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April 30, 2020
Written By ABHIK SEN AND SHISHIR BEHERA,
Despite the stress in the telecom space, call drops, and a sputtering economy, it’s been mostly smooth sailing for the upper end of the smartphone industry in 2019.
Delhi-based senior school teacher Jyotsna Varma, 46, has been using her iPhone 7 since Diwali 2018. Its all-in-one capabilities, friendly user interface, and robust performance continue to work for her so a handset upgrade is not imminent. But when it does happen, it will be to an iPhone 11, she says. Bengaluru-based Romit Dasgupta, 28, a senior analyst at an American bank, bought his OnePlus 7 Pro for its powerful hardware and call quality. Any replacement will be another premium handset, he says. He’d rather delay buying a phone than pick up a cheaper alternative.
It’s too premature—and a bit of a stretch—to liken it to a lipstick economy but there is an interesting parallel in the continued consumer indulgence in smartphones. The ubiquitous gadget—similar to the markets currently—is defying economic realities in India. Despite the stress in the telecom space because of regulatory issues, call drops, and a sputtering economy, it’s been largely a buoyant period for the upper end of the smartphone industry in 2019. Especially premium smartphones which are priced above ₹30,000, but below ₹50,000.
According to data from analytics firm Counterpoint TechnologyMarket Research, the premium market grew at 29% in 2019, while the overall smartphone market grew at 7%. And though premium smartphones account for less than 5% of the overall market, Counterpoint says the segment has the potential to grow 3x-4x.
To explain the Indian’s predisposition towards premium smartphones instead of cheaper alternatives, let’s rewind to 2014: There was a rush of first-time buyers (according to a report from market research firm IDC, smartphone users made up 35% of India’soverall mobile phone market in the quarter ended December 2014, compared to 13% in the year-ago period), facilitated by the entry of some Chinese companies, like Xiaomi, and home-grown players such as Micromax, Karbonn, and Intex, who built smartphones toa price, encouraging people to trade up from their feature phones.
Soon after, this was aided by the ease of4G and the advent of Reliance Jio with cheap data. People finally had access to high-speed Internet at a low cost. The focus shifted to data, and consumers became more inclined to spend on their smartphones, experts say. This led to a fall in the prices of smartphones. “As a result, today one can get a decent smartphone for as little as ₹5,000-₹6,000, something one couldn’t think of five years ago,” says Pinakiranjan Mishra, partner and leader, consumer products and retail, EY.
This led to more phone-time, exploring and finding new use cases: streaming or OTT (over-the-top) apps like Hotstar, Netflix, and Amazon Prime had started coming into their own; the better Internet speeds gave a fillip to online gaming, such as PUBG and Fortnite, as well. This was in 2016-17, when people were already on to their second or third smartphone. Soon after, aided by an upsurge in apps such as TikTok, consumers started spending more and more time on their phones. People were giving as much as four-five hours daily to their phone, says Tarun Pathak, associate director at Counterpoint.
Over five years, people have started seeing a smartphone as beyond just a phone—they use it for entertainment, social media, payments, and features like the camera, says EY’s Mishra.“Then the value perception of a higher-priced phone is very different. So, what I am getting out of a phone is far, far more than what I was getting out earlier.” That’s why many consumers don’t think twice before putting down money for a high-end phone.
Vikas Agarwal, general manager, OnePlus India.
Smartphone makers have noted this trend and have tied up with financial institutions to offer premium phones on equated monthly installments (EMIs), making it easier for people to purchase high-end phones. Pathak says that nine of 10 phones in India are bought on EMI, and other schemes such as trade-ins, buybacks, and online discounts have made it attractive for users to shift to premium smartphones. This, in turn, is raising the average selling price of smartphones in India.
But the ease and use aren’t the only reasons for buying a premium smartphone. “Smartphones are not just a utility item, but a very visible status symbol as well. This is especially so for consumers who cannot easily or immediately afford a more expensive publicly visible products such as a vehicle,” says Devangshu Dutta, chief executive of retail consultancy Third Eyesight. Counterpoint’s research says that the 18-24 age group is most aggressively upgrading to premium smartphones (they generally upgrade every 20-21 months), points out Pathak. But if they buy a $400 handset instead of a $100-$150 one, they may use it for longer, he says. Indians, on an average, upgrade smartphones every 24 months, compared to 32 months in developed markets, Pathak adds.
