The Cell Theory

I actually hate to start writing anything about consumer electronics, my opening lines sounds very much like some story going ‘In our times….’ It makes me feel like a Paleolithic specimen on his way to the museum of natural history.

But I guess the rate, at which electronic products and consumers for them are evolving; it does seem like too much has happened already. The telly had a belly like tube, which got flat, became a size zero with plasma and TFT and now works on LEDS. Radio forgot what Short Wave is. Letter Writing is now a literary art form as just about everything today is SMS Lingo (Save Money by Slang)

If there every is a Demand curve plotted for all consumer electronics, I am confident what will be the steepest category. Cell Phones!!! There will be no other product in India which has the level of desire, acceptability and affordability like a Cell Phone. As a vertical open to access for all, cell phones in India are only 15 years old. (Deregulated outside Government Agencies only in 1995) and till February 2010, there were 564 million cell phone connections in India- that’s almost half of our population.

If first impressions are anything to go with, it was a luxury item that cost Rs.17 even if I would have accepted an incoming call- today it has come down to 1 paise /second. But that is what we would say in management terms is the operational expense; what about the capital expenditure. I feel this is the place where the game has changed majorly.

Recently I came across an article in Business Standard which said the handset market is worth Rs 50,000 crore in India. Wow!!! 5 followed by eleven 0’s…. that’s sleek. What’s more, the number of handset providers has gone up from 5 in April 2008 to 30 till March 2010, one new manufacturer has come in to the market every single month. What’s more, The Union Budget 2010 has relaxed the burden on Indian manufacturers- so more could just be around the corner.

Now I can understand, there are going to be names we have not even seen or heard of much. Lava, Benq I have so far only seen on outdoor hoardings. Karboon, Maxx, INQ, Spice, Micromax have moved into the mind space only after their mega sponsorship stints. But that has been just the tip of the ice berg. I really am not sure if anyone has even heard of Oilve and Airfone.

We are seeing the entry of big shots like Videocon, Onida, Acer and Asus: all with strong backgrounds in other electronics come into cell phones. But how about Luminous - a power and energy storage company - into the mobile handset market; coz that’s what has happened as well. All these new home grown entrants are giving tough competition to well entrenched players - Nokia, Samsung, LG and Sony Ericsson - in terms of price, features, models and services.

In fact the biggest loser has been Motorola; no new model since 2008. I can’t even recall its last ad- MotoRocker was it???

As I said earlier, it is desire, acceptability and affordability that are driving demand today. We always say that innovators have the advantage of being first. But there is a flip side- others can learn from you and your mistakes take advantage of them and make hay in the market which the innovator has spent years to build.

Desires have changed over the years. It is not limited to communication any more. My Dad’s first cell was a Nokia 2210. It was like a bulky and robust brick. My first handset a Sony Ericsson T100 doesn’t even excite my 3 year old nephew as a toy thanks to its’ mono-colour screen and ringers which sound like- well a cell phone ring…To be completely honest, no buyer from any part of India will be happy today with just a phone to talk.

Desires are driven by your level in the pyramid. Not even a first time user will like a phone which does not have a coloured screen, FM Radio/MP3 playback and funky ring tones. If you are not a first time user, a camera, GPRS capability, Bluetooth and expandable memory become basic. Collegians are now driven by the widgets and applications, young professionals want a QWERTY keypad and Managers want to have cell phones that can become an option to a computer.

Manufacturers have recognized this trend; one reason why these new entrants always talk of the pain points of previous users. Just run a check on how many high end models Videocon has on the platter as a new entrant.

Cell phones have today been accepted as a need and no longer a luxury- of course, I still believe a VIRTU at Rs. 5.5 lacs is one. In many ways, it has replaced the concept of a landline at home. As for affordability, you can get a decently loaded cell phone for Rs 999.

So after all this fact findings, the usual question I love to ask- where next??? Cell phones have affected sales of wrist watches, alarm clocks, calculators, calendars, flash lights, cameras, and portable music players. They have killed the digital diary and business organizer.

Considering we still finding new uses for this small screen each day I feel the next victim is either amongst the TV or the Computer, That’s my Cell Theory….