Smartphone industry braces for a Roller coaster ride

The world is changing forever as the coronavirus lockdown forces many to adapt, including all the major global industries. One of the major disruptions is being faced by the smartphone industry and the associated supply chains.

Smartphones have become an extension to our physical bodies and essential tool in our day-to-day lives. A smartphone has become an essential necessity in people’s lives all over the globe.

People are always looking for the next, best, and latest in the smartphone. But, this appetite for novelty got arrested abruptly at the time of lockdown placed to prevent the spread of COVID-19.

There has been a significant influence across various entities that are dealing with smartphones including the customers, suppliers, retailers, and e-commerce companies. Smartphones are pivotal for the Indian economy, both directly and indirectly.

Robust demand & supply after the lockdown expected

Lack of stocks

The average smartphone sale per month in the pre-lockdown India was about 1.4 to 1.5cr every month. The majority of these customers are the ones who are buying a smartphone for the first time, while the remaining ones go for a new smartphone as a replacement or enhancement. 

Due to the lockdown, the whole equation of sales, supply, and demand went into a whirlwind of chaos. During the lockdown, the stocks in the marketing channel have been left stagnant at about 80 lakh to 1 crore units.

Distribution Channels Affected

A marketing channel is also known as a distribution channel, is the way by which products or services get from the producer to the consumer. All of the activities in between are part of a product’s distribution channel. This includes distribution, retail, company warehouses, and in-transit stocks. The whole of this intricate and essential system fundamentally got scrambled.

Increase in Demand For Smart Phones

Since India went into lockdown for about 2 months, the sale of 2.2 cr smartphone units got halted. Also, there has been a dip of 20 percent in demand. So, there is still an active demand for about 1.75 crore units. 

Big brands couldn’t stock up in time

It is important to note that some individual small mobile retailers delivered to end consumers during the lockdown by hoarding the stock with them.

In contrast, big multi-chain retail brands such as Reliance Digital, Vijay Sales, Croma, Sangeeta, Big C, Celekt, Poorvika, BNew, and others, including e-commerce players could not sale their stock due to lockdown restrictions.

However, there is still substantial demand left. This is proved by the fact that, just after the lockdown got partially lifted, about 80 lakh to 1 crore vanished from all these major retail outlets in just 3 to 4 days.  This obviously points to the pent up demand accumulated in the market.

On the other hand, the supply is significantly lagging behind with the availability of only 50 – 60 lakh units. We are projecting that this demand scenario is going to continue for 15 more days till the production catches up to the required 1.5 cr, which may eventually lead to major price drops and over stockings of the channel.

TechRappo Survey Yields

On the similar note, according to Techrappo survey of 10000 smartphone customers, 95 percent of consumers are willing to take phones costing less than Rs.10000.

Feature requirements during present conditions

They prefer opt for notch display, dual or triple back camera, less 4 GB RAM. To be specific, they are eyeing the category which includes smartphones such as Redmi 8A Dual, RealMe C5Y, and other similar ones.

We are projecting that all the smartphones which now cost Rs.12k-15k are going to likely come down to Rs.8k – Rs.10k range soon.

The temporary spike in the market along with restriction in logistics and non-serviceability to certain areas may create delivery issues for e-commerce companies for some time.

Rush to Retail Outlets

On the other hand, this may lead to a temporary spike in retail sales across all regions including urban and rural. As a consequence, this will prove to be a golden time for many bricks and mortar retail players.

In this short period since the lockdown eased, most of the retail establishments have made good margins in spite of an increase in GST and other taxes.

Interestingly, all the stagnant stock of EOL and nonperforming smartphone models has been cleared during this short period of time.

Conclusion

According to this evolving situation, Techrappo experts suggest that time is ripe for companies to shift their focus towards development and production of 5G handsets as the channels for all the 4G devices will soon get cleared off in the next few months.

This is the best time to prepare a master plan for companies to create the necessary channels for the imminent domination of 5G technologies.