Missing spark: Festive season may do little to lift smartphones out of three-year slump

Mint

3 days ago

New Delhi: India's smartphone retailers hope that the upcoming festival season will lift the largest consumer electronics category out of a three-year slump. That may turn out to be wishful thinking.
Retailers have reported muted sales volumes so far this year, while analysts don't expect much growth in the full year, even after taking the festive bump into account. And demand for costlier devices is not enough to offset this trend.
The first six months of this calendar year saw 68 million smartphones shipped to retailers, down from 70 million in the first half of last year, according to data from three market research firms—International Data Corp, Counterpoint and Cybermedia Research—analyzed by Mint. Meanwhile, the average selling price of smartphones rose 6% during this period—up to $274 per unit from $259 a year earlier.
Demand so far could be a precursor to a fourth straight year of slowdown for the category. In 2021, the Indian smartphone market shipped 161 million devices—a scale that the industry has not been able to match since then. In 2022, this fell to 144 million and stayed almost flat at 146 million in 2023. In 2024, sales rose 3% to 151 million units.
While the dip in sales volume has somewhat been offset by rising overall market revenue, the growth isn't significant. In 2021, the smartphone industry in India generated $35 billion in annual revenue at an average per-device price of $219, according to a consensus of the three market research firms cited above. With the second half of the year projected to grow at a low single digit, the current average price of $274 is likely to help the industry generate $41-42 billion in net annual revenue.
That works out to a compounded annual growth rate of 3.7%, causing retailers to look beyond smartphones and brands to find ways to prop up sales through promotions. But such offers can hurt brands' operating margins in a value-conscious market like India.
Not enough spark
Retailers do see some sparks of growth.
'The month of July has seen strong sales and demand from consumers, driven by the launch of multiple flagship smartphones from Samsung and Vivo. In September, we expect to see new iPhones from Apple, which is typically a big demand-creator in the festive season," said Nilesh Gupta, founder and director of pan-India, multi-brand electronics retailer, Vijay Sales. 'Overall, this gives room for 4-5% growth in overall smartphone sales, even as the general volume of sales remains flat."
Zeba Khan, director of consumer electronics at Amazon India, said this year, the e-commerce giant's 'Prime Day' sale was 'our biggest ever". 'We saw orders peaking at over 18,000 per minute. Smartphones delivered high double-digit year-on-year value growth, and we also saw robust growth in AI-enabled laptops, premium tablets, health-focused wearables, and premium audio—which saw strong double-digit growth. We have seen strong growth across the first half of this year, and expect an even stronger second half."
Gupta and Khan, however, are uniquely positioned. Amazon and Vijay Sales are large, pan-India, cross-category operations, making them less reliant on smartphones. Amazon has over 30% market share in India's e-commerce industry—pegged at gross merchandizing value of $60 billion in March this year by Bain & Co.
Vijay Sales relies on home appliances that see consistent seasonal surges in demand—washing machines, air conditioners and refrigerators in the summer months; air purifiers around October; and room heaters and geysers in winter. This lets large retail operations stay immune to weak sales periods, and push for growth by focusing on sales of electronics categories that see seasonal surges in demand.
However, for Manish Khatri, partner at Mumbai's multi-brand electronics retailer Mahesh Telecom, the tale is not so great. 'The first half of this year was very weak in terms of sales, but July has seen a strong surge driven by the launch of multiple flagship phones," he said. 'The next two months have multiple device launches lined up from the likes of Xiaomi and even Apple, which should theoretically help this demand sustain."
According to Khatri, the market, however, remains 'difficult since organic demand for devices remains low, and footfall has gone down by volume—even as those coming in to stores are looking for premium devices priced upward of ₹50,000."
Betting on offers
The predicament is pan-India. Kailash Lakhyani, president of industry body All India Mobile Retailers Association (Aimra), said that due to persistently weak sales volumes, 'retailers are looking to expand into selling televisions, as well as home appliances, to make up for the downturn".
Yet, they have not given up hope. '…[Retailers] are hoping for a return to form for the domestic smartphones market as it has been four years since most people bought smartphones," said Lakhyani. 'Since today's smartphones last for around four years, we're at a time when the festive season this year drives greater sales for retailers."
Brands, however, have yet to share details on special offers and promotional programmes that retailers advertise to generate greater sales. A big reason for this is the availability of round-the-year offers on most electronics categories.
'There are three key offers in the market—instant cashback, bank discounts and zero-interest instalments, apart from exchange programmes. Most of these are available around the year, which is why customers typically buy devices nowadays when they need—instead of waiting for the festive period to come like before," Vijay Sales' Gupta said.
Reliance Digital has yet to respond to Mint's queries on sales projections. Samsung declined to comment, while Vivo did not respond to their festive season sales expectations.
In response to Mint's queries, a spokesperson for Oppo India said that the company will offer 'attractive benefits across price segments" during the upcoming festive season, without offering details.
For Xiaomi India, Redmi Note 14 5G and the upcoming Redmi 15 will lead its festive portfolio, alongside a line-up of smart TVs, tablets, and AIoT products.
'We're supporting this with an omni-channel strategy. We're also seeing early demand, especially from consumers looking to shop in advance for gifting," said Sudhin Mathur, chief operating officer of Xiaomi India. 'To support this, we have planned attractive offers ahead of the main festive period—and are strengthening after-sales and service networks."
Industry analysts, however, do not foresee a surge in demand.
The 2025 festive season is likely to see 'modest, single-digit growth driven primarily by consumers upgrading or replacing their devices, fuelled by a slight rise in purchasing power following recent tax changes," said Prabhu Ram, vice-president of industry research at Cybermedia Research.
'The transition from feature phones continues to be slow, and upgrade intent remains weak amid limited innovation across new devices," said Ram. 'As a result, organic demand stays subdued, with sales largely driven by replacement cycles and promotional pushes."