Customer Centricity And Innovation At Its Core, BoAt Set To Ride The IPO Wave

Homegrown consumer electronics brand boAt turned six last month but the brand is anything but young in terms of market dominance. In Q3 2021, boAt's parent company Imagine Marketing set the record of being the market leader in the hearable segment for the fifth consecutive quarter with a 48 per cent share and 171 per cent year-on-year growth. India’s largest digital-first brand also entered the top five list globally on the fifth position in the wearable segment with a 7.25 per cent market share. As we speak, team boAt is working towards filing a draft red herring prospectus and would soon be heading for an IPO.

The single-most important reason behind its success has been the agility, passion and hustle of founders Aman Gupta and Sameer Mehta, says CEO Vivek Gambhir. “Very rarely do you find this complementarity and synergy which two founders can bring in with complementary skill sets,” he adds while talking about how the visions of marketing and brand visionary Gupta and product guru Mehta come together for Imagine Marketing’s house of brands approach.

The two started off by finding something missing in a fairly boring, fuddy-duddy category, as Gambhir puts it, and made headphones with a high fashion quotient at logical prices. About 30% of its team today is dedicated to design which completely focuses on ergonomic and visually aesthetic designs of products sold at the right kind of price point with most of their products priced between Rs 1,000 and Rs 3,000.

Having said that, boAt has never been the cheapest brand available in the market. “It is a brand born in India but the quality, aesthetics and visual design is world-class in many ways,” says the CEO, adding that the key is not to be low-priced.

When boAt was launched in 2015, there were hundreds of brands in the cluttered category. The brand went on to capture nearly half of the market share and has been consistently coming up with products that have unique features. For instance, its first set of sweat-resistant headphones did really well considering the Indian climate and had the kind of bassy sound that Indians liked.

From ideation to execution, boAt’s R&D team leads the way. The brand has recently started boAt labs, an R&D centre in Bengaluru with a team of 30 R&D scientists which it aims to expand in the coming days. It also focuses on its relationships with its suppliers and for most of them, boAt is the largest customer with whom they’ve had a long-term relationship. The other thing that it has continually worked on is deep technology partnerships with firms like Qualcomm (also an investor) to understand the latest trends in terms of innovation.

A chunk of its research depends on social listening by spending time interacting with consumers. The brand also mines trends to see what the most important search terms in India are to feel the pulse of the nation and marries it with its compelling way of marketing with popular faces from Bollywood, music and cricket world like Diljit Dosanjh, Kartik Aaryan, Kiara Advani, AP Dhillon, Shreyas Iyer, Shikhar Dhawan, KL Rahul, Prithvi Shaw and more. This has translated into a very powerful community of ‘Boatheads’ who have become loyal advocates of the brand.

With 40-50 new products launched annually, product innovation and high number of launches has been critical to the brand’s success. Its digital-first approach has aided the quick launches as it is also less expensive if products don’t work. Until about a couple of years ago, boAt was only a player in the personal audio space but less than a year ago, it launched its smartwatches and already enjoys a 24 per cent market share. From hearables to wearables to its men’s grooming line Misfit, Imagine Marketing's strategy is to become a multibrand, multicategory, multichannel and multigeography player. It is even looking to tap into the 300 million Indians who are mobile gamers with its gaming accessories brand RedGear.

India has also seen other homegrown brands like Boult Audio, Noise, MiVi, among others grabbing the attention of consumers. While talking about competition, the CEO says that the brand’s product assortment, quality and design of products, fast innovation cycle, among other things sets them apart. “Ultimately, boAt is our moat. The biggest moat we have is our brand,” he adds.

Gambhir says that the opportunity and challenge has been to know how to continue scaling up given the kind of growth and momentum the company has been seeing. “We’ve been doubling in growth every year since our inception and have been profitable from year one. A lot of companies have grown but they don’t focus on the bottomline. We are a very prudently run company which has consistently been delivering profitable growth while scaling up,” he adds.

Offline mode on?

While the brand started off as an online player, it is also growing very rapidly offline. “Customer centricity is at the heart of what boAt is all about. We want to be available. Increasingly, we are seeing a presence in the omnichannel world. Most of our consumer segment is very digitally influenced which is why a bulk of our advertising is online. But sometimes consumers might want to walk into their neighbourhood stores. Sometimes they’d go to a marketplace and sometimes they’d want to come to our website. Our idea is for the product to be available wherever the consumers want it to be,” says Gambhir.

