Disclaimer: This is an example of a student written essay.
Click here for sample essays written by our professional writers.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com.

Spice Mobiles: Sales and Distribution Strategy

Paper Type: Free Essay Subject: Marketing
Wordcount: 3392 words Published: 10th Jan 2018

Reference this

Indian wireless sector has been an epitome of growth and success story all along as the cellular subscriber base increased from 1.9 million as on March 31, 2000 to 584 million as on March 31, 2010. As the sector has matured, the baton of growth has been passed-on to novel concepts such as Telecom Infrastructure Companies (commonly known as the ‘tower companies’), Value Added Service providers (popular application being ‘Caller Ring Back Tone-CRBT’) and more recently the “home-grown” Mobile Handset (HG) players.

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!

Essay Writing Service

The Indian Mobile Handset Market is dominated by established international brands such as Nokia, Samsung, Motorola, LG etc. Nokia has been a clear market leader followed by Samsung, a distant second. There has been a continuous jostle for the third position with players like Motorola, Sony Ericsson, LG vying for the spot. Apart from the braded cell-phones, the market is also flushed with cheap, unbranded imported mobile phones that get routed through grey markets to reach domestic consumers (most of these unbranded mobile phones, hitherto, were without any International Mobile Equipment Identity (IMEI) numbers).

When mobile phones were introduced in India in the mid-90s, US based Motorola, Sweden’s Ericsson and Finland’s Nokia dominated the handset market in India. Over the years, the old order has changed. Asian players like Samsung and LG, European brands Philips and Siemens now compete with Motorola and Sony-Ericsson. Now with the emergence of local players like Micromaxx, karbonn and Spice etc., the competition has got all the more intense and the fight for consumer’s pocket has increased. Nokia, the undisputed leader is now challenged by local players like Micromaxx which has replaced Samsung to become the third biggest mobile selling vendor in the country. If we look a bit deeper, it’s not only the price or technology, but the reach of these new players in terms of distribution that has given them such a big chunk of the market and that to so soon!


Given the backdrop of the growth in the domestic wireless subscriber base coupled with no dominant mobile handset player in India apart from the international brand, Nokia, provided business opportunity for Indian firms to take a plunge into the market; thus, the creation of HG players including Spice Mobiles, Micromax, Karbonn, Lava, Videocon etc.

The business model followed by most HG players is relatively simple. These players have research and innovation teams that provide India-centric design specifications to contract manufacturers in neighbouring countries of China, Taiwan etc. These phones are shipped to India which are then routed through the domestic distribution channel for sale in the domestic market. Time-to-market from design-to-production-to-end market is critical in this sector as such players have set-up three-layered distribution system that includes regional distributors to support micro-distributors that in turn service the retail outlets.

The initial part of the success of HG players was largely attributable to the price-elasticity of demand prevalent in the Indian market. These players provided phones loaded with various features at an affordable price. Other key aspect of the strategy followed by these players was to initially tap the rural markets where consumers are relatively less brand conscious and more price conscious. We believe it was not just the price differential that made these players tick; the “home-grown” players provided innovative offerings to rural markets (such as multi SIM handsets, mobile phones with 30-day battery back-up) that provided value-for-money rather than mere price-differential – a key success mantra to tap the ‘fortune at the bottom-of-the-pyramid’. (Hitherto, the key market segment for these players)

The inflection point for the growth of HG players in the recent times also came from the directive from the Government of India to bar handsets without IMEI numbers to be used in India. These handsets were a direct competition to the HG players and a ban on them provided huge growth opportunities for these players. Encashing on this opportunity, the HG players have grown from strength-to-strength and are slowly but surely cementing their place in the Indian Mobile Handset market. Attuned to its primary market segment i.e. Tier-I and Tier-II cities, the marketing by HG players were hitherto more of the ‘push-strategy’ whereby greater pass-through margins were given to Distributors and Retailers. However, off-late they have also initiated the use of ‘pull-strategy’ by venturing into brand building initiatives such as roping-in of brand ambassadors and sponsoring of sports tournaments. We see these initiatives as a prelude before venturing into more lucrative urban markets. However, going forward the HG players shall have to contend with various challenges such as to constantly invest on innovation and brand building; to build and strengthen their distribution network & after-sales services; to move-up the value chain both in term of technology (providing 3-G Technology, QWERTY format phones) and markets (from Tier-II/ Tier-III segments to Urban markets) and to counter direct competition from Chinese players who are looking to set-up shops in India. Here in this study, we will discuss the key distribution strategies and challenges of one such home grown player – Spice Mobile.


The distribution of mobile phones varies considerably from that of other consumer electronics and appliances such as LCD TVs or Air conditioners. This is because the pace of sales of mobile phones is a lot faster than the other consumer electronic goods. Also, the physical size of the products also is a factor. The mobile phone, being a quite fast moving product, hence is not handled by the distributors handling TVs and audio products or washing machines and refrigerators. Hence the supply chain management and logistics management of the two product’s distribution becomes very different. The great Indian mobile revolution is all set to move to the rural part of the country, with handset manufacturers gearing up to come out with market-specific products to acquire maximum share. The next big opportunity for telcos will be in the hinterland where two-thirds of the country’s 1.17 bn population lives.There are many factors driving handset manufacturers and operators to the rural market. Though India is emerging as one of the biggest telecom markets, metros and tier-2 cities are already reaching saturation point. Hence, companies have no option but to explore newer markets to sustain the growth. As of now, India is adding around 9 mn subscribers a month, and in June 20010 the country added 11 mn subscribers.

