Damp Diwali for smartphone companies as sales remain lower than usual

NEW DELHI: Smartphone sales this Diwali appear to have lost some of their sparkle and are expected to be lower than usual after year-round discounts and launches took the wind out of the typical pent-up demand that drives purchases during the festive season.

Customers are not waiting for festive periods to buy smartphones, according to retailers, handset companies and industry experts, anticipating a sharp fall in the contribution of the Diwali month to overall sales. “I believe that India is no longer a country where consumers in mobile phone category wait for festivals to purchase, unlike consumer durables or cars,” said Sudhin Mathur, managing director for Motorola Mobility India. “It’s the new launches that drive sales.”

Mathur cited some Motorola models that clocked high sales although they were announced much ahead of the festive season. “The two-month Diwali period used to account for maybe 35-40% of the annual sales in previous years for mobiles and consumer electronics, but today the same period would contribute to less than 30%,” said Arvind K Singhal, chairman of Technopak Advisors, a retail and consumer consulting firm. Online consumers, too, are not waiting for Diwali purchases, given the frequent discounts offered, apart from assured buyback plans, zerocost EMIs and data-bundling plans from mobile phone operators, Singhal said.

The changes are already being felt and one handset maker now expects a 40% drop in sales from last year, compared with initial expectations of a 10-20% decline. The company had ramped up production capacity recently, anticipating higher sales during the festive period.

OFFLINE CHANNEL TO TAKE BIGGER HIT
Offline retail, especially the unorganised trade, has already been hit by the effects of demonetisation that happened last November and uncertainties arising out of the goods and services tax regime implemented on July 1. Online discounts have made it even tougher for mom-and-pop shops.

“Online discounts started early on (in September), which the offline market had to match… but online segment (discounts are) and will continue till Diwali. It will be tough for offline to match, therefore there is some drop in demand for offline now,” said Navkender Singh, a senior analyst at International Data Corporation India. A leading organised retailer singled out online sales, offers and discounts throughout the year on platforms such as Amazon and Flipkart for driving sales away from offline stores.

“The buzz of the festive season is completely missing… online sales have taken away a lot of the demand,” a top executive of a leading large-format mobile phone selling chain said on condition of anonymity. The view was seconded by a trade channel executive, who said the frequent periods of discounting have hurt the buzz around Diwali. “Sales are down, the shradh (early September) period was worse than Navratras... heavy discounts in the form of cashbacks are being given in online, smaller shops cannot compete with that,” the executive said, asking not to be identified.