The Indian consumer is remarkably savvy thanks to the country’s rich information technology culture and market dynamics, premium smartphone maker
OnePlus co-founder Carl Pei said.
The Chinese-born Swedish computer programmer and internet entrepreneur, who co-founded OnePlus along with Pete Lau in 2013, is in New Delhi to launch the latest offering from his company’s stable, OnePlus TV, on September 26.
The 30-year-old entrepreneur has a fluent understanding of what, how and why Indians buy smartphones and tech gadgets. “They know what a good smartphone is. I have spent some time in the beginning after launching in India. We were about to launch in Indonesia then and when we were visiting Indonesia, we thought it would be similar. But it was completely different because in Indonesia they only looked at price. Here in India, people look at value,” Pei observed.
The current slowdown in the Indian economy and fall in consumption are not worrying Pei much. “If you make good products, sooner or later people are going to find out. You should not think too much about external factors that you cannot control because you cannot control them and so why waste energy on them,” he said.
In a freewheeling interview with Network18's Anuradha Sengupta at CNBC-TV18's special event, Marquee Nights, Pei voiced his thoughts about the Indian consumer, technological innovations and the newest trends in the TV and smartphone market.
Edited excerpts from the interview:
Should we go easy on you because you have just got off a flight?
Sure, let us start easy.
Do you want to tell us why this week is going to be so hyperactive and memorable?
People have been waiting for six years for a new category from us and finally it is coming.
In 2014, when you launched your first phone, you did not even think of India. This market was not on your radar and here we are in 2019, you have market leadership in the premium smartphone category, you also are rolling out globally your new product, the television, in India. So what happened, how did this not wanting to launch here turn into what seems to be like a love story? Why I have Indian customers showing you love?
May be I should start with the original thought. The original thought was back in 2013 and we were looking at the smartphone market and one company whose name I am not going to name, they had a smartphone with the heartbeat scanner on the back. We were looking at it and thinking do consumers really need this, are they going to use it every day, or is it just something interesting to use as marketing and consumers will have no benefit from it. We felt like the Android smartphone manufacturers, they were not really focused on the product, and we thought that there has to be Android users out there who also want the really polished user experience when it comes to their smartphones. That was the original idea and we just put it out into the world just to see what happens.
I think we launched in 36 countries, it was through e-commerce so we could sell to a lot of countries all at once. European Union is quite easy; once you get into one country, you can sell to all the countries. The US has relatively simple import rules. We did not want to deal with India because we had to find a local partner and the logistics was more complicated. However, little did we know that after launching we would get so much interest from here.
I remember because back in the day everyone who worked at OnePlus had to do customer service because we just did not have enough people and we soon noticed that around 25 percent of all the customer service enquiries came from India and this is not having sold a single phone here; it is just people asking we are one of the biggest countries for smartphones, when are you coming, when are you launching here. So that prompted us to come and see the market for ourselves. We had our first fan gathering or community event in Bangalore and I think around 30-40 people showed up and a vast majority already had our phones. We were really surprised.
They bought it abroad?
Yes. Then we started looking at the data and we saw that a lot of orders we had to the US, around 6,000 orders back then, they had US shipping address but Indian billing address. Someone had ordered it through their friends or family in the US and then sent it back.
What does it say to you about the Indian customer because you are in 40 countries, if I were to ask you to use five words to describe the Indian customer, what are the five words you would use?
I don’t think I need five words. The main difference is how savvy they are compared to other markets. I think it is partially due to the history, the rich IT culture here, but it is also due to how the smartphone market looks like. You take a market like the US where we are spending a lot of time now, it is our next frontier market, it is very different because 90 percent of phones are sold via carrier and the consumer habit becomes different because when they need to buy a phone, it is not when a new phone comes out, it is when their contract ends. So, their contract ends, their habit is to let us see what my carrier has for options for me and there is only two real options in the US.
