Change the game
An innovative marketing approach, state-of-the-art products
and right pricing have enabled Samsung to emerge as a market
leader across segments. Mayank Singh and Visvas Paul D Karra
Ajay Ganti, CEO, SARCO has a problem on his hands.
Surprisingly, while he is working overtime to resolve the issue
he also seems to be quite pleased with the situation. As we
settle down for the interview, Ganti shares his predicament –
the response to the recently launched Samsung Galaxy S III
mobile phone has been so overwhelming that the distributor is
running out of stocks to satisfy the market’s insatiable demand.
So while he requests Samsung to ship additional supplies, he is
rationing the available stocks amongst retailers and corporate
This is not the first time that SARCO, the official distributor
of Samsung audio visual, mobile phones and home appliance
products in the Sultanate has stuck with a problem of plenty.
The company has been on a roll for the last four-five years and
the numbers speak for themselves. Samsung is arguably the market
leader in televisions, home appliances and mobile phones. It
enjoys 38 per cent marketshare in televisions, 40 per cent in
smart phones, 30 per cent in mobile phones market and above 40
per cent share in certain home appliance categories. SARCO is
also a franchisee of other leading brands like Citizen, Casio,
American Breeze, Q&Q and Severin.
The company’s success has not gone unnoticed. Microsoft
announced a distribution pact covering its Original Equipment
Manufacturer (OEM) and commercial business for Oman with SARCO
in May 2012. Under the terms of this partnership, SARCO will be
responsible for steering the reseller business, increasing
Microsoft OEM product revenue and supporting the development of
the local channel.
SARCO’s success though has not been achieved by sudden
flight. When Ganti joined the company in 2006, Samsung was not
even amongst the top five brands in either the audio visual (AV)
or home appliances (HA) categories. The brief given to him was
simple – reinvigorate the company. Amongst the first decisions
that Ganti took was to get out of the furniture business, as he
did not see it synergise with AV and HA business. Says Ganti,
“Office furniture used to share showroom space with AV and HA
products. We had good products and LCDs were catching up and as
Samsung was the world leader in LCDs we could see the potential
in the market.”
Then SARCO used to grow at a leisurely rate of 5-10 per cent per
annum; but in an effort to scale up the business, Ganti set a 50
per cent growth target in the very first year. While this came
as a shock to most of his colleagues, they gradually started to
believ in his vision. “It was important to scale up the topline,
as one can always manage the bottomline with better
efficiencies.” To back this vision and to increase visibility
SARCO allocated an aggressive advertising budget in 2007. The
company took up an annual advertising contract with leading
publications like Oman Economic Review, Times of Oman and
Thursday magazines for the whole year.
The other priority was to strengthen its distribution channels.
Though Samsung was retailing at stores like LuLu, Carrefour and
other outlets, there was a feeling that big format retailers
were doing Samsung a favour by displaying its wares. “We
convinced our retailers that we will add value and increase the
overall size of the market,” says Ganti. The company did a
market mapping to figure out prime and peripheral areas, its
strengths and the scope of growth. “It was all about getting the
four P’s -- price, product, promotion, and place right.”
The 32 inch LCD TV was identified as a flagship product and
the company worked on a calibrated strategy to increase its
visibility and presence. In LuLu, SARCO identified unused areas
like aisles and convinced the retailer to lease them out to it
for product display. “The aisles were active areas and when
people walked through them they noticed our products, and these
unused areas in turn became a source of rent for LuLu.” The
company also used the Samsung branding on the stairs between the
two escalators connecting the ground and first floors at LuLu.
In another significant move, it started using a cluster display
for Samsung products as it helped customers to make an informed
choice. In addition the company wanted its products to be
displayed at the eye level. This was a mould breaker as TVs used
to be sold stacked on shelves from the ground to the ceiling.
Says Ganti, “As most people use their TVs at the eye level, it
helps customers to get a more realistic feel about how the
product would look at home.” SARCO employed dedicated sales
staff on the shop floor who gave an informed demonstration of
the product. The stress was on highlighting the strengths of
Samsung products while not de-selling other brands.
In 2006, AV products in Oman were priced at around 10 per cent
higher than the regional market (to compensate for lower
volumes). SARCO did away with this disparity by pricing its
products at the same level as the other markets. Thus customers
got to buy products at never before prices. The efforts paid off
in a big way. “From 2008 onwards we became the No 1 in the LCD
market and our share has never dropped below 50 per cent. Though
our competitors have become aggressive in the last two years,
our value share of the market has actually gone up,” says Ganti.
The company identified gaps in various other product categories
to consolidate its presence. For example, in the HA market,
SARCO realised that it was weak in the air conditioners, which
accounted for 50 per cent of the HA market. It’s Korean rival LG
accounted for almost 50 per cent of the market. SARCO started
consolidating its presence in the B2B market by tying up with
contractors. A big breakthrough came in 2008 when it got a bulk
order for supplying 1000 window ACs, and since then there has
been no looking back.
In a price sensitive category like refrigerators, where a five
to ten rial difference could sway a customer, SARCO found that
most of the competition was in the 300 litre segment and it
started focussing on the 200-300 litre segment. Secondly, while
its competitors were focussed on Carrefour, Samsung started
concentrating on LuLu, KM Trading and Safeer hypermarket to
diversify its presence. Similarly, in the mobile phone market,
which was dominated by Nokia owing to its low-value products
(with an average sale price of $50), Samsung started focusing on
the mid to the smart phone end of the business, which was priced
at RO40 ($100) and above. It also took up exclusive mobile
kiosks at LuLu and the phones were priced at as close to the
grey market as possible. The company today has 25 standalone
mobile kiosks and is planning to increase this to 50 by the end
of this year.
The company has invested RO100,000 in a 1,100 square metre
state-of-the-art service centre in Ghala. SARCO has opened a
service centre in Sohar and its facility in Salalah is being
upgraded. All Samsung products come with a five-year warranty
and the company is working on providing the best in class after
sales service. The company has also invested in training and
developing its Omani workforce over the last two years. Says
Ganti, “We have more Omanis than expatriates in our sales
SARCO has also rode the wave of Samsung’s global success. Moving
ahead the company wants to strengthen its retail presence across
the country, decrease its volume dependence, enhance its value
share of the market and be a one stop shop for consumer needs in
the AV and HA business. If the past success of SARCO is anything
to go by, one can rest assured that it will surely deliver on
May - 2013
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