On an average, Adil Ali sells 8-9 feature phones at his mobile phone shop located in Chennai’s bustling Richie Street, compared to 1-2 smartphones a day. A few streets away, the story is the same at Ankit Enterprise, owned by Khaja Moieen.
While smartphones remain unsold on most days, Moieen is able to sell at least 3-4 feature phones on weekdays and 10-12 handsets during weekends.
Sales in these two small shops are only a microcosm of a larger trend. While smartphone sales across the globe is reaching near saturation, demand for feature phones — that caters to a vast majority of the bottom of the pyramid population — is on a steady wicket.
But things may go topsy-turvy for India’s feature phone market, which boasts of close to 400 million active users. According to an estimate by Counterpoint Research, feature phone shipment in India is expected to register negative growth for the current year at a decline of 44 per cent. In contrast, feature phone shipments posted a year-on-year growth of 11 per cent in 2018 and 12 per cent in 2017.
Unsold inventory
The sharp decline in feature phone shipments is primarily attributed to huge inventory build-up of Reliance Jio’s feature phones. For perspective, Reliance Jio’s market share in overall feature phone shipments stood at 47 per cent in Q2 CY2018, which almost halved to 28 per cent for the second quarter this year. In Q3 2019, Jio’s market share fell to zero per cent, pulling down the overall shipment numbers.
“Huge inventory build-up of Jio feature phones, transition from feature phones to smartphones and good performance of entry-level smartphones in the Android Go platform are the three major reasons for the drop in feature phone shipments,” said Anshika Jain, Research Analyst at Counterpoint Research.
Noting that users are maturing and shifting from feature phones to entry-level smartphones, Jain said, demand has now come down to pre-Jio level.
The decline in Reliance Jio’s shipment has helped other players increase their market share. For instance, Samsung, which had a 10 per cent market share in the segment in Q1 CY2018, grew to 22 per cent in Q3 CY2019, while the market share of Lava grew from 6 per cent to 16 per cent during the same period.
“One of the biggest factors that led to our growth in the feature phone segment is our R&D strength. We invested in Design in India which consistently improved the quality of our products,” said Tejinder Singh, Head-Product, Lava International.
The future of the segment, which still accounts for 43.3 per cent of total mobile phone shipments in India, is not all gloomy. According to a report published by Counterpoint Research earlier this year, more than a billion feature phones are expected to be sold worldwide over the next three years, generating a cumulative hardware revenue of around $16 billion.
The age profile of users, access to electricity, financial inclusion, literacy rates and internet affordability are some of the factors that make feature phones more suitable for the vast majority of the bottom of the pyramid and rural users.
Jain, however, cautions that brands will have to come out with more features at attractive price points to stay relevant to the users.