Poco on hardware commoditization, price fluctuations, ‘phone plus ecosystem’ plans and learnings from Xiaomi | EXCLUSIVE

‘Brands that are flooding the market with multiple launches lack conviction, playing guesswork.’

Two years in, after becoming an independent brand, Poco has had what you can call a “surreal” journey. It has not been easy but whatever it is that it has been doing on its own has seemingly worked out well. And the numbers speak for themselves. The Xiaomi spin-off has sold more than 12 million phones so far and became the number 3 smartphone brand online, all while sticking to a “lean and mean” product portfolio in the middle of a global pandemic and amid burgeoning competition.

The market is not the same as it used to be, two years ago. Supply constraints are making product decisions tricky. Price fluctuations are here to stay, for some more time. The stakes have never been higher. Even as rivals resort to throwing everything but the kitchen sink at buyers, today, launching one phone after the other sometimes with barely any differences, Poco has been taking a different approach.

At Poco, every device must have a clear purpose, have conviction so as to provide enough value –at its price — in sharp contrast to the “guesswork” that every other brand seems to be doing currently. In an exclusive interview with Financial Express Online’s Saurabh Singh, Poco India country director, Anuj Sharma, spills the beans on what it takes to be an independent brand in 2022, while providing key insights on hardware commoditation, pricing strategies, “phone plus ecosystem” plans and learnings from Xiaomi. Excerpts.

– The Poco India 2-year report card.

Born in the pandemic, pretty much, and lived through it — that has obviously been very interesting. Right from the beginning, the team has been extremely focused on having a lean portfolio. I do not think that’s changed. I do not think we’re going to change that even this year. In a couple of places, we’re trying out something [different]. We launched the Poco M4 Pro and M4 Pro 5G almost together giving people [multiple] options and looking at the consumer reaction, hopefully we’ll be able to move into one direction over the other.

Awareness [for the brand] is obviously building. When we started off, it was mostly the South and the Eastern markets. We have started making inroads into the North and the West. Almost every series that we have launched has done well. Even last year, the C3 and M3 were one of the top-selling devices online. At that same price point, most of the other brands put in almost 5-6 devices but because we stayed focused, we were able to do some big volumes.

From a brand perspective, also, we’ve switched gears. Poco started off as a very functional brand with the “everything you need, nothing you do” philosophy. We’ve gone beyond the functional bit, now, and we’re talking a little bit more towards what the core audience that we were looking at is also interested in while doing our own thing.

– The market is greatly commoditised today — your take?

There are only so many parameters that you can play with. Your task is to make the best out of them. If you try to cook with five ingredients, you will only go so far, but the outcome can be different. Platform sharing is there. If you want a product at around Rs 20,000 and if you want 5G, you essentially are down to three chips — Snapdragon 695, Dimensity 810, or Dimensity 700. From a Qualcomm perspective, also, it’s a tricky one. Whether you want the SD695, or you can try out the 750G or maybe even the 765G. The newest chip off the lot is the SD695. It’s 6-nanometers. If we go from SD695 to the next right option that’ll probably be the SD778G, then we’re also taking the price [of the phone] up by almost Rs 5,000.

– How hard is it to resist the growing trend of flooding the market with multiple products for you?

It’s not very hard. Frankly, if you can not choose between what should be the right option for consumers, then you do not know enough about the market. Then you’re just playing guesswork and you are trying to cover your bases, so you want to [bring] one phone at Rs 11,000, one at Rs 12,000, another at Rs 13,000, Rs 14,000, Rs 15,000… Rs 18,000. There’s no end to it. You must have conviction in your product that even if it is, say, at Rs 18,000, while you know there are products at Rs 16,000 and Rs 17,000, are you able to draw consumers in and provide enough value. And consumers have that flexibility. Nobody walks into a shop and says their budget is Rs 17,990.

– Price increase is unavoidable today. Do you think it’s here to stay?

I will not call it price increase alone. Price fluctuation probably will be the right word and we will continue to see it for some more time because of the uncertainty that is there in every aspect, currently, whether it is the semiconductor supply, logistics, or exchange rates. Sometimes everything else aligns, but then the supply disappears. Sometimes your supply is there, but the US Dollar starts rising. So, we will continue to see those fluctuations but at the end of the day, the pricing acceptance is always decided by the consumers. They will choose whether the price works or not.

– Is there a need for consumers to adapt and set their expectations accordingly?

They should be prepared for it. For anything, not just phones. What all this [pandemic and uncertainty] has done is thrown some of the older learnings that all of us used to have in the industry out of the window, so you also have to be quite flexible and be ready for anything.

– Do we need to set a new definition for budget, mid-range and other segments broadening the price points a bit further?

I think yes. The Poco F1 was the perfect flagship killer for its time (in 2018). That was at Rs 22,000. Today, we’re seeing flagship killers as a tag being given to products that are at Rs 40,000. So, in three years we have basically doubled that definition. I am assuming, those who are reviewing those devices are also looking at how their subscribers are reacting to them, and it’s changed. Whether consumers want that flagship killer, there is a similar demand, that is debatable though.

