COVID-19 has had two major impacts so far with respect to the global smartphone market. One is negative growth and the other is a rapid shift to online device purchases. The former is likely to be temporary, as it is driven by lockdowns and supply chain shocks which will be resolved in time. The latter is likely to last for a considerable period of time and the question is whether the spike in online buying will be permanent. In Korea, one of the first countries outside of China to suffer an outbreak, online transactions soared 25% YoY in February, with 28% of all retail sales coming from online channels. Handsets mirrored the trend. Online sales of home appliances, electronic products, and mobile devices such as smartphones, also increased 39% YoY. It should be noted Korea did not impose a compulsory lockdown, implying online numbers could have been even higher. Online share of handset sales varies by country, but has remained stable in most over the past few years. India is by far the highest, while the US, Korea and Japan trail much farther behind.

Online share of handset sales by country, 2019

The coronavirus has changed buying dynamics, with share of online spiking over the past few months of 2020. According to Counterpoint Research’s US online channel tracker, the share of online handset sales in the US more than doubled from January to April. 16% of all handsets sold in the US between January and February were traded online, which rose to 21% in March and soared to 33% in April, when the full-fledged impact of COVID-19 began A similar, but less extreme pattern can also be seen in China. Share of online device sales reached 35%, their highest ever in February during the height of the country’s pandemic. This is very high compared to China's average annual online sales share of 25%, and the online share between November and the end of the year, when there is the largest e-commerce festival, Single's Day, is about 28%.

Monthly online share of total handset sales, China & US

To what degree these numbers will remain elevated remains to be seen. In China, which is gradually moving away from the COVID-19 crisis, handset sales in April are expected to be 29% which is still higher than the annual average. It can be argued first-time online buyers learn about the benefits of online purchases - the lower price and less time-consuming, and continue to use the channel for future purchases, resulting in a significant bump to historical baselines. This could also serve as an opportunity for broader expansion of the O2O industry, as a positive purchasing experience with this big ticket item would trickle across other products.

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