New Delhi, August 8, 2016:Â Online purchase of smartphones in India has seen a sharp fall in the first half of 2016, a near reversal of the uptrend seen in the previous year when consumers flocked to websites or mobile applications for purchases.
The drop could have been in part due to the tightening of ecommerce rules in Marchâ€”which led to fewer discountsâ€”and the decision of several online-only brands, such as Xiaomi, LeEco and Micromax’s Yu Televentures, to sell devices offline too, according to Counterpoint Research, which said the share of online sales for smartphones dropped to 32 per cent for the six months to June 2016. It was 37 per cent for the six months ended December 2015, and 28 per cent in the April-June quarter of the same year.
The downtrend in 2016 had set in in the January-March quarter when online sales accounted for 33 per cent of overall phone sales.
International Data Corporation’s (IDC) senior research manager Navkendar Singh noted a surge in offline sales as per the firm’s preliminary analysis of the quarter ended June 2016. Singh said he expects the trend to “continue as vendors realise the importance of setting up robust offline distribution network”. IDC is yet to officially release its data for the quarter.
However, ecommerce majors Amazon and Flipkart disputed Counterpoint Research’s findings, saying smartphone sales on their platforms have remained strong.
“One of the key drivers for online sales has been convenience, assortment and special price or discounting. If one of these factors is taken away, then consumers that were buying for that factor will not find it lucrative,” said Atul Jain, chief operating officer of Chinese brand LeEco’s smartphone business.
In March this year, the government issued new rules for 100 per cent foreign direct investment (FDI) in the retail sector, prohibiting e-commerce players to directly or indirectly influence prices of goods or services on their platforms, levelling the field with offline players. This basically meant the companies could no longer indulge in deep discounting, one of the key reasons that attracted consumers to the platforms.
As a fallout of these changes, many online consumers have turned to offline stores, said a top executive at one of the country’s largest chain of stores selling mobile phones.
Manu Jain, India head of Chinese smartphone player Xiaomi, said brands that have different prices for online and offline stores, would have seen a change in consumer behaviour.
Xiaomi, which began as an online-only brand in India, has started to sell in mom-n-pop shops and large-format retail stores, and expects sales from offline to grow to 30 per cent from 10 per cent of its total volumes by end of 2017.
“Apart from this (reason), we have also seen decline in number of online-only specific SKU’s (models) and the brands which were having a strong presence in online only segment also started investing in their retail operations starting 2016,” said Tarun Pathak, senior analyst at Hong Kong-based Counterpoint Research.
However, Flipkart and Amazon countered the data and trends, saying the online mobiles industry is pegged at 33-37 per cent and that the segment still has tailwinds that will lead to growth.
“Smartphones is one of the fastest growing sub-categories, witnessing over 48 per cent (QoQ) growth in 2016. In June this year, smartphone sales doubled as compared with January,” said an Amazon India spokesperson.
Ajay Yadav, vice president for mobiles at Flipkart, said the online channel is set to rule the Indian smartphones market, which will also be backed by growth in the 4G phones segment.
“Share of online sales in smartphones has increased by 2 per cent in the last quarter as compared to December 2015 as per our estimates,” he said.
Some like Counterpoint’s Pathak say that as India approaches the festive season, consumers will see a spurt in online discounts, spurring sales through the online channel at the cost of offline.
Pathak said he expects the online segment to make up almost 40 per cent of the total smartphone sales in India by December 2016.