Festive season comes early to smartphone showrooms

Phone retailers said brands have already rolled out exchange bonuses, financing offers and bank-linked discounts to revive the $40-billion smartphone industry in India. To be sure, these are not just the simple bank-linked discounts and exchange deals that buyers have come to expect on e-commerce platforms such as Amazon and Flipkart for a decade now.

Nilesh Gupta, managing director of Vijay Sales said that under one of the schemes, a buyer can hand in an old phone, choose a new phone in a higher category, complete finance paperwork and walk out with a new phone -- all without a down payment. "In some cases, this ends up giving buyers up to 50% better exchange value than what they would have gotten normally," said Gupta, whose 56-year-old retail chain operates 132 stores across the country.

Wooing buyers at stores

Samsung, the largest smartphone seller in India, has set up experience zones at showrooms and offers multiple in-house financing schemes with paperwork that can be completed in 10 minutes, Gupta said. Xiaomi, the third-largest, is also increasing its presence in showrooms. The two phonemakers did not respond to emailed queries.

 

“There is a decline in consumer sentiment, but we are seeing buyers come in more often and not wait until the festive season in order to upgrade their smartphones. This is pushing brands to extend various offers and schemes beyond the core festive season, where the uptick in sales is more evident in categories such as home appliances," Gupta said.

Executives at two multi-brand retailers in Delhi-NCR and one in Kolkata said on condition of anonymity that top brands began discussions on the pre-festive offers last week, adding details were not finalized so far. One of them said brands have withdrawn dummy devices from showrooms, and most ‘experience zones’ are reserved for exclusive retailers.

“Having dummy units of flagship devices is key to the physical retail experience, which is the sole reason for which buyers walk into a store. Most brands have also started adding clauses such as minimum sales targets and prolonged lock-in periods for procuring demo units, which becomes an expensive liability because retailers are already struggling with super-thin margins. Even with offers, it’s difficult to sell without having demos and dummy models in stock—the pressure is now to become an exclusive single-brand retailer partner of a brand, which is difficult business-wise," the retailer said.

Return to pre-covid volumes

To be sure, the domestic smartphone market is expected to be back at its pre-pandemic level by volume this year, even though it will likely remain 5% below the peak year of 2021, when buyers rushed to buy smartphones and laptops to meet work- and study-from-home mandates. By value, however, the market has grown -- In the past five years, the average selling prices of smartphones have risen by nearly 70% to around ₹22,000 ($265) as of mid-2024, up from ₹13,000 ($170) in mid-2020, building a $38 billion Indian smartphone market in 2023. This year, with further shipment growth and a marginal uptick in ASPs, the Indian smartphone market is tipped to cross $40 billion in gross revenue.

“Every deal and discount that e-commerce platforms offer are usually introduced in physical stores as well, although certain offers from brands may vary across retailers. There is price parity in the market, and since buyers are no longer walking in to make discretionary smartphone purchases, it is crucial for brands to extend offers in order to clear inventories," said Manish Khatri, partner at Mumbai-based multi-brand retailer Mahesh Telecom.

Smartphone shipments in the March quarter rose by over 11% to 34 million units, as per IDC data publishedlastmonth.

The availability of such deals will be key to the recovery of the smartphone market. Smartphone shipments in the March quarter rose 5% from a year earlier to 32.5-35 million units, data gathered from four industry analysts showed.

“There is a decline in consumer sentiment, but we are seeing buyers come in more often and not wait until the festive season in order to upgrade their smartphones. This is pushing brands to extend various offers and schemes beyond the core festive season, where the uptick in sales is more evident in categories such as home appliances," Gupta of Vijay Sales said.

Navkendar Singh, associate vice-president at market research firm International Data Corp. (IDC) India, added, “The June quarter is typically one of the weakest periods for the smartphone market, since buyers generally put off their purchases until the pre-festive and festive sales begin later this year. Going forward, there will be offers extended by brands since most projections point to a low-single digit growth of the market this calendar year."

On 10 June, Muralikrishnan B., president of Xiaomi India, told Mint in an interview that increasing affordability options for buyers will be key to the brand trying to sell more premium devices, as well as establish a presence in categories beyond phones, which is part of the company’s India strategy for the ongoing fiscalyear.

There are, however, challenges. Khatri said that even with pre-festive season offers, buyers continue to see a “stagnation" in what all brands are offering. “The ever-increasing flagship pricing is starting to bother buyers, and in the affordable ranges, even though budget 5G smartphones priced at around ₹15,000 are seeing some demand, there is no organic interest since most smartphones have become stagnant in terms of the features that they offer," he said.