17 January 2017 07:40:48 IST

Why Chinese electronics are selling like hot cakes

Xiaomi crossed $1 billion in revenues in India two years after selling its first smartphone here

Chinese products, once known as cheap and low-quality brands, are no longer perceived that way. From mobiles, TVs and refrigerators to fitness bands, brand China is giving its Indian counterpart a run for its money.

Last September, Beijing-based LeEco rattled consumer durables players with a flash online sale in the 4K high-definition TV segment. The sale of its 55-inch LeTV Super 3 series, priced at under ₹60,000, lasted all of three minutes, within which it bagged orders for 4,600 units and was stocked out for the day.

Homegrown giant Videocon reacted immediately by cutting the price of its 4K TV sets by ₹20,000.

In October, Chinese electronics firm Xiaomi sold more than half a million smartphones in less than 72 hours during partner platform sales, achieving an unparalleled industry feat. The company, also called the Apple of China, has crossed $1 billion in revenues in India, just two years after selling its first smartphone here.

“The early impressions about Chinese products were negative as lower-end items were coming to India. But China is now seen as a reliable OEM for some of the best brands globally. If China can make great products for big brands, it can also make a set of brands for itself that are good,” says Harish Bijoor, CEO of the Bengaluru-based brand consultancy that goes by his name.

Cost advantage

China has an inherent advantage due to its lower cost of manufacturing. But pricing is not the only area where these players have an upper hand. They are also focusing on product innovation. “We are into breakthrough technology and disruptive pricing in India,” Atul Jain, LeEco India’s COO for Smart Electronics had said at the time of the flash sale, reiterating the company’s focus on technology.

Companies such as Lenovo, Xiaomi and LeEco also regularly refresh their product portfolio, creating excitement for their brands.

Nirmalya Kumar, Visiting Professor, Marketing, at London Business School, says Chinese brands are following the Asian Tortoise Strategy just as Japan’s Toyota and Honda and Korea’s Samsung and Hyundai.

Tortoise strategy

“The basic principle is to enter with a decent product, sold initially at the lowest entry price possible. This cheap product provides access to price-sensitive consumers. Subsequently, the aspiring brand increases quality and price, attacks the next lowest segment, and so on up the market, until it achieves a dominant position,” he explains.

Eric Braganza, President of Haier India, says the perception of consumers towards Chinese brands is changing. “In the last two years, consumers have been perceiving us differently because of our high-end end products like side-by-side refrigerators, where we are as good as an LG or a Samsung.”

On the back of improved sales and acceptance of Chinese goods in India, Haier is now gunning to be among the top three brands by 2020. “We may have a 7 to 8 per cent share in refrigerators today, but we will take it up to 12 per cent by 2018. We have set up a ₹500 crore manufacturing plant in Pune and are determined to make a success of our brand in India,’’ he adds.

(The article first appeared in The Hindu BusinessLine.)