So, therefore consumers in the US, they do not have a habit of searching or doing research before their purchase because there are only two choices anyway and they are tied to their contract. Whereas here, it is an open market. So, even if you have a contract with a carrier, you still bring your own phone. So this has created a more research heavy culture where people actually look at reviews, look at the news to see what is out there before making a decision. So, it is partially due to the people, but also the market dynamics.
So is the Indian customer a more discerning customer, is that what you are saying?
They know what a good smartphone is. I have spent some time in the beginning – after launching in India, we were about to launch in Indonesia and when we were visiting Indonesia, we thought it would be similar, but it was completely different because in Indonesia they only looked at price -- like this is more than $ 200, I cannot buy this, it is expensive. Whereas here people look at value -- I am paying this much but I am getting that much and therefore it is a good purchase. So, that is what I mean with Indian consumers being savvier.
What about the Chinese consumers?
The Chinese consumers, it is ebbs and flows. When we started, Apple was having its run, but now there is so much competition in China and so many local brands that the local brands are really rising now.
I told you earlier when we met off camera that I am not very tech savvy.
You are an iPhone user.
My iPhone is 5 years old. So the question is every year you guys, whichever company it is and definitely you, launch new products, you have new phones. Would you agree if I sound a bit skeptical and say that it is really just incremental improvements and advances that you talk about, the real technological barriers are broken just once in how many years?
Once in a decade probably. In the early days of the modern smartphone, changes were rapid and now they are becoming more and more incremental. Today, it is actually very hard to buy a bad smartphone; everyone has got really good at making phones. So, now the battle is who can create the most perfect user experience.
The good phones are everywhere, how do we create a great or a product that almost approaches perfection. So, I think this is where we are going to separate the good companies from the great companies going forward. So there is going to be a lot more focus on design, user experience, both the industrial design of the product, the user experience in the software, from typography to motion design, to just all small details, but also visual design for the brands. So, I think that is where the final frontier is going to be.
I found it interesting that given that you are living on the cutting edge of consumer technology, I have heard you say that there is always something new and shiny around the corner in the tech world so it is easy to get sidetracked or distracted, that artificial intelligence which is a big buzz word is overused. So how come you sound so cautious about new technology which is what everybody feels to think is the Holy Grail actually?
There are a couple of reasons. We have been around for a couple of years and every one or two years, there is a new big trend. So, artificial intelligence
(AI), virtual reality (VR), augmented reality (AR), back in the days it used to be drones, you guys must have forgotten about it already, but every year there is like a new thing that investors start pouring money into. However, if you really think about it, the smartphone is still the tech product that we use the most, it has the biggest impact on our lives. So, is there really an industry that is better than the smartphone industry?
There are so many people in the world and everyone needs a smartphone and after one or two years you need a new smartphone. So I do not think that there is another industry that is as good as the smartphone.
Secondly, you need to focus. If you want to make a great product, you cannot dip your fingers into a lot of different things. That is a recipe for mediocrity. So, if you really want to make something good, you cannot keep looking sideways all the time.
How unusual is this outlook for someone in your business?
It is quite rare. There are not a lot of companies who make smartphone who have been this focused on one category. Typically they create everything after a while. So, it required a lot of discipline to take six years before trying a new category and we still see the TV category as more of an experiment. Our focus is still on the smartphone.
Does it seem counterintuitive to do TV, because you have Netflix that you associate with on some of your phones and collaborations? It did an India mobile subscription because people are watching rich, deep, long content on Netflix on the mobile. You guys are doing TV, you want to explain the rationale behind this foray into this product category?
Yes, I think especially, like here in India, we are seeing kind of a leapfrog in technology. Some people are going from their big CRT TVs, they are skipping the platinum TVs, and going directly into smart TVs. So we see that huge trend here in the market and we think that we can apply some of the philosophy when it comes to the product in creating some of the best products we can and then pricing it at a reasonable price and apply it into the TV market.