According to IDC, phones priced between $200 and $500 accounted for 19.3% of India’s overall smartphone market in 2019. That said, premium smartphones make for just a tiny part of all mobile phones in India (smartphones comprise 60% of the market). However, if the trend is towards a more western pattern of adoption, the growing interest of companies in the premium smartphone space is better understood. “Globally, the premium segment accounts for almost half of the overall market and it is also the fastest growing segment across all emerging markets,” says OnePlus India general manager Vikas Agarwal, 39. The capital-intensive industry operates on wafer-thin margins, with frequent technology disruption, making it “unsustainable” to focus on just the entry-level segment.“In contrast, premium users are discerning with higher brand loyalty which allows brands to reinvest in developing innovative technologies.”
That translates into higher margins as well. And competition is less intense in this segment, with a limited number of players, say experts. Therefore, once a company gets its features and price combination right, it’s a large enough market when one considers the different price points. Most players in this segment in India have one or, at most, two models.
realme, a relatively new Chinese brand, entered the segment last November with its X2 Pro. Madhav Sheth, realme vice president and realme India CEO, says his customers wanted “premium specs and top-notch look at a competitive price.”
Nipun Marya, head of marketing strategy, Vivo Mobile India
Sheth, 39, adds that “there has been an increase in the number of people wanting to own more premium phones even though the demand is still niche”. Nipun Marya, director-brand strategy, vivo India, says that the ₹30,000- ₹40,000 segment will form around 57% of the premium segment. “Although still niche and growing from a small base, aspirational Indian smartphone buyers are on a high,” adds Sanmeet Kochhar, vice president–India, Middle East and North Africa, HMDGlobal, which sells smartphones such as the Nokia 9 PureView.
A recent Counterpoint report indicates these smartphone firms are on the right track. In 2019, the ultra-premium segment (phones priced above ₹45,000) grew at 63% year-on-year, the report says. It helps that in a country of 1.3 billion, less than 500 million people use smartphones, so the market is largely under-penetrated. But Pathak says it’s not just about launching a product, but also about the image of the brand—something which can take years to build. In fact, sometimes, doing well in one particular segment could actually work against the company. Upasana Joshi, associate research manager, client devices, at IDC India, says that companies which are heavy on low-end products, face challenges to scale up the brand value. For example, a brand known in the budget segment (like Xiaomi) might find it difficult to make headway in the premium segment.
“A brand must build an identity that a customer can relate with. Today, a customer buys a premium phone not just for its features but the overall value it delivers. And this value comes from the harder aspect of the product and the softer aspect of brand personality. Hence, the need for a strong brand and customer affinity,” explains vivo’s Marya.
The other challenge is that people buying premium smartphones tend to hold on to them for longer, say up to three years. Therefore, companies need to constantly innovate to give customers “compelling reasons to upgrade”, Marya says. This also means that, as HMD’s Kochhar points out, since consumers hold on to their phones for longer, they need an experience that does not deteriorate over time. “This means the need for regular software upgrades for at least a couple of years.”
Customers’ expectations in this segment tend to be higher, which is where brick-and-mortar stores and/or experience zones play a key role. At these locations, people can experience the look and feel of the device before buying it. After-sales support, too, is an important consideration for such expensive devices.
Another concern is the global slowdown in smartphone sales. Can India keep the party going? realme’s Sheth admits that growth in the smartphone market is expected to be “in single digits in 2020, about 5%-6%”, yet he is upbeat about opportunities even in the slow market. As is vivo’s Marya, who explains that India’s premium segment is still at a nascent stage, contributing about 12.5% by value, and as such “it offers immense opportunities”.
A compelling reason for the brands’ optimism in the premium smartphone space is the ushering in of the age of 5G. While telecom companies have been slow off the blocks, experts believe that those in the age bracket of 18-24 years wouldn’t hesitate to buy a 5G smartphone, even if there’s no 5G network available.
