Better deals, bigger discounts: Smartphone market preps for festival revival

This is crucial, since the September quarter marks the festival season in the domestic market—which accounts for nearly 40% of the entire year’s gadget sales in what is one of the world’s largest consumer markets.

Five industry analysts and retailers that Mint spoke with said that this year’s festive period expects to see a mid-single digit uptick in sales of smartphones. This is in stark contrast to the past three years, where quarterly shipments of smartphones registered double-digit declines in the festival quarters of 2021 and 2022—and remained flat last year.

Nilesh Gupta, director of national multi-brand electronics retailer Vijay Sales, said that sales and shipments of devices in the first half of the year is a key indicator of a revival of fortunes in this festival season.

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“Coupled with a strong first half, we’ll also be ramping up Diwali sales and promotions, and brands will be driving better deals and discounts to grab more buyer attention. Given how this year has gone so far, we expect this festive season to be better than the last three years," Gupta said.

New launches

Gupta’s assessment is in line with how brands are looking to align themselves in this industry. A senior industry executive with direct knowledge of the matter said that between August and November, the likes of Samsung, Xiaomi and Vivo are expected to host multiple new launches of smartphones—right in time for the festival period.

Manish Khatri, partner at Mumbai-based electronics retailer Mahesh Telecom, added that a number of brands are already rolling out a wider range of offers in anticipation of festival season demand.

“Samsung, for instance, is introducing cashback offers and instant discounts, along with zero-interest financing options. All of these can be clubbed together. There are also many instances of freebies such as power banks or smartwatches being bundled with certain categories of smartphones, all of which gives us hope for a better festive quarter than the previous two or three years," Khatri said.

To be sure, brands have struggled to draw in new smartphone buyers organically, thereby hurting festival season sales since smartphones are the biggest contributors to the consumer electronics industry. However, the rising average price of smartphones sold has kept the industry afloat—from ₹12,600 in the 2021 festival quarter to around ₹22,400 today, a near-80% rise in the average price has boosted quarterly revenue.

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For the smartphone industry, this meant $12.5 billion in potential quarterly smartphone revenue this year against $8.1 billion in 2020—despite an 18% overall drop in quarterly shipments.

Inverse relation beween price, shipments

It is this that brands are desperate to change. A senior executive at one of India’s top smartphone brands said on condition of anonymity, “Given the core nature of India’s consumers, you can’t expect prices to continue on an upward trajectory indefinitely. At some point, we’ll hit a ceiling, which can hurt us in the long run. To ensure that this doesn’t happen, we’re doing what we can from our end to boost volumes in this vast market once again."

Analysts largely concur, but state that there could be one key tradeoff. Navkendar Singh, associate vice-president at market researcher IDC India, said, “Brands will look to revive shipments, and our outlook for the festive period does suggest growth. But, this is likely to come at the cost of declining average prices. It’s unlikely that shipments will grow along with a rise in the average prices, because fundamentally, there is a demand problem right now in our economy."

Singh further added that the average prices per smartphone may come down by nearly 30%, if brands were to drive higher sales volumes this year.

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“Many deals and discounts are available throughout the year. Buyers in the smartphone market today are only upgrading from older devices, and such buyers don’t wait for the festive period to make purchases. This means that today, it is incrementally more difficult for smartphone retailers to sell more devices than before, and the three-year upgrade logic does not always apply," he said.

Khatri also said that increasing competition among retailers, as well as brands promoting outlets that serve as single-brand physical experience points, have hurt retailers in general. “This is good for buyers, because between local stores and online ones, they’ll find the right deal anyway," he added.