After having some experience in smartphones and the user experience there, we have a lot of new ideas on how we can bridge the user experience between these two form factors. I cannot talk too much about this because we are going to launch this in a couple of days.
I will ask a business question which is that you are launching this in a week, in a country which has put on the record a slowing economy. We have seen consumer sentiment and consumer demand decline sharply. The OnePlus TV is going to launch, get into the market just before Diwali, our big festive season, are you anxious at all given the context of the economy at this point?
There is always ebbs and flows in time and we cannot do anything about this so why be worried about it.
So it does not matter whether it is this year or next year, you have got a great product and you are confident?
If you make good products, sooner or later people are going to find out. You should not think too much about external factors that you cannot control because you cannot control them and so why waste energy on them.
Let me take a couple of marketing questions because I know there are a lot of people here who are passionate, brand custodians who built brands, contributed to making them. When you launched OnePlus, you all decided not to use any of the tools of conventional marketing. So not the distribution that people use, no direct advertising, but you have managed to create these communities and this loyal fan base, how did you do that?
I think it looks like a massive plan looking back but we really didn’t know what we were doing, we just tested a lot of different things and some of them resonated and all of us suddenly found that we are in very deep waters because now we are in a serious game and we have a lot of people who had very high expectations on us. So we had to learn quickly and sell quickly as we went along.
So when we just started we felt like it was too late to start another smartphone brand. It was already end of 2013 and there were hundreds of brands on the market already and we also saw that social media had made it possible to communicate with anyone from anywhere. So we said, why don’t we just do this e-commerce thing and we can sell to everybody, as long as we have people who understand international culture. We can talk to consumers all over the world and out of necessity because we didn’t have the cashflow to invest a lot of inventory - in fact our first batch was only a thousand units and we didn’t know the demand so we have created this Invite system, partially also to do testing. So normally when you make a phone, you do testing, so you go and see that it works in all the countries and in all the networks, we didn’t have the resources for that. So we said let us do a slow rollout, like we shipped it out into the world and if users start complaining then we thought we are going to fix it, we will push a software update before we create a lot of phones.
By accident, the Invite system became really viral, and it is lifetime we have probably done close to a billion dollars in revenue via the Invite system before we start using it so it is a little bit by accident but it got viral. People were selling in eBay – in the beginning for $400.
A lot of people have been very angry about it as well because they have been selling these invites?
So not the phone, but if you get the quote to be able to buy the phones, they first paid $400 and then they paid $350. It is also here in India when we launched, the first time Amazon has ever done a change in their user experience ever, I remember we worked with Seattle team for Amazon to connect our invite system backend with their card so that the user would authenticate it on our website, we get the account, we get the email and then we tell the Amazon server okay, it is legitimate invite and then ship the product.
This was because of necessity more than a big grandmaster plan?
Yes. It was totally by accident because we didn’t know how many phones to make.
I am curious and now when you are chasing, when you want people to buy your phone when you are actively going out and getting people on board and you have changed the model and you are now using conventional marketing, your phones are available in Croma, the Reliance stores, you have got your own stores, experience stores that you set up in two-three places in this country, you have got Amitabh Bachchan as a brand ambassador and also Robert Downey Jr. The question is how are you somewhere as you grow and you want success and you want to have market share and the volumes, are you somewhere – is there a trade of in the core of the brand in the way you do things, in the way you think the world should function?
I think as you grow, you do have to think by the rules but how to balance that is something that we still haven’t completely figured out, something we are still learning. So globally we have been focused on the carrier market because a huge chunk of the sales for smartphone happen in the western Europe and in the north America and I think in some ways we might have over-calibrated to focus on those channels and kind of lost a little bit of what made us special and unique. So we have a plan in place to recalibrate back.
Does that mean that your loyal community and that fan base – are they happy with the kind of techniques that are being used now to popularise OnePlus in the marketplace?