“With 5G coming in, the power of the smartphone is expected to go up manifold, in terms of speed and ease of usage,” says Raja Lahiri, partner at Grant Thornton India. “5G will become a driver, provided it comes at the right price,” adds EY’s Mishra. Most companies Fortune India reached out to agree that 5G would be the next growth driver.
OnePlus founder and CEO Pete Lau believes the evolution of 5G could change the way a human interacts with technology. “The next phase of growth in smartphones will be artificial intelligence and augmented reality user experience and we look forward to driving this change,”adds realme’s Sheth. It will give users an incentive to upgrade, as also attract many first-time buyers of premium phones.
Agarwal from OnePlus adds that over the long term, 5G has the potential to revolutionise industries in India, especially across healthcare through real-time patient monitoring and medical data management, more efficient transportation, and better public safety measures to name a few. “As a major agrarian economy, 5G can also offer promising smart agriculture solutions through easier remote data collection, aiding automated processes,” he says.
As for the recent challenges in the telecom space, experts and industry sources say most consumers aren’t even aware of the regulatory issues, and many ignore the call drops, especially if they carry two connections. And if customers are dissatisfied, they can always port their number to another service provider, experts say.
While big hikes in data prices could be a threat, Indians who have formed a significant consumption habit won’t most likely be deterred by potentially higher data prices, Third Eye-sight’s Dutta explains, keeping India’s connection with the smartphone going for the conceivable future.
(This story was originally published in the March 2020 issue of the magazine.)
Source: fortuneindia
admin
April 19, 2020
Written By Anchita Ghosh
Now that many areas are out of bounds for big retailers for various reasons, is there an opportunity for local kiranas?
People queueing up outside a a kirana store
Tom Abraham, who runs a grocery retail outlet at HSR Layout in Bengaluru, thought of shutting it down as his shop attendants went back to their native place in Bihar after the lockdown was first announced. Plus he was facing problems in sourcing inventory.
Samir Wagadwala, who owns a kirana shop in the Mumbai suburbs of Andheri (East), didn’t find it viable to deliver just one or two orders at the doorstep of customers even as fewer people turned up at his store. Plus getting around the locality freely was a problem.
On her part, 77-year-old Mohana Kumari, who stays alone in an apartment in Noida’s Sector 50, which has been declared a Covid hotspot, has to regularly walk at least half a km to get her vegetables and milk from the nearest Mother Dairy booth.
Let us join the dots. What if there was a platform, which not only solved the inventory issue of the hyper-local businesses, but also provided the facility of delivering the products at the customers’ doorstep like the big e-commerce firms do? Now that many areas are out of bounds for big retailers for various reasons, is there an opportunity for local kiranas?
Well, the answer is yes. A host of business-to-business (B2B) e-commerce platforms have stepped forward to solve the problems of local kirana stores by supplying products and providing manpower, besides bridging the last mile in some cases by delivering products directly to the customer.
Indeed, after the first announcement of a nationwide lockdown on March 24 in the wake of Covid-19 outbreak, the kirana stores — that control 98 per cent of India’s $360-400 bn grocery retail market — were the ones to be hit the hardest. Their distributors couldn’t reach them, while their loyal customers stayed away. Within days, some shut shop. Some smart ones turned to B2B e-commerce platforms like Near.Store, Jumbotail, ShopX, Ninjacart and MaxWholesale. Though most of these B2B players have been around for some time, they have now become the lifeline for many hyper-local business owners.
So while Bengaluru-based Jumbotail solved the problems faced by Abraham by filling up his stock and providing staff support, Wagadwala’s concerns were addressed by Mumbai-based Near.Store, which has tied up many kirana shops with residential societies.
Wagadwala thanks his stars for being approached by Near.Store — a plug-and-play hyper-local tech platform. “I couldn’t go to Vashi, from where I procure food grains. Besides, there was a limit on the amount of grocery I could purchase. Near.Store helped me out with procurement to begin with. It is even taking bulk orders from the housing societies on my behalf and helping me with the delivery,” says Wagadwala.
