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In just half a decade, boAt has become a well-known consumer electronics brand in India with strong portfolio in audio and wearables segment while other segments like power banks and mobile accessories are fast picking up
Started by Aman Gupta and Sameer Mehta in 2016, the brand is on its way for a debut in the Indian public markets soon
Let’s take a look at the boAt’s voyage so far
Starting Small
After completing his MBA from Indian School of Business, Aman Gupta joined a management consultancy firm but soon moved to a global audio company and looked after retailing of brands like JBL for modern trade outlets of Reliance and Croma in India.
Soon he began understanding the consumer trends and realised that there is no one which comes across as a lifestyle and a fashionable brand in the crowded consumer electronics market. Soon he joined hands with Sameer Mehta and cofounded a company called Imagine Marketing
Okay now quickly think about all the mobile phones you’ve used till now and try to recall what is the most frustrating thing that can happen, something that can irritate you on a daily basis?
Let me list down a few things
- Phone responding slowly and getting crashed (Samsung users I feel you)
- Low memory
- Low battery life
- Damaged charging cable
Sameer and Aman figured out that almost everyone faces a situation where the cable bends near an end and finally breaks down. Now either you have to keep replacing it frequently or you need to have a laser sharp focus to keep your phone always in a particular position while charging J
This customer obsession led to the launch of first product under the brand boAt after more than 2 years of research. They launched a double braided charging cable for iPhone with guaranteed 10k bends. No doubt it was an instant hit among the customers and since it was a low engagement daily use product, people were willing to experiment with brands thus driving the awareness
Hello Gen Z
Among all the customer segments, the millennials were most likely to try out a new lifestyle brand but they also had unique requirements and a limited spending power
boAt incorporated all this into their product research and soon launched a fall proof headphones with a sporty look and thereafter they launched a bass heavy headphones considering India’s love for high bass music. Needless to say, both the products were an instant hit
As millennials were quickly moving online to shop, the brand established partnerships with Amazon and Flipkart to launch new products and tap into the fast growing market. The company also came up with the tagline, “You’ve plugged into Nirvana”
The products were designed so that they look fashionable and can be a part of daily accessory. (Many of my friends call my boAt headphones as my JewelleryJ) and also the pricing was best in class
When a person buys say a headphone, one might not be willing to pay 5-6k for a brand like JBL or Sony but that person might be ready to pay more than the cheap Chinese products. This is where boAt comes into Picture
Paying about 1500 for a headphone doesn’t sound too much especially when you get decent Audio quality. Brand A is affordable, Brand B is premium while boAt sits exactly in the middle offering the best of both. This effective price point strategy drives volumes and penetration
The company had handpicked its brand ambassadors from the fields that resonate with the Millenial population. Young artists and cricketers like Kiara Advani, Kartik Aryan, Hardik Pandya and Shreyas Iyer are seen promoting the brand on various channels. They have recently roped in AP Dhillon also for a new campaign
Product Portfolio
Over last 5 years, boAt has expanded its product portfolio to include power banks, smart watches, mobile accessories, speakers and of course, headphones
Below is the sales snapshot
Though audio devices contribute a major share to the business, the other segments like wearables are particularly fast growing. Apple made Airpods mainstream but since then the smaller brands have also grown in size. Similar is the case with smart watches and fitness brands
Acquisitions and Partnerships
The company recently announced a partnership with India’s biggest contract manufacturer, Dixon Technologies. The two will own 50-50 stake in a joint venture that will focus on manufacturing audio devices in India
BoAt also announced a partnership with home grown beer brand Bira. The two brands have similar target audience and both intend to mutually benefit with a collaborative approach. boAt has launched special bira edition audio devices
It recently acquired a Singapore based IOT product development company, KaHa Pte. This strategic acquisition will give impetus to boAt’s wearables portfolio
If boAt intends to stay relevant in such a crowded and a limited differentiation market, it will have to continue fostering such partnerships in future
Will the IPO sail through?
Imagine marketing is one the rare new age companies that is profitable, the profits have grown in line with sales in recent here. Below graph shows the trend
In spite of boAt scaling up really fast, there are caveats in the business which cannot be overlooked. Let’s take a look at major risk factors
- Dependency on e-commerce
The online marketplaces Amazon and Flipkart contribute more than 80% to the total sales while the rest is through modern trade players like Reliance Retail and Croma with distributors contributing a negligible volume to the total business.
Amazon and Flipkart have been also focussing on improving their bottom line and they can ask for better margins for listing boAt products in future and with no alterative channel, the brand will have little room for any negotiation. Also, these marketplaces might list their own private label products to compete against established brands as they have access to nearly endless data to understand customer preferences
The company says it has 20 distributors but still they don’t contribute significantly to the business and boAt will need to scale this channel pretty fast if it wants to survive. Also, boAt does not own any retail stores like Xiaomi or Apple making it completely reliant on others to push its products. Retail stores of Apple are one key driver of business contributing significantly to the top line and bottom line
- Chinese Manufacturing
In plain simple terms, boAt asks someone to manufacture products and just pastes its label. These same manufacturers also make products for other electronic companies and so boAt does not have any product quality differentiation as of now apart from good designs in which other brands have already started catching up. Moving the production out of China will need significant investments and this is possibly the reason they have tied up with Dixon Technologies recently
- Established Brands
In consumer electronics, brand equity is the key. Once a customer tries a product from a particular brand and if the experience is good, he/she will naturally consider that brand while buying other products as well
My dad’s first TV was a Philips one and had great sound quality in those times. Since then, we have bought a microwave, a music system, a refrigerator and even an induction cooktop all from Philips. I bought my first earphone 5 years back and didn’t have too much to spend on so ended up buying a boAt product. Since then, all my audio devices have been boAt ones
So the brand equity is the key and customer lifetime value is very high. boAt uses its pricing and design as a way to drive penetration and promote experimentation but it does not sell big ticket items like mobile phones and music systems.
Brands like Apple, Samsung and Sony are using accessories to drive Average ticket value and thus brand association. Someone who buys a OnePlus mobile device gets additional discount on OnePlus ear pods while people buying an Mi phone get a discount coupon for Mi earphones and an extra cable. Chances are that customers might end up buying to buy from same brand in hope for better service and compatibility
Apple has a partnership with Beats for selling audio devices while Samsung has a similar arrangement with JBL. All this will make life difficult for players like boAt
- Valuations
If you are an active investor in the stock markets, you might have come across a saying, “Bhaav Bhagwaan Che”
Meaning that no matter how good the business is there is always a price for it and if the company demands more, investors might refuse to pay up
BoAt was valued at Rs 2200cr when it raised money from Qualcomm Ventures last year and media reports are saying that they might quote the valuations of 5-6x of the earlier number. If this turns out to be true, we may see another story like PayTM
That’s it from my side for today!
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Mr. Inquisitive 