It’s been a rather awfully quiet 2022. I have not experienced this since my entry in the mobile phone business in 2003. No brand seems to be keen to be in the news. No data points on market share, shipment data, growth over previous quarter or over same quarter last year etc. is being shared by brands, the way they used to be splashed earlier. Not much aggression on social media either. Why?
Obviously the first thing which comes to mind is that the shipments this year, overall and for every leading brand, has been equal to or below last year, resulting in not much change in their market shares. The forecast for this year is a decline over last year with the first half of 2023 also not expected to be a great one with an expected economic slowdown and the premiumisation of devices leading to an increased replacement period. As per news, brands are already cutting down their production by up to 30% since November post Diwali. Based on the information available there has been a 50% decline over last year since November.
To me these may not be the only reasons why brands are quiet. I did mention a few more in my last blog in August – Chinese Checkers (https://www.sharmaajay.com/post/chinese-checkers).
While I would suggest you go through the blog in detail, let me share the key takeaways from that blog here – “The aggression of the Chinese brands would be impacted due the scrutiny under which they have been working since Q3 last year and the fact they would like to show some profits now”. Well the uncertainty does not stop at the brands. I did get a lot of calls from the distributors of these brands fearing scrutiny as well. Imagine the result if both the brands and their distributors become tentative. 2023 may indeed be a weak year as well.
So what are the alternatives available to the brands to cut down their expenses, keeping the uncertainties of scrutiny and economic slowdown in mind. For starters, obviously manpower, marketing, and decrease in margins. Manpower would include both on-roll employees and out-sourced employees like In-Store Demonstrators (ISDs). I am told that except for decrease in margins, the other actions have already been initiated.
The expected cut in manpower and marketing expenses and margins, if any, is bound to majorly impact the already struggling offline channel carrying inventory. To put things in perspective, the online contribution of smartphone sales in India during the festival period was close to 58%. I sincerely hope the margins are not reduced any further as they are already at levels at which the channel partners are just about able to keep their neck above the water.
Are we approaching the time when the bottom line (profits) rather than top line (sales and thus market share etc.) become the priority for the brands and the channels. The recent layoffs, specially in manpower, by some of the leading multinationals do as well point in that direction. Smartphone companies should not be too different in their approach.
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