Aashis Kumar, founder of Near.Store — which was launched just three months back — says the lockdown forced many mom-and-pop stores to down the shutters temporarily. “So we tied up with housing societies and brands. We aggregate orders from these societies online. Say a housing society with 100 people generates Rs 20,000-Rs 40,000 worth of orders in 12 hours. We give all the orders to a nearby kirana store,” he says. His firm also offers them the option of credit like the monthly credits given to customers by local shops.
Last week, MaxWholesale launched an app, Radius The Neighborhood, that streamlines communication between retailers and consumers and ensures contactless delivery. Samarth Agrawal, founder and CEO of MaxWholesale, says the idea is to empower the retailers with technology. “Every retailer serves 100-200 families in its neighbourhood. They don’t have the wherewithal to develop their own apps. So we decided to provide them with a system that will give their customers the experience of big business-to-consumer (B2C) e-commerce platforms.”
He adds his firm was working with some 13,000 kirana stores even before the lockdown. MaxWholesale’s Radius and Near.Store also help build catalogues based on the kinds of products stocked by these stores and the catchment area. This information is stored in the cloud.
Near.Store’s Kumar says the aim is to help small stores and chemists go online. “We have a database of over 200,000 products. We attach a small dongle to the stores’ billing system, which uploads everything they sell offline automatically. This helps list the products, besides creating websites for the stores.”
In 99 per cent of the cases, local shops leverage the supply chain facility offered by these platforms. Manohar Reddy, who runs one of Jumbotail’s J24 stores at Hadosiddapura in Bengaluru, says due to the lockdown, other vendors have stopped distribution. “But I got 100 per cent of my inventory via Jumbotail.”
This unbroken chain of supply has much to thank technology. Near.Store’s Kumar says often he comes to know when a store would run out of stock even before the owner does. ShopX CEO and co-founder Amit Sharma says a lot of brands have also been approaching these platforms to reach a store if their own supply chain is broken at some point.
ShopX and MaxWholesale are in direct touch with millers and mandis. “Models like these are emerging as an alternative to the traditional supply chain,” says Sharma, adding they are also working with the local APMC and police to find a solution to the problem of spoilage of fresh produce.
Most of these small retailers who have tied up with the B2B platforms say their businesses have grown by leaps and bounds since the lockdown was announced. Abraham, who has been working with Jumbotail for the last two years, says the value of his orders grew from Rs 20,000-Rs 30,000 per day to Rs 70,000-Rs 1 lakh per day now. Mohan Baby of C K Stores in Bengaluru says his store sales have grown to Rs 4-5 lakh per day in the last month.
That said, Devangshu Dutta, chief executive of management consultant Third Eyesight, says while retailers have been able to expand their businesses with logistics support form these platforms, they should be watchful the balance of power doesn’t shift to the digital partners.
“Over time, the customer relationship may shift to the platform. If you buy a product from a particular store or brand on the platform, Amazon for instance, you are still shopping on it. Over a period of time, if the platform sees a particular product is doing well, it may promote a directly-sourced competing product.”Pinakiranjan Mishra, partner and leader in consumer products and retail, EY, cautions it is too early to rejoice, both for the platform and the kirana owner.
The supply chain issue is temporary, so tomorrow “if the fast-moving consumer goods companies offer the products without additional cost, why would the retailers take help of the B2B firms,” he asks.
The other side of the coin is the new store and stock management knowledge that the kirana store owner is acquiring. “Now the kiranas know what it would take to ensure 50-100 per cent growth,” says Mishra.
Source: business-standard
admin
April 17, 2020
Written By Alnoor Peermohamed, ETtech
More sellers are signing up on e-commerce platforms such as Amazon and Snapdeal, anticipating recovery in offline demand to take longer in view of the nationwide lockdown being extended to May 3.
The government said e-commerce platforms would be allowed to sell both essential and non-essential items starting April 20.
There has been a spike in the number of signups and queries from new sellers in the run-up to and during the lockdown that began from March 24, the online retailers told ET.
“We now have 6 lakh sellers on our marketplace, up from 5.5 lakh in mid-Jan. The new seller registration run rate continues to be robust, with thousands of new sellers registering on our marketplace three weeks into the lockdown,” said an Amazon spokesperson.
Snapdeal also said it had deployed teams to assist new sellers in signing up on its platform, with large business centres such as Ludhiana, Surat and Salem seeing an increased number of signups.
