EMI, discount schemes help firms sell more smartphones
Firms offer discounts, payment plans to price-sensitive Indian buyers to improve marketshares
Premium(Bloomberg)
Mumbai: When Apple Inc. started selling iPhones on equated monthly instalments or EMIs in January, price-sensitive Indian buyers began lapping up the handsets despite a weak economy.
Indians can now buy the ₹ 45,500 iPhone5 (16GB) by paying only ₹ 5,056 upfront and the rest in equal instalments.
Apple had begun offering price discounts on its older models, including the iPhone4 and 4S, in October, ahead of the launch of iPhone5 in the following month. As a result, Apple’s marketshare, which was pegged at less than 5% in India till the end of 30 September, has improved.
“Sales of Apple’s iPhone, across all its models, have increased by over 50% sequentially in the October-December quarter," said Anshul Gupta, principal research analyst at Gartner Inc. He didn't disclose the number of handsets Apple has sold.
EMIs and discounts are not the only reasons for the surge in sales, Gupta said. Apple’s decision to add more distributors, cut prices of its older models and the introduction of the iPhone5 has also helped, he said.
Apple is offering financing schemes “to promote sales of products like iPhones, which despite generating high amount of interest, had their adoption inhibited due to their exorbitant price points," said Abhishek Chauhan, senior consultant, information and communications technology (ICT) practice at research firm Frost and Sullivan (India) Pvt. Ltd.
Rival Samsung India Electronics Pvt. Ltd had followed suit on 1 March with its own finance scheme, which charges zero interest, no processing fee and requires no upfront payment for buying the ₹ 37,380 Samsung Galaxy Note II smartphone. This is not the first time that Samsung has made such an offer.
“I think affordability plays an important role for customers looking at upgrading their devices and to that extent the finance offer plays an important role in bridging the gap. Having said that, I think the consumers look for the best value as opposed to the best price in the market," said Asim Warsi, Samsung Mobile.
The fact is not lost on handset makers.
Nokia India Sales Pvt. Ltd, too, is reintroducing its “Easy EMI payment" offer for three months and six months across its range of devices by the end of this month in some stores across top seven cities, said a company spokesperson in an email on Tuesday.
The company had introduced this scheme three years ago but had discontinued it later. “With the mobile phone emerging as the most preferred personal device, consumers today are aspiring for more feature-packed devices and investing more in new technology. Easy payment options are, therefore, definitely an important deciding factor in purchasing handsets," said Kannan Gopalakrishnan, director retail, Nokia India.
Price discounts have played an important role in increasing sales. “In the Indian market, pricing and discounts are the most important factor for mobile phone sales," said Gupta. In an internal survey, Gartner discovered that buyers rated price as the most important factor when buying a smartphone. “Quality and brand design were rated below pricing and promotions. This trend was consistent across all kinds of mobile phone buyers," said Gupta. Technology advancements in smartphone devices are also making them more affordable for consumers in India. Competition is also leading to better smartphones at price points that are lower than their previous versions.
“Budget and the price of mobiles comes first for me, and then the configuration and applications of those smartphones," said Shailesh Moralia, a 35-year-old mulitnational company executive.
As a result, prices of smartphones have progressively declined.
For instance, Apple slashed the price of iPhone 4 (8GB) in October to ₹ 26,500 from ₹ 37,900 before the launch of iPhone5 in October.
Nokia, too, has dropped the prices of its Lumia range of phones after the launch of Lumia 920.
Lumia 710 now costs about ₹ 13,500 compared to ₹ 15,500 earlier while the price of the Lumia 510 was reduced to ₹ 10,000 from ₹ 11,500 earlier.
The Lumia range of phones “are clear examples of this—that we are taking high end innovation to new price points," said Gopalakrishnan.
Pricing push on smartphones was started by Indian brands (like Micromax Informatics Ltd), based on which, large international players also followed suit, according to Himanshu Chakrawarti, chief executive officer, The Mobile Store Ltd.
The whole category of smartphones which would earlier start from ₹ 11,000 onwards is now around ₹ 5,000-8,000, he said. Smartphones which made up just about 20% of The Mobile Store’s total sales in India two years ago, now account for 88% of its sales.
Multinational mobile makers have also introduced sub- ₹ 10,000 smartphones in the last one year such as Nokia’s Asha Touch Range (priced between ₹ 4,000 and ₹ 6,500) and Samsung’s Galaxy Y smartphones (priced ₹ 6,190 onwards) which compete with lower priced smartphones by Micromax (lowest priced Android OS smartphone A25 at ₹ 3,500) and Karbonn Mobiles India Pvt. Ltd (Android smartphone A1 plus priced from ₹ 4,100).
According to industry estimates, the sub ₹ 10,000 phones account for 50-55% of the smartphone market in India.
Smartphones sales more than doubled in 2012 to reach 20-22 million units, according to researcher Convergence Catalyst’s 28 February report. Led by high demand for smartphones, the total mobile phone market in India has crossed 218 million units in 2012, growing by 16% over the previous year, according to International Data Corp., (IDC) Worldwide Quarterly Mobile Phone Tracker report released on 3 March.
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