Offline Smartphone Retailing – Beyond COVID-19

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The coronavirus pandemic has adversely affected India’s brick-and-mortar retail counters, as consumers perforce procure online. Traditional offline retailers and smartphone brands are fighting back by reinventing their strategies.

The Covid 19 induced lockdown confined the world indoors. The mobile phones became our solitary survival tool responsible for work, education, recreation, etc. Unfortunately, the lockdown also shut down manufacturing, logistics, and stores. As a result, smartphone sales actually de-grew in 2020 after steadily growing year-on-year till then. Brick-and-mortar stores bore the brunt of this de-growth. Many retail counters shut shop or curtailed operations.

Retail counters have a critical role not just in smartphone sales, but also in helping customers with accessories like putting on the scratch guard, safe data transfer, customer education, etc. Customers also value being able to get better sense of the market, the brand, and the product by talking to a few retailers and shoppers. Phones are a critical, high-touch product, so a high-touch buying process gives a certain comfort. For many, it’s too important a purchase to do entirely online. 

Reflecting the increased importance of mobile phones in our lives, Sales picked up from the third quarter of 2020, registering ~20% year-on-year growth, aided by the gradual lifting of the lockdown and the pent-up demand for a larger number of devices per household. 

Going ahead, smartphone sales is expected to be driven majorly by upgrading consumers  in the mid-range segment (₹10,000-₹20,000) and a revived offline channel play to stimulate growth in the critical brick-and-mortar retail counters for long term sustainability. There will also be an expansion of the retail footprint, especially in the tier 2 and 3 towns. 

Reflecting how the pandemic raged through the country, retail counters in the north were the worst hit with 10% of outlets closed. The west followed closely with 9% of outlets shut, , The south was next with 6% of the stores shut. The east was the least affected with only 3% of retail outlets shut. Additionally, small towns with a population of less than 20 lakh experienced a 10% closure rate, nearly 50% more than larger cities, that saw 7% closures.

E-commerce vs. offline retail

In this scenario, e-commerce had a natural advantage. 

So offline – physical – retail stores had to fight back. They did this by going `phygital’.  Chains like Croma, Vijay Sales, and Reliance Digital went aggressively omnichannel and bolstered their digital sales efforts. Located in malls and market complexes, these chains saw a dramatic reduction in foot traffic after the lockdown due to government restrictions and apprehensions among the people. Vijay Sales started selling through its website and plans to launch video calling facility and virtual product demonstrations. By launching a ‘3-hour delivery’ platform on its website, Croma made the digitally assisted shopping experience more accessible to a wider audience.

Major brands like Vivo, Oppo, and Realme have already stated that they will not do online-only releases any more. State governments in key markets like Maharashtra and Delhi disallowing the sale of smartphones through e-commerce have also helped curb cannibalisation of the offline channel.

Brands & industry react to the crisis

Both retailers and smartphone majors like Apple, Xiaomi, Oppo, Vivo, among others, have been writing to state governments to classify phones as essential goods. At a time when many people are restricted to WFH, they argue, a smartphone is essential. This will be beneficial to all sales channels.

There are many brands and offline retailers taking proactive measures to grow their business. They are attempting to reinvent the customer experience through a phygital (physical + digital) strategy. VIVO, the smartphone brand, has introduced its VIVO Smart Retail programme which offers customers the opportunity to order products directly through SMS, social media, and other communication channels from the nearest retailer. Xiaomi and Oppo have integrated their shopping catalogues with their Whatsapp Business accounts.

 Phygital is poised to win in a country with close to 530 million WhatsApp users and nearly 410 million Facebook users. Due to a better overall brand experience offline and online, customers may find more value are more likely to stay loyal. Phygital marketing strategy is a valuable element of smartphone and offline retailers’ growth and innovation. With minimal contact retail likely to maintain its relevance, it would be smart to find new ways to grow and innovate. Predictvu estimates offline sales will bounce back to 53-56% of overall smartphone sales by the end of the current financial year.

The role of ‘conversational commerce’ (chat-enabled and assisted e-comm) is expected to be transformative. Offline stores can use it to advance their ‘in-store’ business and brands can use it to personalize their messages and develop a connection with customers. Several retail chains, including O-line-O in Mumbai, Gomobile in Delhi, and Kolkata’s Hotspot have built online portals connecting customers with their nearest retailers via Whatsapp or Facebook. Dukaan, Shopify, etc., are enabling offline retailers further by helping them set up easily set up their digital storefronts.

The MEITY’s draft e-comm rules towards promoting a level playing field with greater transparency and fairplay are also a step in the direction of re-balancing the oligopoly of the deep-pocketed online marketplaces.

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