated, “e-commerce is bound to have
an adverse impact on sales and footfalls at bricks-and-mortar
stores. The future consumer will shop online for lower-priced
gadgets, so we cannot ignore the relevance of this platform.
Brands will have to ensure that e-tailers do not undercut
prices.”52 Manish Sharma, Managing Director of Panasonic
India, stated, “While the online channel is important, the
current situation demands a well-considered set of terms and
conditions.”53
While the consumer electronics companies took a
confrontationist approach towards online retailers, several
apparel makers, who were also facing similar problems of
discounting, initiated talks with them to reduce the incidence
of discounts. Ganesh Subramanian, COO at Myntra said, “The
problem is not nearly as big as it is with electronic retailers,
but brands are talking to us about reducing the quantity of
‘coupon’ discountsf.”54
f
Coupon discounts refer to price-offs that all major online retailers and marketplaces
offer customers if the purchase value of merchandise exceeds a certain amount,
usually about Rs.1,500–2,000 across online retailers.
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EMERGING TREND OF EXCLUSIVE ONLINE RETAILING

OF MOBILE PHONES
The conflict between brick and mortar retailers and consumer

electronics companies got further accentuated by recent
emergence of exclusive sales using online retailers. This was
started by Motorola Mobility, which did not have a proper
offline distribution system in place due to a two-year hiatus,
for re-launching its new range of mobile phones for Indian
markets in February 2014. It partnered with Flipkart to launch
its ‘Moto G’ model of mobile phones which were available to
customers in India exclusively through Flipkart.55 (Refer to
Exhibit 6 for launch announcement advertisement of Moto G
model).
The partnership between Flipkart and Motorola was a
new way for people to buy mobile phones online. Exclusive
sale through online channel presented unique challenges
as there was no salesperson to explain the phone features
and customers could not get a touch and feel of product. In
order to overcome these issues, the company introduced
videos explaining features of mobile phones to prospective
customers. This served as a replacement of the staff at the
physical store and helped people make the decision by seeing
the phone online only. It became an instant hit with around
20,000 units being sold out within hours of the launch on
February 6 and the 16 GB version being sold out in first 15
minutes.56 Flipkart saw its online traffic doubling in compar-
ison to regular days and more than two-third of this traffic
was driven by Moto G. 57
The successful launch of Moto G was followed by intro-
duction of ‘Moto X’ and ‘Moto E’ in Indian markets which
were also sold exclusively through Flipkart. The success story
of Moto G was carried forward by other models also and
Motorola sold 1.6 million handsets through Flipkart, claiming
over 5% share of Indian smartphone market within next eight
months.58,59 It helped Motorola to become one of top five
player in smartphone segment, surpassing Nokia, Sony, and
Apple.60 Flipkart also benefitted as exclusive launches helped
it to enhance its image as a pioneer and provider of quality
products.
S0218927518500049.indd 95 02-07-18 3:15:25 PM

