Here’s how smartphone companies across all segments were affected by demonetization

Cash is a dominant mode of transaction in the devices market and the government's decision to demonetize the high-value currency which accounts for more than two-third of the cash supply is having an immediate but temporary impact on the devices market, according to IDC there has been a 17.5 per cent drop in smartphone sales in CY Q4 2016. All smartphone companies felt the impact but in their own ways.

Starting with the low to mid range phones where the market is ruled by Chinese smartphone makers like Xiaomi, LeEco, Coolpad and others. All these smartphone makers sell their devices mostly priced between Rs. 6000 to Rs. 15,000 through online and offline platform. The sale of devices is expected to hit not just offline retail but online channel as well, where Cash-On-Delivery (COD) contributes to a substantial portion of the sales. Major impact of demonetization will be more prominent in smaller cities, where small retail shops transact more in cash and penetration of digital payments is yet to reach the levels seen in bigger cities. After having launched a ‘made for India’ phone, Syed Tajuddin, CEO, Coolpad India said, “Demonetizaion is a painful thing, yes, business has been affected both online and offline platform suffer. Around 30% of smartphone purchases online are COD, can’t expect people to stand in queue for one week to buy out phones, by end of the year there would be 25%impact on decline in the sales”, the company expects the market will be in a much better shape by April next year for lower range phones.

High to premium range phones has not seen much of an impact as they are mostly dependent on online payment methods. The segment itself attracts consumers who are already using non cash payment methods for all purposes. One such brand that has not seen much impact of demonetization on the sale of its smartphones is Oneplus, this Chinese smartphone maker has made a place for itself in the high range segments with phones costing over Rs. 25,000. Vikas Agarwal, General Manager – India for OnePlus said, “Oneplus has been an online only brand and because of it demonetization has not really impacted Oneplus as much as offline brands have been impacted. Online people are used to paying through debit and credit cards the COD transaction were impacted but not to that extent as those users are now using electronic channels to make the payment so for us we do not anticipate any big impact of demonetization on sale of Oneplus device”. That’s true especially because the company chose to launch its latest smartphone OnePlus 3T today in India also in close succession to OnePlus3 which has been one of the top rated phones globally.

Now if we look at the premium phones, Apple’s iPhone7 and iPhone7 Plus are the most expensive phones in the country today priced at upwards of Rs. 60,000. Government’s move to demonetize Rs. 500 and Rs. 1000 currency notes somehow provided a much needed helping hand to Apple to sell its latest iPhones. As reported by Economic Times iPhone sales shot up in India in the three days immediately following demonetisation as consumers rushed to buy these devices with their phased out high denomination notes. And as per trade estimates, over 1 lakh iPhones were sold in these three days alone, which is around three ¬fourth of this handset’s average monthly sales.

So smartphone makers across all segments have felt an impact of demonetization but it’s immediate and short-lived. And now they are trying to tackle the after-effects of demonetization by starting to offer lucrative deals to try and make up for the slow-moving demand from currently cash crunch-hit consumers.