Consumer electronics major Samsung Gulf followed the 'bottoms up' approach last year to achieve stability and growth in its audio and visual business. This helped the company to focus on its business channel from the bottom, which is the retail business along with their distributors.
UAE continues to be the top performer in the GCC market for Samsung with a contribution of over 40 per cent to its audio and visual business. Television is the biggest contributor to its sales along with DRAM chips and mobile phones.
Emirates Business spoke to Ram Modak, Head of the AV division at Samsung Gulf, to learn more.
Could you throw some light on your bottoms up approach?
Within Samsung, it was decided last year to prioritise investments like all the other companies during the crisis. Earlier, there was never any debate on calculation of return on investment. Therefore 'bottoms up' approach helped keeping a count on the marketing dollar making sure the basics are right before investing advertising dollars. The relationship with dealers was also re-looked as it was not about just buying from the shelf but also creating profitability.
Bottoms up meant balancing the dollar, because in the boom years, investments were made in everything, and which is why Samsung are still the largest advertisers. Therefore, internal discipline was brought in with this approach.
Investments were made in creating the right experience before consumers come into stores.
Does that mean you expanded on your retail front?
It was clear that customers did not want the small retail stores which is why they have dwindled away. The industry has moved from a small format to a big box set up. Customers are more comfortable to see products together under one roof.
Therefore, Samsung has partnered with distributors to set up its own stores in addition to the retail outlets from channel partners. It is no more about the number of retail outlets but what is being done in these stores. Even as brand owners, we are getting into details of retail, which was not there earlier.
Samsung's brand store in Dubai Mall is not for commercial purposes, but is just part of the business model. Therefore, we focus on doing more of non-commercial activities with our distributors and retailers.
Even in terms of presentation, the company took efforts on particular products, which sold less.
As a company, we realised that the objective of the distributor and the manufacturer are not the same. Therefore, we need to work with the retailer on a long-term strategy.
This change in business strategy was to give attention to detail and every dollar its importance. Its not that we were wasteful or negligent earlier, but had to create internal discipline. The situation last year also demanded this as there was a lot of uncertainity in the market.
In spite of tough times, you claim that Samsung grew in the Gulf. Any particular factors that maintained growth?
Samsung has come a long way in consumer electronics business. In digital cameras, for example, we have been present right from the floppy camera days. For the consumer electronics, the biggest growth area is television, in keeping with the scenario of over 50 years. This has been a major growth area and consumers in the Gulf have moved towards super slim and LCD TVs.
Studies have shown that the second or third television is no more a luxury but a want. In the UAE particularly, the population has doubled in the past few years and has added to our business. Incomes have also gone up along with lifestyle.
Another uniqueness is the young population. The region has the youngest population in the world. They are very focused on the style and form factor of the product. This has given customers access to mobile and still cameras at an early age. This purchase also translates into other product categories. The crisis did not make a major impact as the customer would have just shifted from a 46 to 40 inches TV.
Have you seen a change in consumer mindset?
The consumer mindset has definitely come back and in the Gulf the euphoria was ahead of the consumers. They always want something more rational, therefore they have never hesitated to put in money.
This was one reason we chose to launch the LED TV last year, which contributed 15 per cent of revenues in the first six months of the launch in the region.