While the brand aims to build some experience stores, the strategy will be to not create many of its own stores but to be available at all the modern trade stores and electronic stores.

Talking about the festival season, Gambhir says that Diwali is generally strong for the brand but this time, it was strong both online and offline as people have physically started going to stores as well following the easing of Covid-19 restrictions.

The Chip And China Conundrum

As the global chip shortage choked the output of several industries that heavily depended on semiconductors, boAt says that it has managed to navigate the situation very well.

The credit for this, Gambhir says, goes partially to the brand’s strong relationship with Tier-1 chip suppliers.

“In times like these, having strong relationships with the right partners really helps. Our partners have been tremendously supportive because they recognise the potential that boAt has and the growth that it has been seeing,” he says.

He also lauds the R&D team for being agile enough to be able to switch certain chips depending on what the supply situation was. “It was challenging but our team managed without any impact,” says the visibly proud CEO.

Like many brands, even boAt faced near-term supply chain challenges over the last two years. Although it claims to be a Made-in-India brand, its model heavily relies on sourcing from China and frequent shutdowns following Covid-19 and challenges with freight from China impacted the brand. The pandemic made its bosses reflect and taught them that they have to have a much more globally diversified supply chain.

“This entire consumer electronics category is, in some ways, overly dependent on China. Being able to have a more flexible, responsive global supply chain and also making a concerted effort for Make in India is one of our biggest priorities,” says Gambhir, adding that they realised they had to make India a much more important part of their manufacturing strategy.

“My personal belief is that this is one category where, if the government provides the right support, we can truly become global unicorns. We lost our way as far as mobile phones were concerned. There are very few strong local players in the mobile phone industry. But if we do this right, this is India’s opportunity to create global players,” he says.

Make in India will require a very vibrant ecosystem of hundreds of local suppliers who are able to manufacture all the parts that go into the products, says Gambhir but he also talks optimistically about the Centre’s Atmanirbhar Bharat campaign. He hopes that the government will announce a PLI scheme for the hearables and wearable segment which will provide a greater impetus for companies like theirs.

About 10 per cent of boAt’s volume was made in India this year with one million units shipped since April 1 and the company is eyeing 30 per cent next year. Complete reliance on India would be the brand’s ultimate desire but does Gambhir see that happening anytime soon? “Today, it is difficult to see that happen. There are a couple of components which are only manufactured in China. But I’m very confident that with the right government support, if we start this journey and create an ecosystem, the entrepreneurial energy and creativity in India cannot be underestimated. If we make the right progress, that could surprise all of us and in 3-4 years, perhaps everything could come from India,” he says.

While the brand doesn’t intend to own any manufacturing units, it aims to partner up and create the ecosystem. What it's looking at is deep strategic partnerships with strong contract manufacturers and major investment in its own design.

The Pandemic Blessing

With the pandemic locking people indoors, boAt was one of the brands that benefited from the situation which was aptly reflected in its FY20 numbers. The brand’s income crossed Rs 704 crore during FY20 and it managed to almost triple its earnings from sales to Rs 700.44 crore in FY20 from Rs 239.4 crore in FY19. It posted a whopping 460% growth in profit with a profit of Rs 48.85 crore in FY20 as compared to a profit of Rs 8.73 crore in FY19.

The stellar performance can be attributed to the new use cases that emerged during the pandemic—gamers, fitness enthusiasts, the work from home crowd and more. The brand saw women wanting a different kind of headset which led to the Masaba TRebel range with Indian fashion designer Masaba Gupta. It also saw the younger demographic wanting their own headsets and would be launching a new range in partnership with Marvel very soon. Replacement rates went up with people buying headsets more often. While these trends had been around for a while, Covid-19 accelerated them.

Gambhir says that the numbers can also be attached to their operating leverage in terms of getting the right pricing from suppliers and strategic sourcing. “As we got larger, we were able to negotiate a bit better. Also, as the portfolio moved towards more premium products, those have allowed us to deliver better margins,” he says.

A spurt in online shopping was another thing that came as a boon for the brand whose products are sold in 98% of PIN codes in India. “As Tier-2, Tier-3 and Tier-4 cities are getting increasingly comfortable with buying online, we’re seeing the same impact on our buying patterns as well,” says Gambhir, adding that 40% of their growth today comes from Tier-2 and Tier-3 cities which wasn’t the case a couple of years ago.

So far, their presence is only in India but by next year, the brand plans to expand to international markets as well.