E.g. if we look into Samsung India’s distribution chain, we find that every Samsung product other than the mobile phone (and IT products, which again has a different distribution chain) are distributed by the same wholesaler. For mobile phones, there is a totally different Distribution. This is a result of the above two major factors (pace of sales and physical size of product).

Example: Distribution of mobile phones by Samsung

The Distribution of Samsung mobile phones is divided by zones primarily. This strategy is more or less similar for all major mobile phone manufacturing companies. The northern region, comprising Jammu and Kashmir, Punjab, Haryana, Himachal Pradesh, Uttar Pradesh, Delhi, Uttarakhand and Rajasthan, have four distribution partners for Samsung Mobile. Now for better reach and response to consumer demands and to cater to them efficiently Samsung are looking to add five more distribution partners to the Northern Region. Samsung has recently strengthened its distribution network in the country by appointing SSK and Link as its distributors for mobile sales in the Western and Eastern part of the country, respectively. The company already has Telemart and United Telelinks as its distributor in the Northern and Southern parts of the country.

There are usually two distributors between the company (Samsung Mobile) and the retailer. E.g. there is a chief distributor for the products for the western zone. Under that distributor, there are other wholesalers for the mobile handsets which are usually for particular cities in case of cities with considerable size and market. E.g. Ahmedabad has two distributors which supply to the retail firms in the city. While some of the smaller cities/towns have a distributor in common. Also, some of the premium retail firms might buy directly from the chief distributor (only if the quantities justify it).

Example strategy: Franchisee retailers

Also, Franchising Strategy for some companies has also helped in driving sales and profitability. E.g. Nokia Priority franchisee showrooms. Nokia has setup priority dealers to boost growth in organized trade. The following have been the benefits for Nokia as a result of the success in franchisee retailing:

Positive brand experience across segments in a controlled environment

Channel drives retention for Nokia – ‘Win the war before the battle’

Positive retail experience drives higher avg. selling prices

Harnessing entrepreneurship spirit of franchisees

Retail space investment by franchisee

Nokia drives location selection, branding & merchandizing support, media support

Tackles fakes effectively

The Value contribution to Nokia by Nokia Priority dealers in 2007 was around 10% of the total revenue generated by Nokia in India. It is expected to be around 20% by 2010.




Mobile Devices

National Distributor


Retailer/ Key Account

When we contacted retail outlets like Hotspot, The mobile store, which comes right before the end user in the distribution system, they gave us similar details regarding the channel members which are above them for various hand set providers. This information was further substantiated by visiting the redistribution stockists of companies like nokia, samsung, LG, spice etc. However, although the above structure is pretty common in industry, the Indian players like Spice, Micromax etc have gone away with the concept of national distributor. We will discuss the implications of this decision by taking Spice Mobile as our information source.


Nokia India(ND)

HCL India(ND)

Bright point India(ND)

GSM Handsets

South and west India

GSM Handsets

North and East India

Margin 3.5%

CDMA Handsets

National Distributor

Margin 3.5%

Redistribution Stockist

Pan India

150 Nos

Margin 2.2%

South and West India

90-100 Nos(Urban+rural)

Margin 2.2%

Redistribution Stockist

Redistribution Stockist

North and East India

90-100 Nos(Urban+rural)

Margin 2.2%

Micro Distributor(Rural)

500 Nos

Margin 3%

Retail Outlets (includes Telecom Outlets, Electronics Stores, Nokia Priority Dealers, Key Accounts, Modern Trade, Operator Stores)

100,000 nos. (Nokia has a numeric reach of 99% and a weighted reach of 99%

Margin 3-5%


This is the flow of goods from the production/assembly units in china and Malaysia to the end user. For Nokia, central warehouses are located in Mumbai, Chennai and Delhi, which then transfer handsets to regional warehouses, typically 1 in each state. From these regional warehouses, handsets are then transferred to the redistribution stockist wherein the actual sales to retailers happen mostly on ready stock basis.


For Nokia, the last level in its sales force is Area sales manager. Earlier, they used to have sales officers and sales managers under nokia’s direct control and pay scale but now these two profiles have been shifted or in some cases omitted to/by distributor. Sales executives, ISD’s all are on the pay scale of distributors.


After sales Support

Centralized Repair Center

Modern Trade

State/Regional Distributors

Located in Delhi

Company operated request


Directly by Spice Mobile

Dedicated sales team at regional level

Margin 6-7%

Pan India

56 Nos (state wise)

Margin 2.2%

Micro Distributor (RDS)

500 Nos (Tier2, Tier3 cities)

Margin 6%

Authorized regional repair center (ARC)

Central distribution and collection center for parts and faulty handsets

32 (in each state)

Authorized service center (ASC)

Multi brand service centres

Total 76 in number across India

Retail Outlets (includes Telecom Outlets, Electronics Stores, Hotspot Dealers, Key Accounts, Modern Trade, Operator Stores)

50,000 nos.

