Demonetisation to slow down PC, phone sales in Q4: IDC

Government's move to scrap old Rs 500 and 1,000 notes will lead to "immediate but temporary contraction" in the mobile phone and PC market in the October- December 2016 quarter, research firm IDC said today.
The ongoing cash crisis is expected to pull down feature phone shipments sharply by 24.6 per cent and that of smartphone by 17.5 per cent during the quarter compared to the previous three-month period.
Cyclically, consumer purchases see a slowdown post the festival season in India.
"However, this year with the demonetisation process underway, the sequential decline is likely to be higher owing to the cash crunch the country has been facing since the second week of November," IDC said in a statement.

This has already resulted in significant slowdown of demand across PC and mobile devices, not just in offline retail but in online channel as well, where cash-on-delivery (COD) contributes to a substantial portion of the sales, it added.
"Considering the poor sales due to the current cash crunch in the country, earlier estimates for mobile phone has been revised downwards by 4.5 per cent. In fourth quarter 2016, feature phone shipments are likely to decline sharply by 24.6 per cent and smartphones are expected to see 17.5 per cent decline sequentially," IDC India Market Analyst (Client Devices) Jaipal Singh said.

Smartphone and feature phone shipment stood at 32.3 million units and 39.9 million units, respectively in the July-September 2016 quarter.

"Although the early indications of October shipments were healthy, due to relatively poor sales in November, the inventory in channel is piling up which could take some time to liquidate as the cash deficit reduces," he said.
However, this is expected to be a temporary impact on the market as shipments are likely to revive to normal run-rate and channel inventory health to improve by second half of next quarter, he added.
The impact of the demonetisation drive is seen to be more prominent in tier III and beyond cities, where small retail shops transact more in cash and penetration of digital payments is yet to reach the levels seen in bigger cities.

IDC also anticipates that the induced cash crunch will
impact consumer's PC purchase as lower cash velocity forces postponing of discretionary purchases.
"More than half of PC buying from retail and exclusive stores in India is done through cash, hence we are anticipating that demonetisation should further bring down the consumer market by 33 per cent in Q4 2016," IDC India Associate Research Manager (Client Devices) Manish Yadav said.
He added that given that smaller cities are more cash driven, the magnitude of impact is expected to be larger compared to metros.
Tablet PC market is also estimated to see shipment fall 3-5 per cent.