DUE TO CORONA VIRUS, HERE ARE THE NEW ABCs FOR THE INDIAN SMARTPHONE INDUSTRY
After: Before COVID-19 (ABC), the outlook towards the industry will see a massive change. The question is, “Is the channel ready?”
I am sure you would have seen my first episode on the impact of Covid-19 on the smartphone industry in India by now. If you have not, I would request you to check it out at https://youtu.be/iK3j9w1OzaY.
Corona Virus will bring a lot of changes in the way the business is done. In this blog, let me share my thoughts on the three key expected changes that will happen on their own or we have to make them happen.
1. Shift from offline to online.
2. The increasing role of the owner at the retail shop.
3. The decreasing role of In-Store Demonstrators at the retail shop.
As I have mentioned in my last blog https://www.sharmaajay.com/post/forget-20-20-it-s-a-test-match and in my YouTube video https://youtu.be/iK3j9w1OzaY, I am expecting the ratio between offline and online changing to 45:55, if not 40:60, from the 60:40 in 2019. A lot of readers/viewers have asked me why and here are my reasons:
A shift from offline to online
a. The last 3 years have shown a slow but steady increase in the online contribution – from 33% to 40%. There is no reason for it not to continue unless some regulations are enforced which change the dynamics.
b. Q1 2020 has shown an increase over Q1 2019. As per an article dated 20th March in Economic Times, smartphone sales in the offline channel had halved since February. Online seems to have grown based on the overall figures for Q1 which have shown an increase.
c. The ratio of sales in H1 and H2 in the last 3 years, based on IDC data, is very close to 45:55. H1 is majorly offline and online goes aggressive in H2. As of now, we can see approx. 40 days or 23% of the H1 period with zero sales for both channels. While both channels will bear the brunt, the impact on offline will be higher as Q1 was stronger for online and even if Q2 is the same for both, online is the gainer for overall H1. At the same time, we would have hopefully got over the COVID issue with the supply chain in full motion in June for online to reap the benefits in H2.
One has to keep in mind that against the offline share of 60:40 in the whole of 2019, the share of online in the festival period in H2 was as high as 50%.
d. Customers avoiding visiting crowded markets for some time with their learnings from TV/online platforms of the damage the virus can cause. They may prefer to go online for a contactless delivery.
e. The increasing trend in online sales in China.
f. Wary customers avoiding walking into stores with multiple ISDs with the fear of interacting with multiple unknown people in a closed air-conditioned room. One could go on and on. From a customer perspective, why take the pain and risk when you can just go online and buy?
A possible solution: What could be done here is to maintain all SOPs for customers and staff in the shop as per the government authorities in terms of personal and surrounding hygiene. It may also be worthwhile to tie up preferably with a government recognised company in the business of office/shop sanitisation to generate customer confidence. It will be a win-win for both the retail shops and the sanitising company. The shop can carry a note “COVID Safe” on its frontage with the name of the company. The government accreditation of the company can be prominently displayed.
The increasing role of the owner at the retail shop
a. I have seen and most will agree that the owners of the shops have moved away from direct customer interactions. They spend more time on their “Galla” or seat near the cashbox. They have become more like managers doing backend activities like raising bills, collecting money, managing operations, meeting company officials, etc. with little or no time spent with their customers. The ISDs literally run the business for them.
b. I have seen many posts/Whatsapp messages saying that during these tough times it is the next door ration shop, not the online, which has supported the customers, and hence the customers should buy from offline. They forget three key things.
The first is that the essential items are small ticket repeat buys with the customers coming back daily or weekly. The second is the credit being given by this shop as the customer is a regular with a confirmed address. And last but not the least, the fact that the owner deals with his customers personally. Possibly these are also the reasons for which he is willing to extend them credit. With the increasing dependence on ISDs and the comfort zone thus available, the offline dealer over the years has lost the “personal touch” so very important to an average Indian customer. Don’t expect the customer to support the retail if the retail does not exhibit that they care for their customers.
The time has come for the offline retailer to talk to his customers on a one-on-one basis and build that rapport with him. He needs to get the customers into a comfort zone. In any case, he has to be ready to accept a bigger role with a reduction in the number of people in the shop to maintain social distancing norms which will be enforced strongly.
c. They will have to become better at financial planning be it fund flow or Opex management.
The decreasing role of In-Store Demonstrators
I for one, feel that the concept of ISDs will change forever due to the strict execution of social distancing norms. One would need to answer many questions.
a. Whether ISDs are required at all? Yes, but definitely not so many, not only due to social distancing but also because of a reduction in costs by brands. Time for the shop-owner to play an active role and make the reduced ISDs more accountable.
b. With reduced strength of ISDs (also due to brands cutting this cost), it will come down to just 1-2 ISDs in a shop. ISDs may henceforth be on the rolls of the retailers and be selling multiple brands. Brands could give subsidies based on their sales. It has to become a variable cost rather than a fixed cost in these times of lower volumes.
c. How will ISDs demo the device to the customer without coming close to him. I cannot think of many ways.
d. How will the customer get a first-hand experience if he wants to power-on a device which is being handled by an ISD? Regular sanitising of the device or use of new gloves by the customer post sanitising of the demo phone. As per a study, a mobile phone has more germs than the toilet seat. Alternatively, smaller screens on the brand counters run by the retail staff on which the customer can see a comparison of different models and also see a demo of the ones he selects. No touch.
You could check out my latest YouTube episode where I’ve talked about the key highlights on the subject. Link to the same: https://youtu.be/STSwV-GMUCI