– How are you adapting to all this whether it be in the choice of products you bring, how you price them, and marketing?

We are still sticking to what we think a particular series should be doing. Then you can set out to build the best possible product that you can. If the prices are going up that basically means that the product price will also rise. The market average selling price (ASP) has gone up over the last two to two and a half years. What was probably at Rs 13,999 is easily at about Rs 17,999-18,999 today. The consumer has also moved along with that. You just need to be constantly looking at that data and adapt accordingly.

– Does this limit your scope to experiment with more products?

Probably a little bit and I think it’s not just the pricing part of it that limits what we can experiment with, but limited platforms (also) means that we can not tweak around so much. In 2020, we were able to get Qualcomm to give us the SD732G. Last year, we were able to get the SD860 for the Poco X3 Pro. Right now, Qualcomm has the SD695 and after that, I think they have the SD778G which is at a higher [pricing] spot and that’s about it. It does make it a bit more limiting, but I think it can still be managed. There’s enough scope that if we stay true to what a C, M, X or F series stands for, we can still adjust to the market inflation and how the ASPs are changing without really compromising too much on the core value that each of these series has and continue to try out new things in that. We might not be able to tweak too much in terms of the chipset, but maybe we can tweak in terms of design or the media experience.

– Is the market back to pre-COVID-19 level confidence? How are you placed?

As a brand, we do not know what living is without COVID. We will have to learn. Once people get out and about, we are hoping that they will appreciate our batteries even more. The world has not completely switched back to the pre-COVID levels yet. Maybe if things stay okay in the next couple of months, we should get an idea. That’s from a consumer perspective. From a supply perspective, I think there is still uncertainty. Because of the geopolitical situation in Europe, we do not know what the exact impact would be. The first impact could be on the raw materials that come in from that region going in to form the silicon substrates. We’re not sure when that effect will come into play, if any.

– Being spun-out of Xiaomi, what are some of the learnings you’ve taken from it and how much of it do you apply in your core business choices?

I think a lot of the core DNA, what Xiaomi was earlier, automatically got built in [to Poco]. In today’s world, without the purchase power or the muscle that is required, the table stakes are so high that creating a new brand is almost next to impossible. Surviving on your own is very tough. While we have been working as an independent team making our own product decisions and portfolio decisions and what we should be bringing to the market or not, I am thankful that we kept the base procurement team at the Xiaomi group. Otherwise, it would have been very difficult to survive considering what all has happened in the last two years.

– What are your expansion plans in 2022 — product side, sales side?

Flipkart has been a tremendous partner. They’ve been both business partners and guides. They keep telling us that we need to do a lot more, so we have not really hit that saturation point there. We’re not in a hurry to expand just for the sake of expansion. We still have to solve for places, regions and continuously take those learnings to ensure that Poco as a brand is known well enough. From a channel perspective, we’ll probably take things a little slow. We do not really have to move too quickly.

From a product perspective, we’ve just been doing phones. We’ve been wanting to do a lot more, but it’s been quite tough. We’ve been trying to do true wireless earbuds (TWS). Forget TWS, there is no Poco headphone in the market. We’re not selling chargers as well. There is a lot of expansion that’s still required to build a “Phone Plus ecosystem”. All the things that you need with the phone, whether it is audio, protective accessories, power accessories, or maybe even fitness accessories those are the areas that we’ve been looking at. We’ve just not been able to get all those things lined up in the right sequence.

– Do you have any plans to showcase your products at Xiaomi offline stores?

We have discussed it with the Xiaomi team. But we need to follow certain brand guidelines from the Government of India. Xiaomi works as a single brand retail trade channel which means they can only have Xiaomi products, so that is a limiter.

– How bullish are you about 5G?

I am cautiously optimistic about 5G. I do not think it’s going to be what a 4G was to 3G. When 4G came in we already had use cases like all of us were already watching videos on broadband or in office. We moved a lot of those things that used to be PC-only to the phone, and we could do it anywhere. With 5G, I am still missing the key use case. Secondly, it’s the technology limitation itself. Even with 5G coming in, we will still have to have a fall back on 4G at least 80% of the time even in cities. So 5G plus 4G will stay pretty much like how 3G and 2G were staying. Hopefully we will see some good use cases [soon]. Right now, at least, I am not really seeing that.

– Some of your colleagues are coming on stage and saying smartphone innovation is dead — your take?

The evolution has become a lot more refined. It’s not as big a step that we would probably see in the early years. And that’s the case for everything. If we look at Android or iOS, also, for the first few iterations, there used to be big, massive changes. Slowly it’s become more of the under the hood kind of optimization and refinements. That’s exactly what’s happening with phones. Smartphone innovation is not dead. Maybe that’s moved to your foldables and things like that. But from my experience, I think that evolution is still happening, and the market is still growing. A lot of the times, it will be the use case that will define what hardware should do.

Also Read | ‘Poco X4 Pro 5G is not as powerful as Poco X3 Pro and that’s okay’ | EXCLUSIVE

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