96 ACRJ
Following the footsteps of Motorola, Chinese handset

maker Xiaomi, touted as ‘Apple’ of China, teamed up with
Flipkart to launch its mobile phones in India.61 Xiaomi
launched Mi3 model in July and sold out its lot within forty
minutes. The huge rush also crashed Flipkart website.62
Buoyed by its success, Xiaomi followed up with five flash
sales on Flipkart which sold close to 100,000 units of Mi3.63
These flash sales, spread over a month, were huge success as
entire inventory available for sale was sold within seconds.
Xiaomi also launched its Redmi model exclusively through
Flipkart.
The immensely successful launch of Motorola and
Xiaomi smartphones, retailed exclusively through Flipkart
was noticed by other smartphone companies also. Oppo, a
Chinese smartphone brand, also decided to team up with
Flipkart to sell its range of devices in India.64 Indian smart-
phone manufacturers also tied up other online retailers for
exclusive sale through them. Celkon launched its Android-
powered model — Campus A35K — exclusively with Snap-
deal.65 Karbonn mobile launched its different new models
through exclusive tie-ups with Snapdeal and Flipkart. (Refer
to Exhibit 7 for Karbonn ads of exclusive tie-ups.) Motorola
further strengthened its partnership with Flipkart by
launching its second generation Moto G and Moto X models
which were exclusively retailed through Flipkart. (Refer to
Exhibit 8 for ads of exclusive tie-ups.) India’s leading mobile
handset company, Micromax, also joined the bandwagon by
retailing its newly launched model Canvas Nitro exclusively
through Snapdeal. This strategy was also pursued by Mic-
romax, Karbonn, and Spice when they launched Google’s
Android One handsets in India.
While the rise of e-tailers provided an alternative
for electronics companies to sell using online channel, it
was also seen as a valuable source of capturing customer
insights. With the rapid growth of online shopping and
product searches, significant data was generated which pro-
vided useful consumer data to consumer electronics compa-
nies, smartphone makers, apparel, and lifestyle brands. This
S0218927518500049.indd 96 02-07-18 3:15:25 PM

data was used by apparel and jewellery brands to plan new

product styles, including material and colour, while electronic
brands were using it to plan inventory levels.66 Philips India
employed the insights from sales and browsing data of elec-
tric shaver products from tier-II towns to gauge the market
potential of its new electric shavers for male customers.67
Moreover, the data from online retailers often cost a fraction
of the fees that market research firms like Nielsen and GfK
charged.68
COMPETITION FROM OTHER PLAYERS
Samsung faced increasing competition from local and inter-

national players in the smartphone market. Samsung faced
serious competition in high-end category (INR 30,000 and
above) smartphones from Apple and Sony. IDC, a leading
market research company, estimated that Samsung’s market
share in this category dropped from 72% in 2012 to 34% in
2013; a drop of close to 50%.69 During this period, IDC report
stated, Apple’s share grew from 18% to 22% while Sony’s
share grew from 1% to 18%.
Indian handset manufacturers like Micromax, Lava,
and Karbonn, along with Chinese brands like Gionee were
also hitting Samsung’s sales in low and mid-end phones.
On 5 August 2014, Singapore-based Counterpoint Research
reported that Micromax overtook Samsung as India’s leading
handset seller, capturing 16.6% market share in the April-June
2014 period as against the Samsung’s share of 14.4% in the
same period.70 The report also stated that in the smartphone
market, Micromax was close behind with 19% share against
Samsung’s leading position with 25.3% share.
This report was countered by B D Park, President
and Chief Executive for south-west Asia, who also headed
Samsung India operations. Mr. Park, citing the company’s
internal research and data from an external agency which he
did not identify, said, “Samsung still holds the lead in India
with a share of almost half the market. In the smartphones
S0218927518500049.indd 97 02-07-18 3:15:25 PM

98 ACRJ
category, the sales of which are expected to cross 80 million

units this year from 44 million in 2013, Samsung’s share was
twice that of the nearest competitor.”71
THE WAY AHEAD
On 18 September 2014, Samsung announced its decision

