Hewlett Packard has lost its personal computer market leadership in India for two reasons: Dell’s focus on the retail and SME segments has started paying off and its new distribution strategy is going through initial troubles

Dell has managed a coup by knocking off HP (Hewlett Packard) from the No. 1 position in the Indian personal computer market, after six years. In the second quarter (April-June) of calendar year 2010, Dell grabbed a market share of 15.2 per cent, against HP’s 14.3.

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The company also saw its India revenue crossing the Rs 4,500 crore mark earlier this year. Steve Felice, President, Global Consumer, SME Business, Dell, says it is a culmination of what the company has been doing in India over the past two to three years.

“A lot of what we did over the last few quarters have helped us gain this market share,” says Sameer Garde, Country Manager, Dell India. Other than focusing on mobility, through which it has captured the consumer, specially the small and medium enterprises (SME) segment, Dell also outspent HP on building its brand and growing its distribution footprint to 5,000.

Dell, which earlier depended primarily on a direct-sales model and focused on the enterprise and the corporate segment, went in for a major overhaul of its strategy in 2007. It launched its retail and partnership model for the first time in India in 2008.

“The new channel partners focused on the retail format well. Add to this a massive branding initiative which continued even during the recession,” says Sumanta Mukherjee, Lead PC Analyst, IDC India. At the same time, Dell did not ignore the direct sales model. According to the company, even now 95 per cent of its enterprise customers use the direct-sales model.

One of the biggest brand initiative the company undertook was its national campaign – ‘Take Your Own Path’ – which was launched right in the midst of the slowdown in October 2008. It was the first such campaign by Dell anywhere in the world. The results of the campaign were evident in the first two quarters. In an internal study, the company found its “favourability” increased from 2 points in the third quarter of 2008 to 16 points in the first quarter of 2009. More importantly, purchase intent went up from below 10 points to 21 points in the same period.

On Dell’s focus in the desktop segment, Garde says “with 70-75 per cent of the Indian PC market still dominated by desktop, it is a crucial segment for us. I think the desktop sales for us is more from the commercial segment. We have tried to remain among the top three players in the segment in the past quarters.”

Many also believe that Dell has been able to capture the booming mobility wave in India. Laptop sales for the second quarter grew by 61 per cent on a year-on-year basis.

WHY HP LOST OUT
While Dell seems to have made all the right moves, observers say HP’s new distribution strategy could have been the reason why its performance was impacted. At the heart of the problem was an overhaul of the way HP moves PCs through its distribution channels. In the new set-up, three big national distributors are helped by about nine zonal distributors. Earlier, six powerful regional distributors had the country’s market carved up geographically among themselves. HP did this to deepen its reach in smaller towns, but the move has unsettled quite a few of the existing distributors as their roles have shrunk.

Mukherjee says though HP has been in the Indian market for long, it did not launch a colour-based product – something where Dell has now got the first-mover advantage. Add to that, the tie-ups with large and smaller retailers that Dell has managed.

The results have been quite bad. HP, which has always been the leader in the Indian PC market, saw its market share shrink rapidly. It was in the fourth quarter of 2009 that for the first time Dell overtook HP’s mantle in the laptop space. While HP managed to pull itself back and overtook Dell in the first quarter of 2010, the second quarter changed the game.

Mukherjee says the gap between HP and Dell has really increased and that’s a matter of concern for the former, and he assumes that this will remain so till the time HP gets its new distribution strategy in order. But that’s a distinct possibility once the initial troubles ease.

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