I think if we remain successful, we are making them proud. They are like I found you before anyone knew about you and now you are everywhere and I am proud for your success. That is the kind of feedback we have been getting but as we grow, we will need to expand our community into new areas. Right now, we started off with tech enthusiasts and over the time we need to figure out how we can attract new groups to our community.
I want to talk about the ethics of technology because you have landed in India in a week the Supreme Court is talking about social media regulation policy, we all know about big technology companies and how they harvest data and what kind of implications that has on society and politics and all of us. As a manufacturer, as a smartphone maker, is this something that is on your mind, can you afford to be conscious of this when you make the stuff that you do?
I think we are in a really good position to be on the consumer side. So we are not an app, we are not a social media. We don’t have to optimise for time spent on our phones, we don’t have to sell ads, so we can protect the consumer because we don’t need to optimise for those metrics. It is something we are looking into. So I don’t think it is going to be hard for us to start making moves here.
The other thing is that the phones are getting smarter but the people who use it are not necessarily getting smarter, would you agree? Because in India we see the way social media is used, we have a unique experience of these horrible WhatsApp fuelled rumours that can result in mob-lynching and violence, how do you see the way people behave with technological innovation and what technology can do for people?
Smartphone was supposed to make us smarter but it is probably not fulfilled that goal yet. I think one of the media consumptions has completely changed and shifted to social media and there is less – it has run by algorithm rather than by editorial team. So you just tend to see more of the content that you are naturally engaged with and then if you have a view, you just reinforce your own view. It is interesting – so we recently worked with one of Apple’s ex-creative directors and we were talking about this why doesn’t Apple embrace social media? He told me that because Steve Jobs hated social media - social media was not empowering people.
I know Steve Jobs is someone you consider iconic, you look up to. Do you agree with what his thoughts are, do you think social media is a force of evil?
I think we are still as a species learning how to use it. So it is a new technology, it had a lot of benefits, it allowed us to connect to people but now we also see some of the negative sides. So we have to find a way forward but I think for all new technology, the positives definitely outweigh the negatives in the long run.
That is what keeps you going?
That is what keeps me going. We talked about Three-Body Problem backstage as well and one of my biggest takeaways from Three-Body Problem series is that – it is a science fiction trilogy.
A very complex one?
Sounds really abstract, ultimately each planet will need to develop a technology to fight other planets and if this new technology is going to help us as a species gain an edge over other species, I think it is worth it in the long run.
Talking about planet, we are speaking in Gurgaon-Delhi, the NCR, even as the US is hosting UN Climate change Summit. We hear about Amazon staffers wanting to make their employers, make their company more compliant, we hear other people who work in tech companies wanting their companies to help prevent climate change, where is OnePlus on that, where are you on that personally?
We are thinking about it. There are so many initiatives or so many things that you can do to kind of improve the world but if you just lightly dabble in each thing, it is not going to create a big impact. We have a saying – do right things than do things right. So even if we try and do things right, so let us say you are running but you notice after a while that you are running towards the wrong direction – then all the energy has gone waste, you have to change direction and start from scratch. So you rather spend more time in figuring out what is the right path forward and even if you are little bit slower, each step actually counts for something. That is not just for CSR but for everything we do.
So what are you doing on the climate change front?
We are still figuring out what we have to do, whether it is climate change or addressing these privacy issues or something else, we cannot do everything because we are still relatively a small company.
You are Chinese, you grew up in Sweden, then the US for a few years – today you are living in China again. I believe you have an apartment there? For 50 percent of your time you are in a different country – is it fair to say you are a global citizen?
I think so.
How do you then react when you are confronted with the fact that national identity and sometimes national insecurities are front and centre today in many countries, including in India? How do you react to that as a global citizen?
Maybe I have the privilege because I don’t really think about these issues that much and I think with all the increased connectivity that we have, actually interest groups around the world are a lot closer to each other than kind of people in different countries – let us say you are smart phone fan - smart phone fan in India and in the US are actually very similar. If you are a running fan, if you run marathons then someone in China, someone in Sweden might be very similar.