to adopt a complete offline route. The company, due to
mounting pressure from brick-and-mortar retailers, declared
that they have decided to extend exclusivity on selling rights
of 48 models, including its much-awaited Galaxy Alpha and
Note 4, to offline retailers. This was declared in New Delhi
by a senior Samsung official while speaking to a gathering
of retailers from AIMRA. He said, “We have taken action
against many rogue distributors, who were dumping their
stocks online and beating down the price of our handsets. We
are working hard to bring back price hygiene in the market.
Our revenues from online sales have come down from 30% to
single digit. We also have plans to stop billing WS Retail, the
largest reseller on Flipkart.”72
Retail experts took this move with a pinch of salt.
Arvind Singhal, founder and chairman of retail consultancy
Technopak, said, “It’s a regressive move, especially before the
festive season when you are going to see a lot of discounts
online, perhaps the fact that around 80% of India’s INR 60,000
crore handset business is still done through offline retail
might be reason for the company to shy away from online
trade. But, Samsung needs to wake up to the fact that it’s
not the future since Chinese manufacturers are offering same
specification handsets at one third of the price.”73
Samsung needed to decide its future course of action
with respect to its distribution practices. Should it continue
the way it is going on right now and start selling through
only one channel, thus eliminating the channel conflict issues.
Samsung could also adopt the strategy of selling separate
products for both the channels to avoid any conflict between
them. Alternatively, Samsung could also adopt omni-channel
strategy. A right answer would ensure continuance of
Samsung’s leadership position in mobile phone category.
S0218927518500049.indd 98 02-07-18 3:15:25 PM

ENDNOTES
1
http://timesofindia.indiatimes.com/tech/mobiles/
Samsung-Galaxy-S5-Mini-launched-at-Rs-26499
articleshow/42107866.cms, accessed on 20 November 2014
2
http://www.samsung.com/in/aboutsamsung/samsungelectronics/
india/index.html, accessed on 21 November 2014
3
http://telecomtalk.info/history-of-indian-telecommunication/67789/,
accessed on 30 October 2014
4
http://conversations.nokia.com/2014/07/31/happy-birthday-
indias-first-ever-mobile-phone-call/, accessed on 30 October 2014
5
http://blogs.wsj.com/indiarealtime/2013/09/03/nokia-in-india-a-
brief-timeline/, accessed on October 30 2014
6
http://infographicjournal.com/a-brief-history-of-samsung-mobile-
phones/, accessed on 30 October 2014
7
http://www.business-standard.com/article/companies/samsung-
from-fridge-tv-company-to-mobile-messiah-114110700025_1.html,
accessed on 20 November 2014
8
Ibid.
9
Ibid.
10
http://www.rediff.com/money/2008/jan/15samsung.htm;
11
http://knowledge.wharton.upenn.edu/article/korean-conquest-
how-lg-and-samsung-won-over-the-indian-market/; accessed on 23
November 2014.
12
http://www.rediff.com/money/2008/jan/15samsung.htm;
13
http://www.broadbandindia.com/forum/showthread.php/230-
Samsung-to-revamp-sales-amp-distribution-across-India, accessed on
25 November 2014
14
Ibid.
15
http://www.business-standard.com/article/technology/samsung-
mobile-rejigging-distribution-plans-for-north-109020900016_1.html,
16
http://www.dnaindia.com/scitech/report-samsung-india-eyes-
smaller-towns-50-growth-1793825; accessed on 25 November 2014
17
http://yourstory.com/2014/08/indian-e-commerce-ecosystem/,
accessed on 16 October 2014
18
http://www.technopak.com/files/E-tailing_in_India.pdf, accessed
on 21 August 2014
19
Ibid.
S0218927518500049.indd 99 02-07-18 3:15:25 PM