“We are indeed seeing a spike in the number of seller queries with regard to the resumption of business and also new registrations. The government’s announcement of allowing business across all categories is providing independent sellers an accelerated and safe channel to resume their business operations,” said Rajnish Wahi, senior vice president – corporate affairs and communications at Snapdeal.
Walmart-owned Flipkart declined to comment.
A source in the company, however, said it was still too early to determine if there had been an increase in new seller signups.
Industry experts said this could be a stop-gap arrangement for sellers to kickstart businesses immediately.
“The fact is that small businesses are really cash-strapped and if they have to pay salaries to their employees, then they need to earn money,” said Devangshu Dutta, chief executive of retail consulting firm Third Eyesight. “The motivator for these businesses seems to be that they have inventories and e-commerce is a good way to get to the customer who is unable to get out.”
Source: economictimes
admin
April 15, 2020
The MHA has come up with fresh guidelines allowing e-commerce companies to operate, ensuring strict social distancing without any restriction on their timing and closure, after April 20
Written By Peerzada Abrar, Samreen Ahmad & Neha Alawadhi
The main problems e-commerce firms are facing on the ground include absenteeism of delivery people and difficulties in getting curfew passes
E-commerce companies such as Amazon and Flipkart, and sellers, have reached out to the government seeking clarity on whether they would be allowed to sell non-essential items under the fresh guidelines.
On Wednesday, the Ministry of Home Affairs (MHA) in the fresh guidelines allowed e-commerce companies to operate without any restriction on their working hours from April 20, provided they ensure strict social distancing.
However, some said there were ambiguities that need to be addressed, because while inter-state transportation of non-essentials was allowed, it was not clear whether e-commerce companies would be allowed to sell the products.
“The ambiguity is still there. It doesn’t say that e-commerce players can sell all items including non-essential products on their platforms. A lot of firms are asking the government to provide more clarity,” said a senior official working with an e-commerce firm.
“For instance, a delivery associate might be carrying a TV (phone, laptop) and the police on the ground might seize these items.
”Industry insiders said the main problems firms faced on the ground were absenteeism of delivery personnel and hardship in getting curfew passes, issued by state governments. “You (government) told the delivery staff wages are valid even if you are not coming to work,” said a person. Additionally, passes were issued to those carrying essential services and not to firms per se, the person added. “It is the prerogative of the state to decide what is essential and what is not.
”Experts say there was also no clarity in the guidelines on the nature of non-essentials. “If companies are able to follow all the social distancing and safety protocols stringently, then the chances of getting things up and running are reasonably good. Probably some products that were not specifically listed as essentials but are essential in nature, such as grooming, stationery, home essentials like cleaning and kitchen products, will also be allowed to run now,” said Pinakiranjan Mishra, consumer leader at EY India.
Experts said there was no distinction between essential and non-essential with respect to transportation. “If that works, then all e-commerce firms should be able to work, but it depends on how the guidelines are implemented at the state level. There are red zones as well, where movement is restricted. So, firms will have to liaise at the local level to ensure delivery,” said Devangshu Dutta, chief executive at Third Eyesight, a consulting firm.
Dutta said a lot of backend work was required for companies to keep websites running for non-essentials. For example, content work, including photoshoots, text and data support, was provided by external agencies and the work couldn’t be done from home.
“How the backend work would be done is also a question that needs to be answered,” he added.
Meanwhile, online retailers are expecting huge demand for products and are reaching out to sellers to keep stock ready to fulfil pending and new orders after April 20, according to sources. Srinivas Mothey, senior vice-president at Paytm Mall, said: “We hope to open most of our categories, including electronics, small appliances, clothing, mobile phones, and accessories, among others,” said Mothey.
“The government has just come out with fresh guidelines. We believe things would be far better by the time we restart full-fledged operations,” said Mothey, when asked about the ambiguity related to the selling of non-essential items.Amazon India said it was evaluating the guidelines and had sought clarifications from the authorities on implementation.
“We are committed to the government’s efforts of ensuring social distancing and delivering products that customers need the most at their homes. The resumption of economic activity from April 20 is a welcome step that would nonetheless depend on unhindered availability of labour,” said an Amazon spokesperson.
