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Consumers vie for low-cost smartphones

Phone companies are taking a sharp turn in their pricing strategies to aggressively compete in the low-cost segment as the Covid impact leaves a strain on consumer wallets. Major brands including Samsung - first around Rs5K device launch in years - and Realme, with expansion of its low ranger portfolio, are joining the likes of Xiaomi and HMD-Nokia to capitalize the opportunity in the below Rs 10,000 price band. "There is a backward integration in pricing by most brands because most new use cases and replacement opportunities for smartphones lie in below Rs 10,000 category now," said Tarun Pathak, Associate Research Director at market intelligence firm Counterpoint. He added that the rise in e-learning needs of consumers has created a one-time opportunity for brands to sell devices with lesser specifications and cost. The entry level category has been shrinking over the years, due to diminishing demand and high distribution costs. The share of smartphones priced below Rs 5000, categorized as entry-level, has trailed from 12% in 2017 to 4% in 2019, whereas, for those priced between Rs 5000-Rs 10,000, categorized as basic, it has fallen from 45% to 42%, according to Counterpoint Research. But the COVID-19 impact appears to have rekindled the cheaper smartphone segment as consumers cut back on discretionary spending and buy phones only for immediate needs. This has led to even home bred players such as Micromax and Lava also making a re-entry into smartphones through devices in the segment to tap into the growing opportunity from replacements within the price segment. Korea’s LG too is betting on the segment in a bid to again tray for a foothold in the world’s second largest smartphone market.Analysts, though believe, this could be another knock-out phase for smaller Indian players who have been cornered to 1% market share by Chinese brands over the past 5 years.“Until now LG, Micromax, Gionee, iTel and Lava had seen some adoption for their low-priced smartphones, but it will be difficult to compete with technologically superior brands like Samsung who can offer better specs at lower prices,” said Adwait Mardikar, research analyst at Canalys.Meanwhile, there is a huge divergence shown by well positioned affordable brands such as Vivo, Oppo and Xiaomi venturing in the above Rs 40,000 space for the first time.Analysts say this is a trial-and-test strategy for brands who have played on volumes so far to gain market share in the mid-segments and now want to experiment how the market receives their high-end products."These brands have been trying to set a premium positioning since long and Covid has given them an opportunity when all three premium kings Apple, Samsung and OnePlus are bringing out lower priced models," Pathak said. “It will be interesting to see the outcomes of these realignments in the Indian smartphone space.”