NEW DELHI: Mobile phone makers plan to move their sales to cost-effective online stores post the covid-19 induced lockdown, industry executives said on Wednesday.
There will be greater focus on budget and mid-range phones, offering discounts to get rid of old inventory. Moreover social distancing norms means offline sales through physical stores would become a tougher proposition.
For offline retailers, selling some of the existing products through established online platforms like Amazon can be a burden as they charge higher margins.
Samsung has tied up with more cost-effective online platforms like Benow to help the already stressed offline retailers to sell their phones through online channels.
Other OEMs are also considering the same. Compared to Benow, bigger e-commerce stores like Amazon charge 5% as referral fee percentage on cell phones.
“It is a good option for delivering products within the city limits for offline retailers. They don’t charge anything from retailers for listing their products and have their payment platform. We just have to manage the stock in our store and deliver them when an order comes through," said Manish Khatri, partner at Mahesh Telecom.
Once the lockdown is lifted, Realme plans to engage with customers through online channels along with the e-commerce partners like Flipkart. “We are taking a pause on our offline expansion due to the situation and will take more conservative approaches," said Madhav Sheth, vice president, Realme and CEO, Realme India. "Once the situation is normalized, we will reach out to customers through a strong offline channel strategy."
Many OEMs would be forced to re-evaluate their channel strategy after the lockdown lifts. “You might see more online to offline strategy where customers can order online and book a time slot when they can go and pick the phone from the store," feels Tarun Pathak, associate director, Counterpoint Research. This way the retailer can continue to sell phone without causing overcrowding in line with the social distancing norms as mandated by government.
Fall in demand is another issue, as many would lose jobs or will have to live with pay cuts. Faisal Kawoosa, founder and chief analyst at techARC points out, buying a phone will no longer be elective, but will be driven by need. "Also, we will see shifts in demand side like people who would earlier spend ₹50,000 on phones will now look for an option for under ₹30,000."
Sheth agrees that mid-premium to flagship segments will be impacted that due to loss of income, which will lead to greater traction in the budget to mid-range phones as compared to last year.
Trying to get phones classified as essentials will also go a long way in helping them getting their business on track. “If phones get registered as essentials, both selling and manufacturing can start right away. If manufacturing doesn’t start soon the supply for coming months will also get disrupted," adds Kawoosa.
Selling the existing inventory will be a big issue for retailers. By the time lockdown is lifted, they would have already lost over 4 to 8 weeks of sales. Selling those old models will be difficult. Pathak points out, the inventory will not move as fast as before. Retailers will need some sort of relief like payout polices, where OEMs can ask retailers to pay after 7 weeks instead of 2-3 weeks. The other thing they can do is take back some of the older stock and sell them through online channels.
“We can expect heavy discounts from OEMs as they would want to get rid of older stock as it will impact their bottom line. No OEM would like to remain behind in terms of product planning especially during a transition phase from 4G to 5G," Pathak adds. iQOO has already slashed prices of its flagship iQOO 3 smartphone by up to ₹4,000.
Due to disruption of supply chain, servicing will also be affected. Many OEMs have extended warranty on phones until May 31.
“We have also increased the warranty by 90 days, while replacement period has been extended by ten days post lockdown," said Gagan Arora, director- marketing, iQOO India.