The Indian smartphone industry has shown a decline in sales since 2019. This is because it is believed that India is at a “tipping point” in the growth of the middle class.
Some of the reasons emerging are sluggish demand and rising consumer preference for refurbished smartphones.
Senior Research Analyst Shilpi Jain said with the current market dynamics they are noticing a change in consumer behaviour. According to their observation, demand is now higher during promotional periods. For this, they gave an example of how at the beginning of the quarter, there was a surge in demand due to Republic Day sales, and after that the demand dropped significantly.
There are other important reasons behind the decline in the Indian smartphone market, and they are as follows:
As mentioned earlier, with the opening of two of Apple’s stores—one in Mumbai and the other in New Delhi—cheaper rivals are finding it difficult to sell their phones. In fact, according to research firm International Data Corporation (IDC), 31 million smartphones were shipped in India in the first three months of 2023, which is 16% less than the same time in 2022. Moreover, this shipment is considered the lowest first quarter shipments in four years. IDC also highlighted that demand for smartphones has declined due to an uncertain economic outlook and as the stockpiles of handsets remain high.
Another reason given by analysts for this is “premiumization.” This is a phenomenon that occurs when wealthier consumers move toward more expensive products. However, brands like Apple and Samsung benefit greatly from this, and cheaper brands like Xiaomi and Realme see a decline in their sales. From a bird’s eye view, the contrast between Apple’s sales and the shrinking market for cheaper devices reflects India’s uneven post-pandemic recovery.
India Ratings and Research said the population in the bottom half of the income pyramid is suffering because of the K-shaped recovery, which is preventing broad-based consumer demand from developing and hampering wage growth. It further indicated that while demand for luxury goods such as cars, cell phones, and other products is evident, the desire for items for mass consumption is still subdued.
To understand this better, take the example of how, before the pandemic hit, sales of entry-level scooters dropped by 20% in April this year compared to April 2019. This clearly shows that the customers with lower incomes are “hesitant to upgrade”, according to the president of the Federation of Automobile Dealers Association, Manish Raj Singhania.
On the other hand, one scenario that cannot be ignored is the ongoing problems in India’s rural economy, exacerbated by extreme weather and climate change. Although spending on household goods and services increased by 20% in March 2022, it fell sharply this year. It should be noted here that the credit for this also goes to the increase in interest and high inflation in the country.
It should be noted that the smartphone market in India is currently driven by Apple and Samsung, and thus, analysts expect a modest growth this year. Butto capture this growth, it is important that 5G devices and other market drivers offer compelling utility for consumers.
But as said, the global smartphone market as a whole is likely to struggle for the next two quarters due to various factors such as low consumer confidence, supply chain problems and above all, the ongoing price increase.
Proofread and Published By Naveenika Chauhan