Phone companies sweeten retailer deals ahead of festivals

Top handset makers Samsung, Realme, Oppo, Vivo and Xiaomi will offer higher margins and out-of-the-box incentives to retailers to push smartphones in the run-up to the make-or-break festive season, which contributes around a third of annual sales for these brands.

They will also indulge in targeted marketing of devices that have been unaffected by a global shortage of chips.

To push sales, these brands are offering retailers international trips, Covid-19 insurance and helping out with their household chores, such as grocery shopping, electrical works and plumbing.

Retailers say some brands are pushing models priced more than Rs 15,000, at the cost of lower-priced devices due to inventory challenges.

Executives at advertising and media-buying companies representing smartphone and auto makers say there is no pullback yet on advertising spends though they will be recalibrated in the festive months from September to December, a period which contributes about 40-50% of their annual ad spends.

“There is no reduction or pullback in ad spends by handset makers. But they are expected to promote models which are not dealing with the shortage (of chips),” said Shashi Sinha, chief executive of media buying group IPG Mediabrands.

The festive season is a critical time for the industry following a sharp dip in sales in the April-June quarter owing to the Covid-19 second wave, said a senior executive at one of the top-five smartphone brands. Though demand has revived since then, the months ahead of Diwali will play a crucial role in determining how the year pans out.

Firms tracking the smartphone market say brands may struggle to meet demand this festive season due to supply challenges.

Smartphone brands could see a 5-15% shortfall in shipments in the lead-up to the festive season, said Faisal Kawoosa, founder of tech market research firm TechArc. Companies cannot afford to be conservative, said another executive at a top smartphone brand.

“One must remember that most buyers don’t quite understand supply crunch (issues) and whether the device in the market is new or old. In festive times, the buyer will buy the device available, depending on the budget,” the person said.

Brands will, however, be selective about directing ad spends. They may spend on outdoor advertising only in select locations with higher footfalls.

“For example, air travel hasn’t hit its peak,” the executive said. “So, will brands want to advertise around airports at the previous levels?”

Ashish Bhasin, chief executive (APAC) and chairman of Dentsu, said products that deal with chip shortages will not be advertised till supplies resume.

A Jaipur-based retailer said brands that retail phones of Rs 15,000 or more have “told us to push for their sales and not give prominent displays to cheaper ones”.

Brands have assured retailers of increased margins if they cross targets.

Realme said it will provide Covid-19 insurance worth Rs 2 lakh.

“Not only this, but we are also helping them with groceries, electrical work, plumbers etc so that their families are at ease when they are working,” said Deepak Nakra, offline sales head, Realme India.

A Mumbai-based retailer who is a member of Samsung’s President Club said “if you are part of the Club and meet your targets, then there is an all-expense paid international/domestic trip. This was not there last year when we were given robot vacuum cleaners, exercise bikes etc.”

Market leader Xiaomi will give its “preferred retail partners” better margins if they sell some higher-value models that are currently in stock. “Margins of handset players vary between 3% and 9% depending on the model,” said a Mumbai-based retail partner, adding that there were not many incentives on offer last year as the trade had just reopened following a three-month Covid-19 induced lockdown. Financialstory.in