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 report
 

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 clients.

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.

The turnaround
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.”

Bulls eye
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.

Gap analysis
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 force.”

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 this promise. 

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