In a market where handset brands are struggling with single-digit margins, the Chinese managed to reduce their distribution, retail and marketing costs by a total of 15-20 percent by going online-only, say industry insiders.
"The e-commerce growth has happened in one year…from two to three million users to 50 million. And for an outsider [Chinese brands] it is easy to say 'I don't have a distribution network so I have no option will give it to one [online] player'. Smart move, but no rocket science. For them the timing was right," Vineet Taneja CEO of Micromax Informatics told CNBC.
"Motorola, [which is now owned by Lenovo], pioneered the concept of selling online-only brands in India and seeing its success, the likes of Xiaomi and Huawei, for whom growth had maxed out in China, decided to do the same in India," says Neil Shah, research director for devices at technology market research firm Counterpoint.
The top 10 Chinese phone brands in India have almost doubled their market share in a span of few months to close to 8 percent, according to Counterpoint.
"Made in China" gets a fillip
An innovative online selling model - like flash sales that last only a minute - helped Xiaomi sell a million handsets in the first four months of its launch in July 2014. On top of this, it was also successful in convincing consumers it was giving them a high-end product at low-end prices.
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"Our founder Lei Jun believes that high-quality technology doesn't need to cost a fortune," Xiaomi's India head Manu Jain told CNBC.
Chinese handset makers have overcome the general impression in India that their products are low quality, say experts.
"Xiaomi, Gionee and Lenovo have largely overcome the perception challenge. Their buyers are the Generation X and they know the pulse of these consumers. They have given them feature-rich phones, and have also used the social media well," Jaideep Mehta, managing director, South Asia at International Data Corporation (IDC) told CNBC.
Too lucrative to ignore
India is one of the world's fastest growing mobile phone markets and people want to be here because even if you get a market share of one percent it is huge, according to Taneja.
The market which is estimated to touch 250 million units by the end of this year after hitting 200 million units last year is poised to hit close to 300 million units by end 2016.
As well as size and growth, Indian consumers are also looking to upgrade their handsets. Today India sells more feature phones than smartphones, but the swap is expected to take place by end of this year. And by 2020 smartphones are expected to make up 80 percent of all phones sold in India.
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While a smartphone can be got for as little as $35 in India, as the market moves up the value chain the price is also expected to rise, say industry experts, making India an attractive market.
Product launch frenzy
Xiaomi and its Chinese peers have put the Indian handset market in fifth gear pushing their local counterparts to innovate quickly to stay ahead. "It is becoming difficult for the Indian players to retain their place, to differentiate themselves," says Gupta of Gartner.
In an attempt to stay ahead of the pack, mobile phone makers scramble to introduce new models at a frenetic pace, together with high decibel advertising and fancy launch parties. According to one Indian tech reporter he has at least three launch invites a week to attend a mobile phone launch.
It's easy to burn cash and launch new phones but in the next two to three years there is bound to be a shake-out, say experts. "We are on the cusp of the next generation of mobile phones. The market will slow down from the current frenzy of product launches. Soon the market will be driven by true innovation rather than incremental feature or design changes," says Mehta.