What comes to mind when we hear ‘Earphones’?🤔 Think think?
So today, we will be talking about a brand that didn’t even exist a few years ago & now it is the market leader in the audio segment.
Before diving into how boAt started, let us understand the market conditions. Mainly boAt targets millennials & people in their early 20s.
In the year 2018 alone, more than 60 lakhs students graduated. Almost every student owns a mobile phone in cities. Everyone requires an earphone, so boAt cleverly tried to seize the opportunity.
Due to the emergence of work from home due to Covid-19, where every working individual wants to attend a meeting, there is a need for earphones & here they captured this opportunity very well.
So now let’s plug into nirvana 🥳 & decode the BoAt story & how it became the top 5 wearable brands in the world.
How boAt started
Aman Gupta was a CA & has worked with Citi Bank as an Assistant Manager & Aman was keenly interested in Marketing, so he joined JBL in 2012 as Sales Head.
He fell in love with the audio industry & wanted to do something of his own. With his friend Sameer Mehta, Aman & Sameer started boAt lifestyle in 2014. They bootstrapped boAt by investing 30 lakhs from their wealth.
Initially, they saw a problem that Iphone's charging cable used to break easily owing to its poor quality, so they started selling unbreakable charging cables for iPhones.
Let’s Offend: All the iPhone users please stand up-
You all know the phone is over expensive.
You also know your brand new iPhone will become outdated in a year.
And FYI the resale value of your “super-cool” iphone is sometimes less than a below-average smartphone. Plus the cable thing.. ohh we all have seen it.
They decided to go through e-commerce and started selling on Amazon & Flipkart.
Aman & Sameer succeeded as no other company selling quality cable at such a low price. But Aman & Sameer were ambitious as Aman had previously worked in JBL, so he had insights regarding the Audio industry.
A massive gap existed in the market as no branded product was available at a low price & even if some did exist, they were not providing good quality products.
The gap in the Market
They both saw a huge gap in the earphones market.
The types of earphones market in India.
Ultra-premium(costs ₹15k+): Apple, Bose
Premium(costs ₹10-15k): JBL
Sub-Premium(costs ₹5-10k): Sennheiser.
Economy/Affordable(costs ₹1-5k): boAt,Mivi.
Cheap(costs ₹50-500): Imported mostly from China, Vietnam.
So initially, when no brand existed in the economy/affordable market. Some cheap Chinese products exist, but they were not up to the mark as the products they were selling were of low built quality & people were not interested in buying them.
The business model of boAt
BoAt now sells various products from wired earphones to wireless ones, from speakers to headphones & from smartwatches to trimmers.
boAt lifestyle has a market share of 27.3% in the earwear category & it is the leading brand in this category. It earned a revenue of ₹1,531 crores & the profit was around ₹127.1 crores in FY2021. Its earnings grew by 61% from ₹48.85 crores in FY20 to ₹78.6 crores in FY21.
Image Source:- Startuptalky.
BoAt focuses on selling wired earphones at the lowest prices possible due to cutthroat competition in this segment. Their products are priced between ₹350 to ₹550 as no brand sells wired earphones in this price segment.
It has always created products that have led to demand-pul, which means they don't have to do more marketing for the products launched as they have always launched the products which are of high quality & made them available at the lowest prices they can keep.
For example, BoAt launched a portable Bluetooth speaker named ‘boAt Stone’ that became an instant hit as they were selling this at around ₹2,000 & other competitors of boAt were selling the speakers at ₹5,000.
Revenue breakup of boAt
Earphones & Headphones: ₹947.35 crores.
Wireless speakers: ₹297.40 crores.
Wired earphones: ₹94.92 crores.
Other accessories & products including chargers, chargers & more: ₹172.03 crores.
Strategies that helped boAt succeed
BoAt lifestyle has become one of the top 5 wearable brands globally.
Let us know what made them one of the top wearable companies in the world.
Online first approach:
It started selling online initially as it is easier to manage the distribution & sale of products. Then slowly, with time, they entered the offline market because, in small cities & rural India, people were still buying these products from nearby retail shops.
Outsourcing the manufacturing:
The main issue was they didn’t have the expertise to manufacture good quality earphones in India. So they decided to outsource the manufacturing to Chinese companies as China is the hub of electronics manufacturing.
So they solely focused on designing the product & building the brand with marketing & sales.
Focusing on affordability:
“Indians want products at a logical price. We didn’t price our products very high or very low we sold products at the right price” - Aman Gupta.
Let’s Offend: ₹100 ki cheez ko ₹500 mai leke khud ko cool samajne waalo!!!!! Hell has a special place for you.
BoAt priced their products very low in the branded category & today; we can see they sell good quality products at the lowest possible prices.
Both Aman & Sameer knew that most Indians are middle class & they wanted branded earphones at low prices.
Upping the bass:
“Baby ko bass pasand hai” 😋.
Indians loved the bass when listening to music, so they added more bass to their wearable products & this alone was the factor that improved the product's quality.
BoAt marketed itself as a lifestyle company & as a fashion brand for Genz & millennials, not as a boring electronics company just trying to sell an earphone.
Great customer service:
They focused on good customer service if a product comes under the warranty BoAt has started a new service where the customer will get the home delivery of the product.
The company is rapidly expanding its product line as they have gained a good market share in the wearable audio market & now they are also focusing on personal care & smartwatches.
It has acquired two companies named Tagg & KaHa(Cove IoT). KaHa is a Singapore-based smart wearable IoT(Internet of Things) development startup. With this acquisition, boAt can continue building innovative products.
Tagg digital is an Indian consumer electronics startup founded in 2016 & it deals in smartwatches, earphones, and speakers. It was a pure bootstrapped company started by Rohit Dhingra, Amitesh Bharadwaj, and Saurav Prakash & didn’t raise capital to date.
Challenges boAt is facing
Most of the boAt products are made in China with third-party manufacturers & in 2020, due to the India-China dispute & covid-19, the companies are facing many issues in importing the products from China.
So to solve this issue, under the PLI scheme, they have set up a 50:50 joint venture with Dixon technologies to manufacture some boAt products in India.
But even this will not resolve the issue in the short term as it is costly to manufacture in India & even by 2024, around 50% of the boAt products will be made in China.
There is too much in this space as there exist new-age startups as well, and even traditional companies are stepping up in this category. The competitors of boAt are Mivi, Skullcandy, Noise, pTron, Xiaomi, Samsung, etc.
No after warranty service
So if a product has issues after the warranty period expires, even if a customer is ready to pay extra money boAt currently does not offer after warranty service.
Imagine Marketing, the parent company of boAt filed a DRHP with SEBI earlier in 2022.
The DHRP consists of an issue size of ₹2,000 crores, where it is now expected to seek a valuation of 1.5 - 2 billion dollars this year.
IPO will be a mix of fresh stock issues & an offer for sale.It is expected that Imagine Marketing will IPO before the end of this year.
Even in this hyper-competitive space where the established traditional payers exist, boAt did well. In such a short time, it has earned one-fourth market share in the wearable industry. As there are many challenges as well for boAt, only time will tell if boAt will continue to grow 😎 or boAt will sink 🤔.