Flipkart Captured Half of Online Smartphone Sales in India in 2015

New Delhi, Mumbai, Hong Kong, Seoul, London, Beijing, Buenos Aires, San Diego – March 31, 2016

India is the second largest smartphone market in the world in terms of number of users, however, the smartphone penetration of the total mobile users remains significantly lower than developed economies; only four out of ten mobile phone users own a smartphone. This makes the Indian market attractive for hundreds of brands to enter every year as they try to gain scale. However, India is also a complex market. It has relatively low barriers to entry but it is a challenging market to scale from an off-line go-to-market perspective. With the advent of e-commerce platforms such as Flipkart, Snapdeal, Amazon, PayTM and others, new entrants can adopt a “direct-to-consumer” model, selling mobile phones directly through e-commerce without any middle-men.

Counterpoint Research Senior Analyst, Tarun Pathak comments, “This trend has not only allowed newer brands to offer attractive pricing, but also when coupled with attractive discounts, cashbacks, marketing support from e-commerce platforms has driven the e-commerce channel to become one of the most important channels to distribute and sell mobile phones in India. One in three smartphones sold in India was sold through e-commerce channels in 2015, just eighteen months after brands seriously started to focus on e-commerce strategies”.

Adding to the trends, Mr. Pathak, comments, “Lenovo (including Motorola) was the biggest beneficiary of this trend, capturing 25% share of smartphone sales through the e-commerce channels. This has helped Lenovo to jump to the number three spot in India’s smartphone segment. The new entrants, mostly Chinese brands, together captured almost half of the online sales segment. Indian brands overall were slow to get on the bandwagon as they heavily invested in offline sales channels, but Micromax, with its Yu brand, became the number one domestic brand across online channels”.

Research Analyst Pavel Naiya, adds, “Flipkart was the leader, contributing to almost half of all the smartphones sold online in India in 2015, thanks to its inventory led model. Amazon also benefited from the inventory-led model and tripled its smartphone sales over the period of twelve months. In 2015, it was a three-horse race between Flipkart, Amazon & Snapdeal, together accounting for almost 90% of the online smartphone sales volumes. We believe the competition will intensify in 2016 as players such as PayTM, Shopclues and others are aggressively promoting their platforms and a greater shift towards marketplace models”.

The recent announcement from the Indian government on a new policy that allows 100% FDI in ecommerce marketplaces will boost the competition between online marketplaces.

Mr. Pathak comments on this new policy, “The new rule will ensure a level playing field with smartphone brands going for multi e-commerce platform strategies, as well as using offline retail. A 25% cap on the sales for inventory-led e-commerce players will have significant implications on the e-commerce sales dynamics from now on. Exclusivity with marketing support, which was synonymous with ‘indirect subsidy” earlier for new brands entering the market, will no longer be a “power driving” factor. Thus, going forward we believe the onus will be on brands to drive promotion and sales in these marketplaces, rather than depending on the inventory-led e-commerce players for any significant sales boost”.

Mr. Naiya, also comments, “While players such as Flipkart and Amazon enjoy stronger brand and value offering through inventory-led model, however, this year e-commerce players will have to create stickiness factors to drive sales. Customer loyalty so far has been elusive due to a “deals-centric” competitive environment. We believe trends such as, mobile wallets and social commerce are going to be hot this year to create stickiness among the online shoppers. Players such as Snapdeal, PayTM are well positioned against Flipkart, Amazon from this perspective as the new rule aims to redistribute power across all players”

Exhibit 1: Smartphone Market share by eCommerce channel – CY 2015

Smartphone Market share by Ecommerce

 

Source: Counterpoint Research Ecommerce Smartphone Tracker

Exhibit 2: Smartphone brand share in eCommerce channel

Smartphone Brand share by Ecommerce

Source: Counterpoint Research Ecommerce Smartphone Tracker

  • Top five smartphone brands captured three-quarters of the eCommerce sales channel during 2015.
  • With Motorola getting a head start in online channels, Lenovo (post the Motorola acquisition in Q3 2014) decided to go ahead with a similar, successful strategy. One in four smartphone sold online was a Lenovo (incl. Motorola) followed by Samsung for CY2015.
  • Micromax was the largest Indian brand followed by Intex and LAVA in terms of online smartphone sales.
  • $100-$150 wholesale price band is one of the sweet spots for online sales, almost one in three smartphone sold online were in this price band. However, sales by price band varied a lot across different market places, depicting the brand value of different platforms.
  • 4G LTE smartphones were very popular across online channels in the last quarter of 2015. Almost three in four smartphones sold online were 4G LTE capable smartphones.

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The Market Monitor research is based on sell-in (shipments) estimates based on vendor’s IR results, vendor polling triangulated with sell-through (sales), supply chain checks and secondary research.