With an estimated seven crore orders in just four days, Ringing Bells has gained an altitude that looks dangerously high. It must figure out a way for correction, right away.
Just three days ago, when I first wrote my views on the Freedom 251 pricing, its website was unable to cope with the traffic and not many of the millions of potential customers were able to pre-register for the phone. It looked like a great marketing move then, assuming the company might have to give away the smart phones to a few thousand users at most.
A day later, however, the registration process was resumed and more than five crore bookings were claimed by Ringing Bells, the company behind Freedom 251. The Rs 251 pricing suddenly looked unsustainable beyond repair and I even received a few comments to the very effect. Valid concerns there, I must say.
Nobody has an idea of the gameplan that the Ringing Bells promoters and management might have up their sleeves. On the face of it, they do seem to have bitten more than they could possibly chew. Not surprisingly, several readers became more emphatic in stating that it was a scam, and at best the company would be making refunds later after keeping the money with them for a few months and earning interests on it.
No doubt, if Ringing Bells fails on its promise of delivering the smartphone, it would be a big disappointment for many. And with the huge volume of bookings that they allowed to happen after the resumption of registrations, they have made the task of delivering the smartphones to buyers manifold more difficult for themselves.
Could they still survive? This question is beginning to puzzle many a mind. However, here are some possibilities that still exist (wonder if the Ringing Bells team is geared to convert the massive challenge at hand into an opportunity of the same size):
1. Work out a strategy to filter the registrants down to a few thousands: While this may not appear to be the most honourable thing to do, it still would make things more manageable. Unless the company has already thought through the situation and has a plan in place (which looks doubtful after these many bookings), it is better to do some crisis management now. Probably the company could give away the smartphones for Rs 251 to a few thousand registrants and give others the option of taking a refund now itself rather than later. That way, it would at least save itself from potential allegations of earning interest on customers’ money. Such a move should also be accompanied with an honest communication that explains everything transparently. Depending on how this whole exercise is carried out, an opportunity to salvage things exists. (The company has already made its first move to rationalize things, saying it would only be giving one phone per e-mail address. It needs to find more ways to slash down the number to a manageable limit.)
2. Get the government to subsidize the product: Theoretically speaking, the government could subsidize a smartphone the way it did the Aakash tablet just a few years ago. However, practically, it may be quite difficult. First, it could be seriously questioned on what basis it decided to go with a start-up like Ringing Bells, which has had no background in the smartphone segment. Also, if the government had to be associated then it should have been announced from the very beginning. So, this first possibility is ruled out.
3. Enter into a bundling deal with a large telco: This could actually be a good possibility. Even if there was no understanding with a mobile service provider at the time of launching Freedom 251, it could very much be done now. This would mean that the buyer is locked into using the service of a specific mobile service for a period of, say, 24-36 months. Such an arrangement could land the mobile service provider as well as Ringing Bells in a win-win situation wherein either the service provider subsidizes the smartphone or allows a revenue sharing with the vendor.
4. Sell out to a bigger smartphone vendor: Again, this could be a fair possibility, especially in the context of some deep-pocketed Chinese players looking to make it big in the India market. With the five crore bookings claimed by Ringing Bells, it could lead to a shipment share of up to 40 percent in one shot and potentially catapult any company to No. 1 position in the India smartphone market. That such a move could become a subject of investigation by, say, the Competition Commission of India is another matter.
5. Rope in a strategic investor and dilute promoters’ stake: It is not unlikely for a large investor to get interested, given the buzz and actual registrations that it has generated. In fact, given that promoters don’t happen to come from a strong smartphone market background, it is very much important that a strategic investor with much international experience in the smartphone business comes on board. It may dilute the promotors’ stake into a minority but it could be worth taking the route rather than risk going solo.
6. Go for an initial public offering (IPO): However, before considering this option, it would still be important to bring in a strategic partner, even for a minority stake, given that the existing management and promotors alone may lack the end-to-end capabilities that involve taking out an IPO successfully.
There could be other possibilities as well, and if the promoters have started off with the right intent, then they should try and explore all possible routes to ensure that they deliver what they have promised to the best extent possible. Like millions of other users, I too would be watching with all curiosity.
About the Author
Deepak carries around 25 years of experience. He is the Founder Analyst at B&M NXT. His focus areas include strategic business consulting & advisory, strategic communications, sales enablement and capacity building. He is also a columnist at Governance Now, India’s leading magazine on public policy and governance matters.
You can connect with him on LinkedIn here.