Samsung, OnePlus woes threaten premium smartphone growth in India

Samsung and OnePlus saw the most tepid demand from buyers for smartphones priced at ₹40,000 ($500) or more during the six-week period from mid-September to end October, said six retailers and distributors across India that Mint spoke with.

Read this | Diwali smartphone sales revive budget phones—for now

“Samsung’s premium devices saw a clear downturn in demand from buyers during the festive period, even though it did strongly in the budget 5G smartphones range," said Manish Khatri, partner at Mumbai-based retailer Mahesh Telecom. Most buyers who walked in during the festive period were not too impressed with the features that Samsung’s or OnePlus flagship phones currently offer, he said.

Impact on retailers and brands

Lower sales in the lucrative high-priced smartphone category, which has fuelled revenue growth for smartphone retailers, distributors and brands after Covid-19 pandemic, will be a concern to the industry. 

Premium devices ($400+) account for 13% of the market by volume according to market researcher International Data Corporation (IDC), but deliver a greater share of revenue and profit, with margins being up to 10 times that of budget phones priced at $180 or lesser.

Read this | Apple marks record India, global quarterly revenues, driven by iPhone sales

OnePlus’ shipments to retailers across India during the festive period declined 46% year-on-year, according to data shared with Mint by market researcher Counterpoint India. Its market share during the festival season fell from 6% last year to 4% this time.

Samsung’s festive volumes fell 7% over a year earlier during the auspicious period of buying, bringing its volume market share from 17.2% to 15.8% this year.

Samsung and OnePlus did not immediately respond to Mint’s emailed queries on their festive season sales.

Consumer sentiment and future outlook

While the decline in demand varies across online and offline retailers, it is a sign of stagnant features, according to Tarun Pathak, director at Counterpoint India. “OnePlus has seen a year-on-year decline across all stores, with its premium brand value diluting considerably due to it selling less-premium devices at scale. On overall terms, more buyers are opting for devices that are one generation old, since they offer a near-flagship experience."

Pathak said brands like Samsung that marketed their latest flagships based on artificial intelligence features have struggled to sell since most buyers consider AI to be a surplus.

Buyers perceive it as a lack of innovation. Kartikeya Rana, a 31-year-old Dehradun resident, wanted to buy a smartphone to replace his five-year-old Apple iPhone 11.

“I wanted to shift to the Android ecosystem ... (with) Samsung’s Galaxy S24 lineup. However, I decided to put off my purchase because the retailer near my residence is awaiting stock of the company’s Galaxy S22 model from two years ago," Rana said. “The new generation’s AI features felt completely surplus, and the Galaxy S24 seemed too expensive for its overall feature set. With the S22, I can get almost the same experience for half the price."

According to IDC India’s smartphones report from 13 August, while ‘mid-premium’ devices priced $400-800 ( ₹35,000-65,000) accounted for 6% of the market, the ‘super premium’ segment priced above $800 ( ₹70,000 and beyond) accounted for 7%. The ‘entry-premium’ or ‘mid-range’ smartphones, priced $200-400 ( ₹15,000-35,000), was also a growing segment with 30% share of all smartphones sold in the country.

While the entry-premium and super-premium segments saw year-on-year growths in volume over last year, the decline in mid-premium category will make it more difficult for retailers to market devices to new buyers. That, in turn, is leading to retailers failing to meet distributorship and brand-driven sales targets, hurting their margins and ability to offer additional discounts.

“This puts the online retailers of Amazon and Flipkart in a position of major advantage. Their entire model works differently from physical retailers, which still account for half and, at times more, of India’s 150 million-plus smartphones sold each year," said a Delhi NCR-based multi-brand electronics and appliances retailer, who spoke on the condition of anonymity due to a non-disclosure agreement with the Korean electronics retailer Samsung.

More here | Smartphones see a muted ’23, this year may be better

“But we’re helpless here—and in order to drive better value in business, we’re expanding to more electronics categories and appliances," said this retailer. “Samsung, which was once our biggest value driver in terms of revenue, has become increasingly difficult to sell to buyers."

Analysts expect this predicament to persist.

“Consumers are not buying into Samsung’s marketing of AI features in their phones, and OnePlus has also had a meek quarter," said Navkendar Singh, associate vice-president at IDC India. “For some brands such as Motorola, pricing has also worked in their favour. On overall terms, Apple has retained its position of growth since there is ample room for the iPhone in India."

According to a senior industry analyst, who also spoke on the condition of anonymity, because of Samsung’s demand slowdown, coupled with Apple’s sustained growth, the iPhone maker is a clear number one in the smartphone market by revenue, followed by Samsung. IDC’s report pegged Apple to have sold over 4.85 million iPhones in the $600 ( ₹50,000) and above segment, accounting for 78% of the premium smartphones market in India during the first half of the year. 

Also read | Next Diwali, you may drive a sub- ₹10 lakh GenAI car

“In the near term, if new phones by Samsung and OnePlus do not show a spurt of changes in design and innovation starting in January next year, these long-established brands could further struggle in India, leaving the premium smartphones market to potentially see a slowdown as well," the analyst said.