Smartphone demand muted in run-up to festive season

Consumer demand for smartphones remained muted in the run-up to the festive season in August despite multiple rounds of online sales and margin hikes for retailers, said retailers and market trackers. The industry expects only a single-digit pickup in sales during the festive season, as compared to double-digit spikes seen in the past few years, they said.

Chandu Reddy, director at South Indian mobile phone retail-chain Sangeetha Mobiles, said there was a slight dip in July and August, immediately after the company concluded its anniversary sale which started in June, while for others in the market, the dip started from June onwards.

“We are only seeing spurts of consumer demand during specific festive periods in July and August, otherwise it has been lower than normal,” Reddy said, adding that retailers are now adding more categories of products in their stores to attract walk-ins.


For instance, pure-play mobile retailers are adding small appliances and consumer durables such as air fryers and water purifiers, he said.

Reddy said brands have also increased the margins for retailers to push for higher sales. However, while sales value has been increasing, volume is not. “Samsung sales have increased. Xiaomi is also making a sort of comeback in the market,” he said.

This year the festive season is spread across two quarters, with Diwali at the end of November, along with the Cricket World Cup in India expected to act as a catalyst for sales. Festive season typically accounts for a fifth of annual mobile phone sales, according to market experts.

However, Tarun Pathak, research director at market tracker Counterpoint Research, said early indicators suggest higher retail inflation and expectation of better offers closer to Diwali have kept consumer demand for smartphones weak in August.

While demand in July was good for smartphones, “August saw a massive dip in offline retail, and then late September we expect shipments to pick up, so Q3 will be more or less muted”, said Pathak.

TechArc co-founder Faisal Kawoosa, however, expects shipments to reach 91 million in the second half, almost double the 49 million shipments seen in the first half. He said early indicators suggest the new model launches are seeing good uptake from consumers.

Both Pathak and Kawoosa said brands are now matching offers across both online and offline channels, indicating that consumers might get better bargains by comparing offers across channels which might drive some of the uptake during the festive season.

“But it will still be a single-digit year-on-year increase in shipments, rather than in double digits, which used to be every year for the festive season sales, leading to an overall 5% on-year decline in shipments,” Pathak said.

However, while volumes remain low, offers from non-banking financial companies (NBFCs) are driving up the average selling prices (ASP) of smartphones. Reddy cited a big NBFC tweaking its algorithms to approve loans for iPhone purchases quicker than for other devices, so as to lock-in big ticket customers for future transactions.

“While the overall ASP for mobile phones remained at Rs 22,000, ASPs for NBFC-led transactions were around Rs 25,000-26,000,” Reddy said.