100 ACRJ
20
http://www.hindustantimes.com/business-news/future-to-
invest-rs-100-crore-in-omni-channel-retailing/article1-1259754.aspx,
21
http://www.thehindu.com/business/Industry/amazon-now-in-
india/article4783615.ece, accessed on 20 November 2014
22
http://www.thehindubusinessline.com/features/weekend-life/
can-indian-etailers-be-profitable/article4673803.ece, accessed on 21
October 2013
23
http://www.livemint.com/Industry/f6eARBcJOWrTZTzuDcZZzI/
Ecommerce-boom-hurts-brickandmortar-retailers.html, accessed on
22 November 2014
24
http://retail.economictimes.indiatimes.com/news/e-commerce/
e-tailing/losing-the-plot-deep-discount-e-commerce-sales-hurt-
consumer-experience/45228482, accessed on 22 November 2014
25
Ibid.
26
http://timesofindia.indiatimes.com/life-style/fashion/trends/
Delhi-swears-by-showrooming/articleshow/36765986.cms; accessed
on 20 November 2014
27
http://gadgets.ndtv.com/mobiles/features/online-offline-
retail-battle-in-india-nears-a-tipping-point-569053, accessed on 22
November 2014
28
22 November 2014
29
http://articles.economictimes.indiatimes.com/2014-08-06/
news/52514332_1_lenovo-india-offline-canon-india, accessed on 22
November 2014
30
Ibid.
31
news/54928910_1_flipkart-retail-sales-online-shopping-growth,
32
http://timesofindia.indiatimes.com/tech/tech-news/Offline-
vs-online-Traders-to-not-supply-goods-to-e-tailers-over-pricing/
articleshow/42719765.cms, accessed on 22 November 2014
33
http://timesofindia.indiatimes.com/tech/tech-news/Samsung-
goes-offline-with-mobile-phones/articleshow/42741523.cms,
34
November 2014
35
news/54928910_1_flipkart-retail-sales-online-shopping-growth,
S0218927518500049.indd 100 02-07-18 3:15:25 PM

36
Ibid.
37
22 November 2014
38
http:///firstbiz.firstpost.com/corporate/indian-retailers-are-up-
in-arms-against-the-online-onslaught-46359.html, accessed on 22
November 2014
39
22 November 2014
40
dealers-threaten-boycott-over-e-pricing/articleshow/39678073.cms,
41
Ibid.
42
Ibid.
43
news/54691396_1_adarsh-shastri-lal-bahadur-shastri-samsung-india,
44
November 2014
45
Ibid.
46
November 2014
47
22 November 2014
48
November 2014
49
http://www.livemint.com/Industry/
fWmnYwZv46dUSxwwOzV61I/Everyone-hates.html, accessed on 22
November 2014.
50
http://www.financialexpress.com/article/markets/online-retail-in-
india-more-than-18-month-party/, accessed on 22 November 2014
51
November 2014
52
22 November 2014
S0218927518500049.indd 101 02-07-18 3:15:25 PM

102 ACRJ
53
November 2014
54
22 November 2014
55
http://indianexpress.com/article/technology/mobile-tabs/launch-
flipkart-brings-motorolas-moto-g-to-india-prices-it-at-rs-12499/,
56
news/47200968_1_moto-g-flipkart-motorola-mobility, accessed on 21
November 2014
57
Ibid.
58
http://www.hindustantimes.com/technology/gadgets-updates/
motorola-unveils-new-moto-g-and-x-smartwatch-with-flipkart/
article1-1260409.aspx, accessed on 21 November 2014
59
http://www.livemint.com/Industry/
fWmnYwZv46dUSxwwOzV61I/Everyone-hates.html, accessed on 22
November 2014
60
news/52428502_1_micromax-smartphone-segment-phone-market,
61
http://ibnlive.in.com/news/xiaomi-apple-of-china-to-make-
india-debut-on-flipkart-expected-to-launch-two-phones-this-
month/483005-11.html, accessed on 22 November 2014
62
news/52385706_1_flipkart-manu-jain-india-operations, accessed on
22 November 2014
63
http://gadgets.ndtv.com/mobiles/news/sixth-xiaomi-mi-3-flash-
sale-sees-20000-phones-sold-in-24-seconds-581964, accessed on 22
November 2014
64
http://tech.firstpost.com/news-analysis/after-xiaomi-oppo-
smartphones-to-be-sold-exclsuively-on-flipkart-231050.html, accessed
on 22 November 2014
65
http://www.thehindubusinessline.com/features/smartbuy/tech-
news/chinese-co-xiaomi-unveils-first-smartphone-in-india-priced-at-
rs-14999/article6189835.ece, accessed on 22 November 2014
66
news/54239217_1_canon-india-significant-data-analytics, accessed on
22 November 2014
67
Ibid.
68
Ibid.
S0218927518500049.indd 102 02-07-18 3:15:25 PM

