Billed as a “true disrupter” in the Indian smartphone market last year, Chinese internet and technology conglomerate LeEco has vanished into thin air within months, leaving behind vendors with hefty unpaid bills and employees owed their dues….writes Nishant Arora
After laying off a substantial number of employees — as many as 85 per cent staff across the sales, marketing and distribution departments since December — the company said in March that it does not have any plans to exit from India.
It also said the “resource head count in India is well aligned to the scale of operations envisioned and in line with industry benchmarks”.
But the ground reality is strikingly different.
Reduced to a staff of 30 from 480, LeEco, which had a huge marketing spend, is today nowhere to be seen — not on billboards, TV screens or in newspapers.
There are just eight or nine junior-level staff working at its Gurgaon office while the rest are in Bengaluru and other places.
There is no senior-level person after Atul Jain, Chief Operating Officer (Smart Electronics Business), and Debashish Ghosh, Chief Operating Officer for Internet Applications, Services and Content, left the company.
The left-over operation in India is now being handled from the company’s Beijing headquarters.
Moreover, the company is yet to settle huge vendor bills and has held back full-and-final settlements of some of its employees.
An email regarding this, sent to LeEco’s India communication head Ravi Bansal, did not elicit a reply and calls to his cell number also went unanswered.
One such former senior employee said on the condition of anonymity: “We have been waiting for final settlements for quite some time now. Despite several reminders, there have been only promises from the global team sitting in China.”
“The message here is how unethical, partisan and whimsical HR practices at LeEco have contributed considerably to the mess, misery and distress to a number of employees,” she added.
According to laid-off employees, the company asked them to leave in a phased manner, beginning December, and “paid those immediately who either were influential in their own respective fields of work or threatened to take the legal recourse against the company”.
Vendors also have sorry tales to share.
“I have close to Rs 5 lakh due to be paid for the work I did for LeEco. I tried to contact the company via emails and WhatsApp several times, but to no avail. I have no idea when will I get my money back,” owner of a PR consulting firm that caters to regional markets said.
Tired, another vendor is set to sue LeEco next week.
“I am sending a legal notice to the company next week as they have failed to settle my dues after several reminders over a period of time,” said another vendor who is also a tech blogger.
Similar are the stories with several vendors — including big ones like advertising and PR agency Madison Communications and event management firm Wizcraft.
Madison lodged a complaint with the Advertising Agencies Association of India (AAAI) as well as the Internet and Mobile Association of India (IAMAI) against LeEco in December last year but is yet to get its dues — over Rs. 41 crore — cleared.
Wizcraft is also waiting “patiently for the last 12 months for its dues (amounting to over Rs 1 crore) to be cleared and no breakthrough”, according to a company official who did not want to be named.
“LeEco has left a trail of unpaid dues as well as dead stock in the markets. The unpaid dues run into crores of rupees though we do not have a definite number. Shipments are zero as they have shut down their office and left the country,” Jaideep Mehta, Managing Director, IDC South Asia, said.
After its entry into India, the company launched five superphones, a LeEco membership of content and internet services, an e-commerce platform LeMall and, most recently, “SuperTVs”.
The SuperTVs, incidentally, were launched in the presence of Minister of State for Electronics and IT P.P. Chaudhary in March — at a time when news of LeEco sacking 85 per cent of its staff and winding up its India operations were already creating ripples.
“As the demand for electronic hardware is expected to zoom to $400 billion by 2020, it is heartening to see foreign companies such as LeEco entering the Indian market and showing willingness to invest in the country,” Minister Chaudhary had told reporters at the launch of the SuperTVs.
Former LeEco employees are now asking how it is possible for a company to come to India, set up shop, announce multi-million rupee manufacturing plans in the presence of cabinet ministers, and disappear as if nothing has happened.
“We need stringent rules in place for the companies who come up with big plans and vanish without any responsibility towards its employees,” one ex-employee said.
In August last year, LeEco had also announced a $7 million manufacturing unit in Greater Noida in the presence of then IT Minister Ravi Shankar Prasad.
LeEco planned to ramp up the production to approximately 200,000 “superphones” per month by the end of 2016, before a severe global financial crunch caught up with the company at the end of the year.
The company’s market share has dropped from 1.4 per cent to a mere 0.1 per cent (Year-on-Year) during the first quarter this year.
“LeEco’s model was itself flawed, and the problems were compounded by their push into driverless cars and other unrelated businesses where they clearly had no competence,” Mehta said.
According to Tarun Pathak, Senior Analyst, Mobile Devices and Ecosystems at New Delhi-based Counterpoint Research, LeEco entered India with online as a major channel strategy but the kind of promotional activities they did was similar to any leading offline player.
“There was a disconnect in their marketing campaign although there was nothing wrong with their products or ecosystem strategy,” Pathak said.
“Brands need to watch out if they are overspending to acquire customers with the assumption of upgrading or creating a recurring revenue stream from the same in a highly competitive market,” added Pathak.
Meanwhile, employees and vendors are keeping their fingers crossed.