Note ban dent: Smartphone sales drop 31% in November, Chinese vendors gain

Sale of smartphones in top 50 cities in India plunged 31 per cent in November due to demonetisation. Sale of handsets in smaller towns, too, suffered heavily as consumers postponed purchases. While Tier-I towns saw smartphone sales declining 32 per cent month-on-month, in Tier-II and III cities, and smaller habitats, sales dipped 30 per cent, analyst firm International Data Corp said in a report on Tuesday.

“Demonetisation has impacted the smartphone market at almost all levels, including the customer demand and stock movement in the distribution channels. There was a huge drop in inquiries and significantly reduced footfall at the retail level”, said Upasana Joshi, senior market analyst at IDC India.

While the impact of note ban was felt across markets, it is the Indian brands that have been hit the most. Sales of smartphones from Indian vendors dropped 37.2 per cent in top 50 cities in November, compared to the previous month.

Chinese vendors gained at the cost of local players as their market share went up to 40.7 per cent from 38.3 per cent in October. Drop in Chinese handset sales, too, was lower than Indian brands at 26.5 per cent. Market share held by companies from other countries remained unchanged at 35 per cent.

In Tier-I cities Chinese manufacturers captured 42.6 per cent market share after the note ban – up from 38.7 per cent in October. While Indian players lost over 2.5 percentage points as their market share went down to 24.2 per cent from 26.8 per cent a month ago.

Dismal performance of Indian players continued in smaller markets as well as their share fell to 24.2 per cent from 26.6 per cent in Tier-II, III cites and areas beyond these as global brands gained. Share of brands other than Chinese and Indian increased to 36.8 per cent.

According to analysts at IDC, in the offline channel, while the Indian vendors were struggling, the Chinese vendors like Oppo & Vivo pulled in strong demand due to the strong distribution network. “Better partner incentive schemes and promotional activities during the slowdown” aided their growth, market analyst Varun Singh said.

Market share of Indian brands have been declining since 2015. During the past two years, Chinese firms have gained at least 20 per cent share of the market – from some 15 per cent in 2014 to over 35 per cent in 2016.

The impact of demonetisation was felt more in the sub-Rs 13,000 category where most purchases are in exchange of cash. This segment accounts for nearly 80 per cent of the total smartphone market by volume.

“Interestingly, the premium smartphone segment saw some growth during the weeks following demonetisation, wherein consumers were seen rushing to buy higher priced smartphones using the demonetised currency, with reports of these high priced models being sold at a premium”, Joshi said.

It estimated that the impact of liquidity crunch on the market will be temporary and sales may reach the normal level by February.