15-09-2017 Shelley Vishwajeet
AFTER BUMPY RIDES IN THE PAST TWO QUARTERS, THE APPROACHING FESTIVE SEASON SHOULD CHEER UP THE INDIAN SMARTPHONE MARKET BY SHELLEY VISHWAJEET
The first day of Sharad or Maha Navratri has traditionally heralded the onset of festive season in India with major festivals popping up one after another till Holi (Basant Panchami). And since the festive dates follow a lunar cycle, they keep changing each year (though they remain the same according to lunar calendar). This year, Navratri begins on 21st September.
Festive season is also the time when people indulge in generous shopping; especially await to purchase the big ticket items like car and jewelries with market peaking up around Deepawali. This is also the time when general mood remains elevated helped generously by the cool weather after exasperatingly prolonged hot and rainy season which also makes it the best time for companies to promote their products.
Historically, the sales during festive seasons have also been highest. And this festive season should prove to be slightly more welcoming for companies, especially phone makers which have had a bumpy ride this year for various reasons.
For the first two quarters, the potential demand for smartphone in India didn’t really translate into sales as like many other consumer durable segments it got hit hard by a series of unexpected events such as demonetization and GST rollout, which created liquidity crunch in the hands of consumers leading to slump in the market. A recent Canalys report states that the Indian smartphone industry witnessed a negative growth for the first time in history as there was a considerable decline in the sales of smartphones across leading brands in the country in Q2 2017 – the reason cited by it was the GST effect. The year-on-year decline was pegged at 4 percent for the second quarter.
IDC has a slightly more positive take on the market impact. The latest International Data Corporation’s (IDC) Quarterly Mobile Phone Tracker reports that 28 million smartphones were shipped to India in Q2 2017, which is a modest 3.7 percent Quarter-on-Quarter (QoQ) growth and a meager 1.6 percent Year-on-Year (YoY) growth. Nonetheless, it also points out that just as the market had started to recover from the impact of demonetisation from late last year, the implementation of the Goods and Services Tax (GST) in the country from July 2017 meant weak sell-in shipments in the second quarter as the focus was on clearing the existing inventory. However, vendors’ proactive steps on absorbing the impact of GST helped to stabilise the sell-in for the month of June.
Good news is that though the third quarter of the year started slowly as the sales channels adjusted to the new taxation system but they quickly recovered within a few weeks. The Indian smartphone market is now preparing for the biggest quarter so far; offline channels have already cleared the old stocks, eTailers are getting ready for mega online festivals, and vendors are set to launch new models in the Diwali festive period.
“The sentiment is indeed positive in the market. All the ambiguities have cleared now, and vendors are gearing up for the upcoming festival season to recover from the slow start in the first half of this year,” says Jaipal Singh, Senior Analyst, IDC India.
Indeed as companies gearing up to announce lucrative offers to attract buyers. The leader Samsung has already announced price cuts on its bestselling models ‘Galaxy A5 and A7 smartphones ahead of the festive season in India. Others are expected to follow suit soon. Last year all major brands such as Panasonic, vivo, Oppo, Xioami, Micromax, Lenovo had rolled out mega festive offers to push up sales.
Recovery is also expected this festive season for Indian brands which had been reeling under the dual impact of domestic turbulence as well as onslaught from Chinese vendors.
“Indian vendors have shown an early sign of recovery and now when most of them are ready with their 4G product portfolio, a new set of China-based competitors have entered in the sub-USD150 segment” says Upasana Joshi, Senior Analyst, IDC India. “Indian vendors are putting all their efforts and second half of year will be crucial, either it will see a revival of Indian vendors or emergence of new dominance in the sub- $150 segment from China based vendors,” adds Joshi.
Samsung retained its leadership position with a marginal decline of 4 percent from the same period of last year. Samsung is already facing pressure from China-based vendors in the mid-tier segment and competition has intensified even more for the vendor as the online-focused vendors have started to strengthen their grip in the offline segment.
Xiaomi secured second place with a healthy 25 percent QoQ growth in Q22017. The vendor continues to expand its offline presence with the opening of Mi homes, Mi authorised stores and partnering with the key large format retail stores. This helped Xiaomi to triple its offline shipments in the second quarter of the year. Also, Xiaomi’s Redmi Note 4 with over 2 million shipments in Q22017 has become the highest shipped smartphone in a single quarter in the history of Indian smartphone.
vivo remained in third place with 26 percent QoQ growth and captured 13 percent market share in Q22017 – a significant jump from a mere 4 percent market share in the same period last year. New launches coupled with aggressive investments on above-the-line marketing activities and in-shop promotions were the key driving factors.
OPPO climbed up to the fourth place, though shipments declined by 13 percent QoQ. OPPO has strengthened its portfolio in the US$200-US$300 segment and aggressively positioning itself as a strong competitor in this segment.
Lenovo (including Motorola) slipped to fifth place as its shipments declined 25 percent QoQ. However, its Motorola brand saw a healthy 17 Percent QoQ growth contributed by a couple of new launches at the end of quarter.
Overall mobile phone market shipments saw a modest 6.5 percent QoQ growth after declining consecutively for two quarters. 34 million units of feature phones were shipped in the Q22017 with 8.9 percent growth from the previous quarter but remained flat as compared to the same period last year.
The Forecast: Historically, the third quarter of the year is also the biggest quarter for feature phones as most of the purchases happen during the festival time and vendors start filling the channel in preparation. Feature phone market is going through a transformation as much awaited Reliance’s 4G feature phone is expected to hit the market in the Q3 2017.
“Reliance’s 4G Jio Phone has created an excitement both in the channel and consumer front. This may stabilize the declining feature phone market in the short term and year 2017 is expected to end with a similar volume as last year,” says Navkendar Singh, Sr Research Manager, IDC India. “Experience of early adopters will be crucial for the 4G feature phones in the 2G dominated categories. Network connectivity, battery performance, and internet enabled multimedia experience will carve the path to the next phase for this category,” adds Singh.
Acche din for smartphone companies are indeed around!