The months of May-June typically see fewer shipments as retailers want to clear most existing stock before new ones in the cyclically more active quarter of July-September arrive.
Consumers who may have missed the recent mobile phone offers on Amazon and Flipkart need not lose heart as more such discounts are expected in the weeks leading to July 1 from brands and retailers wanting to move out old stock before the implementation of the goods and services tax (GST) regime, which could lead to a rise in handset prices.
Analysts and sector watchers say that while some handset brands may offer discounts directly to consumers, via online and offline modes, retailers are also likely to offer price cuts to reduce unsold inventory. Counterpoint Research expects up to 10% price cuts on handsets late June.
“June will be dry in terms of sell-throughs (sales to customers) and if price increase happens in July, discounts may be offered by brands starting mid-June till the month end, such that the old stock is cleared before models with increased prices start coming in,” said Navkendar Singh, senior analyst at International Data Corporation (IDC) India.
Last week, a council deciding tax rates on all goods and services in India fixed a 12% rate on “telephones for cellular networks and parts for their manufacture,” which will make most phones expensive by 4-5% from their current tag prices, says industry body Indian Cellular Association.
The GST rates would kick in from July 1, and the higher prices, if passed on to consumers by companies, would be applicable from the following days or weeks.
Tarun Pathak, associate director at Hong-Kong based Counterpoint Research, cited feedback from trade channels while saying that brands have already started pushing stock to distributors, who are hesitant to take them and push further into retail due to the uncertainty during the transition phase of the GST.
“So, we can expect discounts of 5-10% towards June-end by retailers because even they would not want to hold on to stock which may become expensive in a couple of weeks,” he said.
The months of May-June typically see fewer shipments as retailers want to clear most existing stock before new ones in the cyclically more active quarter of July-September arrive.
This quarter is just before the Diwali quarter, which sees maximum sales to customers. IDC expects a 10% drop in shipments in June than what is typically shipped in a month.
Counterpoint Research expects a drop in shipments for both May and June, from an estimated 42-43 million combined to 38-39 million, as Pathak said that distributors had already started refusing stock from vendors to avoid holding inventory which may have to be sold at higher prices, and may therefore remain with them.
Faisal Kawoosa, principal analyst and GM at research firm CMR, said that discounts are likely from players that are not in good shape now, and would use price cuts as a marketing strategy to increase sales and increase their market share.
Leading phone makers didn’t immediately comment on price cuts or discounts, saying they were still evaluating the impact of GST on business and operations.
The likely discounts next month would mean yet another instance when phones — primarily smartphones — would become affordable for two months, which could lead to their higher adoption.
Top online retailers Amazon and Flipkart went almost head-to-head offering big discounts on smartphones, which became top revenue and value contributors for the sites. Amazon’s sale was from May 11-14, while Flipkart’s was from May 14-18.