For the first time in 20 years Indian mobile sales register a drop; Is it an indicator of a future trend?

Contrary to expectations that India would soon overtake USA as the second biggest consumer of mobiles, the Q 1 2015 figures has shown a fall of 14.5% from Q4 2014. As per Cyber Media research report, mobiles sales in India were 62 million mobiles in 2014 and dropped to 53 million mobiles in first quarter of 2015.

Predictions, however, indicated a continuous growth and by 2016 sales were expected to touch 204 million smartphones. Mobile manufacturers, telecom operators and service providers have based their growth plans per se. The unforeseen decline has triggered jitters in the industry.

Surprisingly feature phones registered an 18.3% drop as compared to a dip of 7.14 % for smartphones

Is this just a cyclical change or is it an indication of the future? Experts have attributed several factors for this fall in sales and most state it is a cyclical change.

Tax: India’s ‘Make in India’ policy saw the government increase excise duty on mobile handsets from 6% to 12.5% making them costlier by 4%.

China for whom India is a major market recorded a slow down to single digit in 2015 as per a Canalys report and along with the Chinese New year festivities in early 2015 was another reason.

The new exciting phones have not yet come into the market in the first quarter of 2015 and with the heavy competition amongst brands, consumers seem to have opted to wait and watch.

The rapid growth in Internet penetration in India, over 100 million users using the Internet daily, has resulted in a preference for handsets with internet connectivity, hence the fall in feature phone sales.

Increase in purchasing power is another contributor to the decline in sales. As Canalys Analyst Jingwen Wang commented on the Chinese market which also recorded falling sales in 2015 and which is also applicable to the Indian market, “Consumers are losing their appetite for ultra-low-cost devices, as expectations increase in line with spending power and, combined with rising market saturation, this is resulting in a major shift to devices that provide better user experience.”

In line with the above trend Samsung noted increase in smartphone sales mostly due to its mid level Galaxy A series. Samsung also is confident its latest flagships Galaxy S6 and Galaxy S6 Edge will push up its sales.

Samsung is still leading Indian sales with an 18.5% overall share and a strong 27.9% of the smartphone market.

Online marketing in India has grown immensely to 40 million consumers and in 2015 it is expected to go up to 65 million consumers. A US $ 17 billion industry is forecast to grow at 35% per annum and reach over US $ 100 billion in the next five years.

Mobile phones accounted for 11% of total online sales and it is expected to rise to 25% by 2017.

It does look rosy but with the competition, flash discount offers online and the exclusive tie ups by some brands with online sales, consumers are not in a hurry. It is common for individuals to own at least two phones and the next purchase would naturally be for an improved version. They are looking for better options and prefer to wait. This has resulted in the dip in the Q1 sales in 2015.

Why is Q1 not an indicator of a fall in mobile sales?

India’s growing coverage by telecom providers and the rapid rise in Internet will create a need for mobiles that can meet increasing expectations of the consumers.

One positive factor for growth is the amazing convenience of mobiles and the internet ideally suited for the fast paced instant world of today. Mobiles are no longer just phones. They have evolved into smartphones and have even become wearable gadgets like the smart watches.

India’s economy is expected to grow by 7.5% in 2015 which means an increase in spending power and more disposable income to spend on non utilities.

First time users will also be entering the market whether it is a low-end, mid level or a high-end mobile, it can only increase sales.

Another plus point for increase in sales is the competition with many new brands like Xiaomi and Asus entering the market and offering high value for every rupee spent. This has spurred a healthy response from established market leaders like Samsung, Microsoft, and Micromax etc.

Mobiles come in a wide range of affordability and features.

Samsung has indicated it plans to respond to “the growing middle to low end market with a streamlined lineup.”

Mobiles are fast becoming indispensable and are now a necessity. When the economy is heading towards growth the Q1 figures can only be a cyclical dip in sales.