69
dealers-threaten-boycott-over-e-pricing/articleshow/39678073.cms,
70
news/52428502_1_micromax-smartphone-segment-phone-market,
71
news/52687132_1_samsung-india-chief-market-share-handset-
market, accessed on 26 November 2014
72
goes-offline-with-mobile-phones/articleshow/42741523.cms,
73
Ibid.
S0218927518500049.indd 103 02-07-18 3:15:25 PM

104 ACRJ
Exhibit 1
Samsung Electronics — Achievements from 1997 to 2013
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7)7/&'PDUNHW
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'HYHORSHGODUJHVW79PRQLWRUDQGVOLPPHVW3ODVPD'LVSOD\3DQHO3'379
LQZRUOG
5HOHDVHGµ/LTXLG&U\VWDO'LVSOD\/&'79IRUWKHILUVWWLPHLQWKHZRUOG
'HYHORSHGVWHYHUVSHHFKUHFRJQLWLRQSKRQH
'HYHORSHGWKHZRUOG·VVW2UJDQLF/LJKW(PLWWLQJ'LRGH2/('IRUµ79
/DUJHVWPDUNHWVKDUHRIIODWSDQHOWHOHYLVLRQV
VKDUHRIJOREDO$FWLYH0DWUL[2UJDQLF/LJKW(PLWWLQJ'LRGH$02/('
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:RUOG·VODUJHVWFHOOSKRQHPDNHU
)LUVWFRPSDQ\LVWKHZRUOGWRKDYHIXOOUDQJHRI'RIIHULQJV
:RUOG·VODUJHVWVPDUWSKRQHVDOHV
Source: Prepared by case writers from different sources.
S0218927518500049.indd 104 02-07-18 3:15:25 PM

Exhibit 2
Launch of Popular Smartphones by Samsung Electronics in India
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Source: Prepared by case writers from different sources.
S0218927518500049.indd 105 02-07-18 3:15:26 PM

106 ACRJ
Exhibit 3a
Revenue of Samsung Electronics (India) and its Competitors
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(All figures in billions)

Source: Business Standard dated 21 November 2014, accessed on 30 November 2014 from
http://www.business-standard.com/article/companies/for-durables-indians-continue-to-trust-foreign-
brands-114112001519_1.html
Exhibit 3b
Profit of Samsung Electronics (India) and its Competitors
1DPHRI&RPSDQ\ ² ² ²

6DPVXQJ(OHFWURQLFV,QGLD
9LGHRFRQ,QGXVWULHV
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(All figures in billions)

Source: Business Standard dated 21 November 2014, accessed on 30 November 2014 from
http://www.business-standard.com/article/companies/for-durables-indians-continue-to-trust-foreign-
brands-114112001519_1.html
S0218927518500049.indd 106 02-07-18 3:15:26 PM

Exhibit 4
Distribution Structure of Samsung Electronics in India
KŶĞͲ>ĞǀĞůŚĂŶŶĞů dǁŽͲ>ĞǀĞůŚĂŶŶĞů
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Source: Prepared by case writers.
S0218927518500049.indd 107 02-07-18 3:15:26 PM

108 ACRJ
Exhibit 5
Blog-post by Nikon Advising its Customers Against Buying Online
Source: Blog of Nikon India Private Limited, accessed on 26 November 2014 from
http://www.nikon.co.in/en_IN/about/product_news.page?ID=templatedata/en_IN/taggable_content/data/
news/products/Flipkart-news
S0218927518500049.indd 108 02-07-18 3:15:26 PM

Exhibit 6
Launch of Moto G Through Exclusive Tie-up with Flipkart
Source: Times of India dated 6 February 2014, accessed on 21 November 2014 from
http://epaper.timesofindia.com/Default/ClientEpaperBeta.asp?skin=pastissues2&enter=LowLevel
S0218927518500049.indd 109 02-07-18 3:15:27 PM