Margin 3% atleast rest depends on consumers bargaining

As opposed to other competitors, the differentiating factor about spice distribution chain is the removal of one layer in the distribution chain, namely the national distributor level. They distribute their products directly to regional distributors, who in turn distributes to the micro distributors and then, to retailers. Micro distributors provide the extensive reach to them as they have strong presence in the rural areas/villages where they operate.

Find Out How UKEssays.com Can Help You!

Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.

View our services

The key advantage of operating such a structure according to our discussion with Spice sales team is the margins that the national distributor makes, which can be passed down the chain to the regional distributors and retailers. This results in higher profitability for channel partners ie. regional distributors, micro distributors, retailers, which in turn results in them being more aggressive in promoting the Company’s products to its customers.

The entire warehousing and distribution management has been outsourced with effect from 31st October, 2005 for the period of 5 year to AFL Logistics, a division of AFL Pvt. Ltd. (‘AFL’), one of the logistics management companies in India, which is responsible inter alia for shipment of goods to regional distributors through its controlling warehouse based in Delhi.


Now let’s discuss in details the various function of channel members

Company: Spice mobile manufactures the goods in Himachal plant or assembles them once procured from China and send the same to the distributors. The logistic partner (AFL) assist the company in the same. The company does the negotiations and promotion activities on its own. The credit and payment policies are also handled and negotiated between the company and distributors. Also company directs certain promotions to retailers.

Regional Distributors: Ownership is transferred once invoice is generated by spice to state/regional distributors. They transfer the products from company to distributors. They basically take order form the distributors and provide them with the products. They bear risk and negotiations are also handled by them. These parties absolve company from appointing more personnel and funds for the activity of mere transportation and inventory holding from warehouse to the distributor.

Micro Distributors: They are the primary buyer of company. The sharing of information, risking and payment are carried out between regional distributors and distributors and then between regional and company. Distributors provide market coverage to the company also create orders. In Spice mobile, promotion activity is carried out by distributors.

Retailers: They usually undertake all the functions and transfer the physical possession and ownership to customers. They usually only perform promotion along with company, for rest of the function they interact with distributors. They act as the final source of information and payment to the company.


Regional distributors/Stockist

Stockist / Micro Distributor



Involved in the business of re-distribution to authorized micro distributors

Responsible for warehousing, transport of goods to next tier and payment collection

May be non-exclusive, but have separate set-up for each business

Involved in the business of re-distribution to wholesalers and retailers

May be exclusive to the business

Includes all classes of retail outlets

Involved in counter sales and not in the business of redistribution

Not required to be exclusive to the business


High financial strength with ability to hold stocks

Infrastructure – Office, IT capability, godown space

High financial strength with ability to hold stocks and provide credit in the market

Infrastructure – IT

Limited spend on localized sales & promotion

Appropriate store location and size



Multiple Micro distributors in a given territory

Having multiple distributors in a territory can spell problems for the company because when two or more distributors supply to the same retailer it can cause disputes. Also the distributors do not pledge loyalty to the company. This problem is faced in dense markets like NCR where distributors are very closely located. Like in Gurgaon sector 14 market, spice distributor itself is doing retailing as well although there are other retail stores in the market whom he himself sell! There is a clear limited control over distribution; i.e. spice people cannot take action against any non performer or in some cases high performer doing some leakage in the system.

The company does not have any MIS at the distributor level

The company does not have any MIS at the distributor level where it can measure the sales done by the distributor. The distributors have their own software in which they fill in their sales of a period and send it to the company. Thus secondary sales are not captured frequently and spice is dependent on distributor for this data. It seems spice is not at all interested in tracking the final sales.

There is no clear cut liability of goods damaged in transportation

As told by the distributors, there is no clear cut rule for the liability of the goods damaged in transportation. Sometimes it is borne by the company and sometimes by the distributor. But if the value of the damaged goods is significantly high, it can result in a conflict between the company and the distributor.

No exclusive retail stores to capture urban markets

Spice has a very strong presence in tier 2 and tier 3 towns. But, in metros and tier 1 cities they fall way behind Nokia, Samsung etc. One reason is that spice on mobile store, “Hotspot” doesn’t work on exclusive spice model but carry a full range of competitor products. Thus to capture the interest of urban consumer, apart from new higher end models, spice also need a strong independent stores more in the lines of Nokia priority dealers as part of its distribution network.

No dedicated sales force to monitor distributor

As per our discussion with Spice distributor and Spice sales team, sales person or ISD’s are on a pay scale of State distributor. Although their targets and region is set by distributor, sometimes with the help of Area sales manager, since ASM does not have any ownership of sales force, all “push” efforts and execution of sales plans cannot be tracked to a definite level.


Cite This Work

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Related Services

View all

DMCA / Removal Request

If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: