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Retail channels gearing up to pip online smartphone sales this festive season

The smartphone market is showing signs of recovery in the second quarter (Q2) of calendar year 2023 (CY23), ahead of this year’s festival season. However, smartphone sales in 2023 via e-commerce may not reach the highs of last year, according to analysts.

One of the reasons why offline sales may lead is because brands are increasingly ramping up their offline footprint in the country. This, analysts said, would take away share from online sales this year.

“This festive season, the share of online smartphone sales will come down compared to offline,” said Shilpi Jain, senior research analyst, Counterpoint Research, a technology market research firm.

“We are seeing a rising trend in the offline market as online-heavy brands like Xiaomi, Realme and OnePlus are focusing on expanding offline retail channels,” she added. Jain said that in June this year, demand for offline channels grew as brands such as OPPO, Vivo and OnePlus recorded increased footfalls in their physical stores.

For instance, OnePlus’ smartphone sales, which had a share of 85-90 per cent via online, have come down to 55-60 per cent, Counterpoint data said.

Reduced offline restrictions, coupled with similar discounts compared to online, led to a spike in demand for offline channels, where customers can get a more personal and hands-on product experience, analysts said.

According to Faisal Kawoosa, founder and chief analyst at Techarc, a research firm, besides consumer demand, there has also been a fundamental change among online-focused brands.

“Compared to brands like Samsung and OnePlus, which have strong fundamentals across offline as well as online, brands like Xiaomi and Realme have been heavily dependent on online channels,” said Kawoosa.

“Brands intentionally kept their offline channels weaker as online was a hot-selling channel but that is changing now. Brands have now realised that they need to be well-rounded,” he added.

Shipments fell 16 per cent year-on-year (YoY) to 31 million in the first quarter of CY23 — the lowest first-quarter shipments in four years, according to International Data Corporation (IDC) data.

While inflation hit a two-year low in May, original equipment manufacturers (OEMs) reduced their sell-in during Q1, which improved inventory levels. Sell-in refers to the sale of goods to retail traders prior to public retailing.

Meanwhile, online retailers hosted multiple summer and monsoon sale events, accompanied by aggressive promotions to get rid of their existing inventory, which has improved the outlook for Q2, according to analysts.

What will also drive smartphone sales, going forward, is the premium category, which grew 53 per cent YoY this year.

This category has been a key growth driver, while the launch of affordable 5G devices in the Rs. 10,000-20,000 price bracket also stimulated growth.

In May, 5G device shipments crossed the 100-million mark overall, overtaking 4G device sales for the month, Counterpoint data signposts.

Analysts expect smartphone shipments to reach anywhere between 34 and 36 million in Q2 of CY23. This has resulted in an uptick in sales on e-commerce platforms like Amazon and Flipkart.

Amazon said it has witnessed double-digit growth in smartphone sales during Q2 of CY23. This was mainly driven by its growing portfolio of smartphones and continued traction for 5G-enabled smartphones from customers.

“Growth in the smartphone category is not just being driven by tier-1, but tier-2 and 3 cities, too,” said Ranjit Babu, director, Wireless and TV, Amazon India. “We have witnessed a continued growth trajectory from the previous quarter,” he added. Business Standard

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