Offline sales of smartphones surge, despite better offers online

The value of smartphones sold offline grew significantly in the first half of 2022, even as offline retailers feud with smartphone makers over an alleged price difference between online and offline channels. According to a report by market intelligence firm GfK published today, the offline market saw a 44% year-on-year (YoY) growth in terms of value in the first six months of 2022.

As the festive season rolled in, offline retailers have often accused smartphone brands of favoritism, claiming that they offer larger discounts offline and better prices. They’ve claimed that this has hurt their sales, as consumers choose to buy phones online instead of visiting physical stores. 

The good news for retailers, however, is that the channel has at least returned to pre-pandemic levels this year. “The offline channel growth of smartphones reached 2019 sales levels in 2021. In 2022, it is projected to grow by 25-30% over 2021 by value in offline channels,” said Dheeraj Mukherjee, head of sales, India, GfK.

Sales of phones offline are being driven by premium products though, with customers preferring Amazon and other online channels for buying cheaper products. Kailash Lakhyani, chairman of All India Mobile Retailers Association (AIMRA), noted that customers prefer offline stores when they are buying phones priced above ₹30,000 smartphones, as they want to experience the product before paying for it.

GfK’s report noted that smartphones priced above ₹20,000 accounted for 40% of the offline market in H1, 2022, while it used to account for only 17% of the space in 2017. Lakhyani noted that “70% of stocks of premium phones like iPhones sell in the offline market”.

The demand for phones priced above ₹20,000 has grown across Indian cities between H1 2019 and H1 2022 as well. The report claimed that it grew by 240% in tier 4 cities, and by 186% in tier 3 cities. Tier 2 and tier 1 cities saw 162% and 86% growth, respectively. 

However, the offline channels’ boom might be short lived. Lakhyani also pointed out that footfalls might drop during the festive season, as consumers choose online channels. “Most of the stock during the festival season sales is with the online market. Even if customers come to offline stores, they don't get the product, especially during this season. If they find the product, offline stores can’t match online in terms of offers and discounts,” he said.

Further, the online market still leads in terms of the total volume of smartphones sold in India. According to market research firm International Data Corporation (IDC), online channels accounted for 52% of smartphone shipments in H1 2022, growing at 5% YoY. The offline channel, on the other hand, only grew at 1% during this time. That too, after a decline of three straight quarters on a YoY basis.

Like Lakhyani, IDC also predicted that the online channel will remain strong in H2 2022 due to festive sales and the discounts and promotions they bring. Last month, market research firm RedSeer predicted that e-commerce retailers are expected to garner sales worth $11.8 billion in gross merchandise value (GMV) this year, accounting for a growth of 28% YoY.