GfK is the unparalleled, always-on, AI-powered intelligence platform and consulting service for the consumer products industry, globally. Here, Nikhil Mathur, MD India, GfK, talks about laptop and smartphone sales post lockdown. Excerpts from an interview:
DQ: When was the last time the laptop market outgrew smartphones in India?
Nikhil Mathur: The smartphone market will continue to outsell the laptop market due to the significant difference in the industry size of these two product categories.
However, we have been witnessing a relatively higher growth for laptops since the beginning of the year 2020 and it continued in the post lockdown phase as this market benefitted from “at-home” needs and digitization during lockdown.
During the time period of June-August 2020/19, laptop sales registered a volume growth of 19% in offline and 160% in online retail. Although smartphone sales volume registered a de-growth of 7% in offline retail, the market grew by 6% in online retail as compared to previous year in same time period
DQ: Would laptops have outgrown smartphones if the phone market didn’t contract because of the pandemic?
Nikhil Mathur: As stated earlier, the smartphone and laptop market are not comparable due to the significant difference in the form factor and product utility.
At the onset of the lockdown, which we term as the ‘panic’ phase, the most basic need was for continuity of work and education. This trend continued even post lockdown. The surge in sales resulted in consumers flocking to equip themselves for the future needs. This resulted in the laptop sales volume growing at 19% in offline and 160% in online retail during June-Aug 2020/19.
As consumers adjusted to life in lockdown, the need for ‘entertain at home’ also kicked in, aiding the growth of the premium price segment (>=52k) owing to increased sales of ultrathin and gaming laptops. This growth momentum was backed by the additional new user base including MSMEs, students, working professionals.
However, during the same time period, the overall smartphone market contracted largely due to decline (~30%) in the entry-level segment products priced at <10k, which comprises 40% of the total smartphone market in offline and 32% in online retail.
On the contrary, the average selling price of an entry level laptop is <32k, which is 24% of the total market in offline and 35% in online retail. The growth of both product categories was largely driven by mid and premium segments.
DQ: Do you see this as a short-term boost for laptops given its driven by product preference post lock-down? How long do you think it will last?
Nikhil Mathur: The laptop market was growing even before pandemic, largely due to sales of ultrathin and gaming segments, and the shifting consumer lifestyle and preferences. This was further fueled by the pandemic as consumers had been spending a good amount of their time in-home.
Noteworthy to mention, it is not only about the product/ device anymore. It is about the consumer ‘lifestyle’. Across the globe, markets are moving from “want” to “need” norm. This has led to a structural shift in product preferences as Covid-19 added a lot of value to such product promises that simplifies consumer life.
Depending upon how the market unfolds in the pandemic situation, GfK estimates that the @home norm is here to stay. In the longer run, the market is expected to grow, however, we need to cautiously monitor the growth rate.
DQ: While the demand for laptops due to the pandemic is understandable, why are laptop supply chains not hurt as much as phones? Or, is the growth due to the fact that the laptop market was in a slump in general?
Nikhil Mathur: The slowdown in supply chain started even before the pandemic had hit the country, because the exim industry was the first to be affected by the pandemic and other trade dynamics.
Additionally, the resource crunch at manufacturing facilities considering social distancing also played a key role. The pent-up demand was led by @home needs i.e. work@home, entertainment@home, learning@home, all of which added to the supply chain woes.
As a matter of fact, companies declared work from home even before nation-wide lockdown was announced and hence, there was a disruption in demand-supply chain dynamics. Laptop was the only category that did not witness drop in the demand for all these reasons.
DQ: Are channel consumers preferring to buy laptops and what are the growth drivers?
Nikhil Mathur: With the onset of the pandemic, contactless shopping became more prominent. As per our Consumer Pulse Study conducted during the lockdown period, 73% of surveyed urban Indian consumers had said they would prefer to shop online more post- lockdown.
The trend pronounced by the consumers during lockdown continued. We have seen an increasingly upward trend in online retail purchases.
Brick and mortar continue to remain as a dominant purchase channel for laptops with 58% contribution. However, we have seen an increasing upward trend of online channel purchases reaching 42% volume contribution in June-Aug 2020 from 25% during the same time period last year.
The study revealed this massive shift in channel preference was led by consumers preferring contactless shopping (55%), availability of better discounts (52%) and variety of products (48%).
DQ: Has there been a change in the price range in which Indians are buying laptops? What’s the best performing segment?
Nikhil Mathur: Performance and experience are the key growth drivers for consumer and tech products. The pandemic has not only shifted consumer behavior towards @home norm, but changed category preferences and added some new user base, including working professionals, school and university students and MSMEs.
As a result, laptop market growth was primarily driven by the gaming and ultra-thin segment. Eventually, laptops became a multiple utility device owing to @home norm (work@home, entertainment@home, learning@home) and therefore, it provided a positive boost to the market growth.
During the time period of June-Aug 2020/ 2019, the industry also witnessed a significant shift in the price band, which is reflected in higher price point products. In terms of volume, products priced at 32k-42k contributed 35% in offline and 26% in online retail. Similar trend was observed for products priced at >52k contributing by 27% in offline and 20% in online retail.
As there was a disruption in the supply chain coupled with increased exchange rate, it left no choice for consumers to buy what was available in-stock with retailers. Thus, pushing the market growth from entry level to mid and premium segments.