If you want to move into a chaotic, difficult-to-navigate, hyper-competitive market in which profit margins are thin, consider what Hip Street – a digital accessories firm based in Markham, Ontario – is doing in India.
An offshoot of DJP Associates founded in 2002 by Indian-born Moe Kriplani, Hip Street entered its president's land of origin only last year. But this is not the country he left two decades ago.
As the world's second fastest growing economy – in which cellphone connections now number in the hundreds of millions – the company needs to crack a complex retail environment in which mobile phones are sold across 10,000 cities. It must take on cutthroat, low-priced Indian, Chinese and Taiwanese brands on the one hand, and Korean giants like Samsung and LG on the other.
One year into its Indian operations, with the first of its goods shipped last April, the company – which plans to invest $10-million in India over a five-year period – is betting on a litany of partnerships and carefully crafted innovation. It is also playing on its North American location to win customers while staying profitable.
"You have to have a sales guy in every state," said Sukhesh Madaan, general manager of South East Asia for Hip Street, noting that tax laws and regulations vary across zones. That is a far cry from North America, where Hip Street easily reaches out to 6,000 retail outlets by using chain stores such as Wal-mart and Sears.
In India, Hip Street forged a partnership with Global Infonet, a nationwide chain specializing in back-end distribution. The partner moves its network for brands such as Lenovo, Western Digital and Microsoft and Dell, and can solve many a headache for Hip Street.
"You have to be deeply penetrated in India," said Mr. Madaan. "Retailers throw in their own terms and conditions. Things move on credit [and]they have a tendency to say it is not moving – take it back."
Hip Street could prosper if the Indian government's proposal to allow foreign direct investment (FDI) in multi-brand retail comes to fruition. For the moment, it is already talking to homegrown large-format retail chains such as More to improve its retail presence. In India, organized retail remains a nascent industry.
The firm's brand-building is subtle. For instance, it plans to use a Disney franchise to target notebook computer bags for kids, while it banks on the fact that its presence in a large range of products such as digital music players, keyboards and a host of accessories is such that sales in one promotes awareness in another.
"We are the only brand that has accessories across categories," says Mr. Madaan.
In a cutthroat game where Chinese and Indian brands are clearly cheap, the North American origin can spell an advantage, though Hip Street does most of its manufacture in China to keep costs low.
"People still associate a 'premium-ness' with a North American image," Mr. Madaan adds.
But achieving "premium" status is not cakewalk. The premium margin usually comes on account of quality and after-sales service. To achieve this, Hip Street's Canadian unit takes ownership for both research and development and quality control. Until an after-sales service network is put in place, Hip Street is offering 100 per cent replacements – the kind of thing that sends ripples of a reliable image to customers.
Last but certainly not the least, it is the product that speaks for itself. Using its own Canadian R&D and design, Hip Street has developed accessories such as QWERTY keyboards that work with Apple's iPad tablet computers and the BlackBerry Playbook, snap-on covers that increase battery life for iPhones and special cameras with larger buttons for older people.
The fact that Hip Street's headquarters are close to where the cutting-edge action is in digital products gives the company the confidence it needs in taking on a market that is huge but challenging because new products come in as fast as old ones fade out.
Ambitions stretch beyond India. Mr. Madan, a 37-year-old who earlier worked for Sony Ericsson, is just back from Nepal, and is headed for Bangladesh next week. A tie-up for distribution in Sri Lanka is already in place.
Hip Street sees itself as a middle-rung player, positioned above the cheap Asian brands with a cool image. "Our motto is affordable innovation," says Mr. Madaan, but added that much hard work is ahead. "We need to grow up the value chain, because margins are under pressure."
Special to the Globe and Mail
Narayanan Madhavan is associate editor of the business news pages of Hindustan Times, a leading Indian daily newspaper. He has previously worked for Reuters, the international news agency, as well as The Economic Times and Business Standard, India's leading business dailies. Though focused mainly on business and economic journalism with a strong focus on information technology and the Internet, he has also covered or written about issues including politics, diplomacy, cinema, culture, cricket and social issues. He has an honours degree in economics and a master's degree in political science from the University of Delhi.