Flipkart said it would continue to serve consumers to promote social distancing through its sanitized supply chain.“At this critical juncture, the e-commerce industry can ensure that citizens stay indoors and all their needs are met through home deliveries,” Snapdeal said.
Source: business-standard
Devangshu Dutta
April 7, 2020
Oil shocks, financial market crashes, localised wars and even medical emergencies like SARS pale when compared to the speed and the scale of the mayhem created by SARS-CoV-2. In recent decades the world has become far more interconnected through travel and trade, so the viral disease – medical and economic – now spreads faster than ever. Airlines carrying business and leisure-travellers have also quickly carried the virus. Businesses benefitting from lower costs and global scale are today infected deeply due to the concentration of manufacturing and trade.
A common defensive action worldwide is the lock-down of cities to slow community transmission (something that, ironically, the World Health Organization was denying as late as mid-January). The Indian government implemented a full-scale 3-week national lockdown from March 25. The suddenness of this decision took most businesses by surprise, but quick action to ensure physical distancing was critical.
Clearly consumer businesses are hit hard. If we stay home, many “needs” disappear; among them entertainment, eating out, and buying products related to socializing. Even grocery shopping drops; when you’re not strolling through the supermarket, the attention is focussed on “needs”, not “wants”. A travel ban means no sales at airport and railway kiosks, but also no commute to the airport and station which, in turn means that the businesses that support taxi drivers’ daily needs are hit.
Responses vary, but cash is king! US retailers have wrangled aid and tax breaks of potentially hundreds of billions of dollars, as part of a US$2 trillion stimulus. A British retailer is filing for administration to avoid threats of legal action, and has asked landlords for a 5-month retail holiday. Several western apparel retailers are cancelling orders, even with plaintive appeals from supplier countries such as Bangladesh and India. In India, large corporate retailers are negotiating rental waivers for the lockdown period or longer. Many retailers are bloated with excess inventory and, with lost weeks of sales, have started cancelling orders with their suppliers citing “force majeure”. Marketing spends have been hit. (As an aside, will “viral marketing” ever be the same?)
On the upside are interesting collaborations and shifts emerging. In the USA, Jo-Ann Stores is supplying fabric and materials to be made up into masks and hospital gowns at retailer Nieman Marcus’ alteration facilities. LVMH is converting its French cosmetics factories into hand sanitizer production units for hospitals, and American distilleries are giving away their alcohol-based solutions. In India, hospitality groups are providing quarantine facilities at their empty hotels. Zomato and Swiggy are partnering to deliver orders booked by both online and offline retailers, who are also partnering between themselves, in an unprecedented wave of coopetition. Ecommerce and home delivery models are getting a totally unexpected boost due to quarantine conditions.
Life-after-lockdown won’t go back to “normal”. People will remain concerned about physical exposure and are unlikely to want to spend long periods of time in crowds, so entertainment venues and restaurants will suffer for several weeks or months even after restrictions are lifted, as will malls and large-format stores where families can spend long periods of time.
The second major concern will be income-insecurity for a large portion of the consuming population. The frequency and value of discretionary purchases – offline and online – will remain subdued for months including entertainment, eating-out and ordering-in, fashion, home and lifestyle products, electronics and durables.
The saving grace is that for a large portion of India, the Dusshera-Deepavali season and weddings provide a huge boost, and that could still float some boats in the second half of this year. Health and wellness related products and services would also benefit, at least in the short term. So 2020 may not be a complete washout.
So, what now?
Retailers and suppliers both need to start seriously questioning whether they are valuable to their customer or a replaceable commodity, and crystallise the value proposition: what is it that the customer values, and why? Business expansion, rationalised in 2009-10, had also started going haywire recently. It is again time to focus on product line viability and store productivity, and be clear-minded about the units to be retained.
Someone once said, never let a good crisis be wasted.
This is a historical turning point. It should be a time of reflection, reinvention, rejuvenation. It would be a shame if we fail to use it to create new life-patterns, social constructs, business models and economic paradigms.
(This article was published in the Financial Express under the headline “As Consumer businesses take a hard hit, time for retailers to reflect and reinvent”.
