Smartphone sales down to 8-9% in April-June triggered by rupee fall, consumer fatigue

KOLKATA: The booming Indian smartphone market seems to be losing steam as sales growth tapered down in the April-June quarter despite the launch of several new models and buyback and EMI schemes.


Leading retail chains The Mobile Store, UniverCell and Planet M Retail - which sell mostly smartphones through more than 1,400 outlets across the country - say sales growth slowed to 8-9% in the latest quarter, more than 20% less than the preceding January-March period.

They attribute the slowdown to a number of reasons including the free falling rupee making imported gadgets more expensive, slowing down of upgradation in the top-end segment and consumer fatigue caused by too many similar products in the market.

"The huge euphoria in the market during the start of the year has sobered down," Himanshu Chakrawarti, CEO of the country's largest cellphone retail chain The Mobile Store, says. "The EMI and buyback war in the January-March quarter pushed up demand but now consumer fatigue seems to have set in," he says.

The smartphone market, however, is still faring better than cheaper phones. According to the latest data from by market tracker GfK-Nielsen, overall handset sales in the country fell 1.6% year-on-year during April-May. On a sequential basis, sales growth was 3% in April and 7% in May, compared to more than 12% growth in the first quarter. GfK-Nielsen's figure for June is yet to be published.

With brands like Samsung, Sony and HTC increasing prices by 3-6% last week due to the free fall of rupee, retailers fear the demand for high-end smartphones may slow down further.

Retail chains say sales growth has dampened in the above Rs 25,000 segment despite the launch of a slew of flagship models in the April-June period, including Samsung Galaxy S4 and Galaxy Mega, BlackBerry Z10 and Q10, and Nokia's Windows Phone 8-powered Lumia series. They say Apple's iPhone too has hit a plateau in India.

Videocon Group-owned Planet M Retail CEO Sanjay Karwa says consumers who have brought hi-end models priced above Rs 25,000 last year or early this year are not upgrading so easily for the latest flagship launches.

"Consumers who brought handsets like iPhone 4S, iPhone 5, Samsung Galaxy S3 or Note II are not changing their handsets at the same pace with which they would do whenever a new flagship model would get launched. The macro-economic factors are probably pinching them," he says.

At Planet M, sales growth of high-end handsets priced above Rs 25,000 has almost halved year-on-year in the quarter ended June.

Samsung Mobile country head Vineet Taneja, however, says the market leader's sales are not impacted and that its flagship model Galaxy S4 has become the highest selling smartphone in the Rs 25,000-plus segment and registered higher sales than any other flagship device in its first month.

The Mobile Store, which reported around 15% same-store sales growth in January-March, clocked around 8-9% in the latest quarter.

UniverCell, the country's second-largest mobile phone retailer with 430 stores, too says its same-store sales growth has come down in April-June.

D Sathish Babu, managing director at UniverCell Telecom, says sales of sub- 4,000 handsets fell 20% in the latest quarter because telecom operators have suddenly stopped promotional activities such as lower call rates or free SMSes.

"The options for upgradation in this price has become limited since now even entry-level handsets are feature rich like dual SIM," he adds.

Retailers say smartphones priced in the Rs 8,000- 20,000 range is the segment that is growing at a fast pace. There have been a slew of launches in this segment too, including Micromax Canvas 4, Sony Xperia L and Samsung Galaxy Fame and Galaxy Core.

Indian brands such as Micromax, Karbonn and Videocon plan to launch products in this segment with specification and features that match up to the flagship models of multinationals.

In fact, Indian brands Micromax and Karbonn were the second- and third-largest smartphone brands in the country in terms of shipment during January-March, according to CyberMedia Research. During this period, 9.4 million smartphones were shipped in India, which was 167.3% more than the year-earlier period.

Smartphones now account for 26% of the total market by volume and 70% by value.