So I think the world is getting connected in different ways and eventually nation borders are going to be less important but of course there is always ups and downs. You have fears of this and have fears of something else.
Is it anxiety – when earlier this year China blocked a UN resolution to declare Jaish-e-Mohammed chief as a global terrorist and there was a lot of online chatter here and media chatter about should we ban Chinese products, is that what we can do to retaliate for that decision they took. How do you as a businessman, as a global citizen, as a tech entrepreneur, how do you react to this kind of an action?
It might not sound great but I did not know about this. I have really come to like to stoic philosophy -- what you cannot impact or what is out of your reach you really don’t need to think about it.
The Zen mode -- all phones and phone makers are now becoming conscious of the fact that we are spending too much of our time on the phone. As a guy who makes a living out of smart phones, how long is your Zen mode?
When I am good, I do ten-minute meditations, it is very hard to keep it up and keep us going, so ten minutes are usually my timer.
So, the longest that you can be without your phone is ten minutes?
I can be without my phone for a long time. I don’t need Zen mode to put my phone down.
But your Zen mode, meditation is ten minutes?
You are on several lists – Forbes 30, under 30 Fortune, so you made a splash, you are a successful businessman, what is the best thing that success has got you. What is the one thing that you can do today because you are successful, which you could not have done if you were not this successful?
I actually think I am still pretty young and I am just starting out and those lists don’t really matter. I used to think they matter but I don’t think those lists are that impactful or they are impactful but they don’t really matter as much. What it has given me is just more opportunities to learn because as the company grows, the level of difficulty also grows, we have to do new things. I came from LA because we were shooting a new commercial with Robert Downey Junior. The biggest benefit is you just keep getting exposed to more and more things.
So that is the best side of success.
That is really philosophical and not like under-30 answer, is it?
I don’t know.
What is your biggest indulgence that your success and your wealth allow you to access?
I bought an apartment for my parents in Sweden.
Are they proud of you? They were disappointed when you dropped out of university?
They were really disappointed for the first four years, now they are okay.
On the flipside what have you lost because of the success?
You have only gained, it have been a good journey the last six years.
It has taken a lot of time, the time I could have spent with friends or family and because I moved away from Sweden a lot of friendships over there are not as close-knit as they could be.
I want to ask you one more question and that is the smartphone, 5G, we are already gaming, streaming, video calling, what should we and what do we expect next? Have we just scratched the tip of the iceberg in terms of what is possible or can we even imagine what else is possible?
So 5G is today more a buzzword.
Malaysia is going to roll it out.
They have it but it is going to take a couple of years.
China is rolling it out.
Yes, but there is no consumer application.
What does that mean?
When 4G just came out, it took into 2-3 years before Snapchat or Instagram took off, so you have all these new technologies and more bandwidth but how do consumers really benefit from that? That is not something that you can tell in advance like the companies who are making the 4G or 3G smartphones, they couldn’t foresee that Snapchat or Instagram will be the use case for 4G. So just like us, we want to be on the forefront of 5G, where we released the first commercial available for 5G phone in the UK for instance but is more to empower other people to invent the future of 5G on our platform because we have the most tech savvy consumer base out of all the smartphone brands. So we just want to empower our people for the future but we don’t have all the keys and we don’t have the answer.
So you are not going to tell me what the 5G-ready world is going to look like?
I don’t think anyone can tell you.
Isn’t there something hologram calling?
You can guess but who knows what is going to happen like we have discussed – this week we have a big launch event for a few thousand people from our community watching; maybe in the future when there is 5G, you will feel like you are next to somebody that you met online who is in a totally different country, I don’t know, we will see.
As we were growing here in India, we had this idea of signing Amitabh Bachchan and that is the phrase we were using internally with the team here like if we do this, it is such a big thing, anything can happen.
‘Kuch bhi ho sakta hai’ is the one phrase Carl knows. Do you want to tell us how do you learn that phrase?