110 ACRJ
Exhibit 7
Launch of Karbonn Models in Exclusive Tie-ups with Snapdeal and Flipkart
Source: Times of India dated 3 July 2014, accessed on 21 November 2014 from
http://epaperbeta.timesofindia.com//
Gallery.aspx?id=03_07_2014_018_003&type=A&eid=31805
Source: Times of India dated 4 July 2014, accessed on 21 November 2014 from
http://epaperbeta.timesofindia.com//
S0218927518500049.indd 110 02-07-18 3:15:27 PM

Exhibit 8
Launch of 2nd Generation Moto G and Moto X Models Through Flipkart
Source: Times of India dated 6 September 2014, accessed on 20 November 2014

from http://epaperbeta.timesofindia.com//
Source: Times of India dated 25 September 2014, accessed on 20 November 2014

from http://epaperbeta.timesofindia.com//
S0218927518500049.indd 111 02-07-18 3:15:28 PM

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ASIAN CASE RESEARCH JOURNAL, VOL.

22, ISSUE 1, 81–111 (2018)

HISTORY OF SAMSUNG ELECTRONICS

Samsung Electronics was part of Samsung Group, the largest

© 2018 by World Scientific Publishing Co. DOI: 10.1142/S0218927518500049

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financial crisis of 1997 pushed the company towards change

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SAMSUNG ELECTRONICS IN INDIA’S MOBILE

Samsung’s entry in India also coincided with India’s telecom

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With Apple’s iPhone launch in 2007, the mobile handset

S0218927518500049.indd 84 02-07-18 3:15:24 PM

REACHING THE CUSTOMERS

One of the reasons for Samsung’s success was the manner

S0218927518500049.indd 85 02-07-18 3:15:24 PM

necessitated due to post-2008 crisis wherein the company saw

ONLINE RETAILING IN INDIA

Over the last few years, India showed remarkable growth

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was still a small part (with estimates ranging from 0.1% to

S0218927518500049.indd 87 02-07-18 3:15:25 PM

retailing).20 Reliance Retail also launched its e-tailing websites

S0218927518500049.indd 88 02-07-18 3:15:25 PM

The splurge of discounts led to customers taking up

PROBLEMS DUE TO ONLINE RETAILING OF

The phenomenon of showrooming and practice of deep dis-

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Many consumer electronics companies saw sales slip-

S0218927518500049.indd 90 02-07-18 3:15:25 PM

long-term.36 More than 4,000 small offline retailers selling

RESPONSE BY SAMSUNG ELECTRONICS

Samsung initially did not provide an active response to

S0218927518500049.indd 91 02-07-18 3:15:25 PM

given them time till 15 August. If we don’t see any positive

Table 1. Price Comparison between Offline and Online Retailers

S. No. Brand and Models Online Price Offline Price

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RESPONSE OF OTHER CONSUMER ELECTRONICS

The rising channel conflict was handled by other consumer

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Arun Jaitley, India’s Finance Minister, in the July 2014 budget

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EMERGING TREND OF EXCLUSIVE ONLINE RETAILING

The conflict between brick and mortar retailers and consumer

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Following the footsteps of Motorola, Chinese handset

S0218927518500049.indd 96 02-07-18 3:15:25 PM

data was used by apparel and jewellery brands to plan new

COMPETITION FROM OTHER PLAYERS

Samsung faced increasing competition from local and inter-

S0218927518500049.indd 97 02-07-18 3:15:25 PM

category, the sales of which are expected to cross 80 million

THE WAY AHEAD

On 18 September 2014, Samsung announced its decision

S0218927518500049.indd 98 02-07-18 3:15:25 PM

S0218927518500049.indd 99 02-07-18 3:15:25 PM

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Samsung Electronics — Achievements from 1997 to 2013

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