Why low-cost smartphone brands are eyeing smaller cities
Industry players say increasing data penetration and enhanced reach of e-commerce have increased smartphone consumers in Tier II and III cities
While the overall smartphone industry is growing by 50 per cent in India, the under Rs 5,000-market in the smartphone sector is growing by 18 per cent year-on-year in Tier-II cities and rural areas, say industry experts.
Seems as the best time for the smartphone industry has arrived in Tier II or smaller towns. Not just the retail but e-commerce platforms have also seen a high in the sales of mobiles in Tier II and Tier II markets.
During the Big Billion Days Sale, Flipkart witnessed the growing appetite of tier II and III cities for mobiles, large appliances and consumer electronics, said Flipkart Group CEO Kalyan Krishnamurthy in a statement.
Arijeet Talapatra, CEO, Transsion India, spoke about smartphone player itel experiencing an 18% year-on-year growth in smartphone shipments during Q1 2019, as per the Counterpoint Research Report.
"Fast-paced digital adoption is now being propelled by rural and semi-urban India, registering a 35 per cent growth in internet users over the past year," said Talapatra. itel's target audience is consumers who opt for a phone under Rs 5,000 lies in tier-3 and smaller markets.
Talpatra said that around 35 per cent of the population is below the age group of 40, resides in small towns and looks for phones that are priced under Rs 5,000.
Goldee Patnaik, Head of Marketing, itel Business Unit, said that to market themselves in Tier II or below markets they heavily rely on Out-Of-Home advertising. Patnaik revealed that over 50 per cent of itel's marketing spends are focused on Below the Line Activities - largely on Retail Visibility and on-ground activation programmes.
Digital and Social Media spend accounts for 15 per cent followed by 20 per cent in local connect activities, which is largely driven around Regional Festivals and Events. Lastly, over 15 per cent gets spent on segmented ATL like Outdoors, Radio or Print Syndications during a campaign launch, Patnaik added.
itel grew 40% year-over-year in Q3, 2019 over Q3 2018 and in the feature phone segment, itel climbed up to the number two position with 16 per cent market share for its value-added feature phone offerings, as per Q3 2019 counterpoint research.
This shows how increasing data penetration and enhanced reach of e-commerce has made smartphone consumers in Tier II and III cities become more aware and demanding.
Batooni, another hyperlocal player, deals with video advertising also recorded huge growth parameters in Tier II or below towns. Batooni also keeps tracks of the devices used for uploading the content. Jitendra Chaturvedi, Co-founder & Director of Batooni, says that the value of smartphones and other communications devices is rapidly increasing in small towns.
According to him, 47 per cent of their overall business comes from smartphones priced between Rs 5,000 to Rs 10,000. This data reveals there is a clear trend of migration from feature phones to low-end smartphones in smaller cities and towns.
Chaturvedi believes that small towns lap up emerging technologies very quickly as long as they are in an affordable price range.
"So, while we do not foresee a great adoption of foldable screen mobile phones soon, internet platforms that run on reasonably priced smartphones and are useful, even if only in entertainment, should find enthusiastic takers," he added.
Experts also say that consumer behaviour has drastically changed over the last 5-8 years and smartphone brands are looking to tap these potential consumers in smaller cities.
"Consumer behaviour in India is changing as a consequence of rising incomes and exposure to new technologies," said Hina Mittal Nayar, Co-founder & CEO, ProfiliAd.
A few years back, everyone’s marketing focus was urban population in India - from a cab booking app to an e-Commerce app to a food delivery app. But today, the scenario is different.
Smartphone demand from tier 2 and 3 cities are outgrowing the demand from tier 1 cities as urban markets have begun to saturate, according to an International Data Corporation study. It is time to now focus on around 500 million users from rural and smaller towns, the report said.
Discussing the future of the smartphone industry in tier 2 or below cities, Nayar said that over the next five years, it is expected that 9 out of every 10 new Internet users in India are likely to prefer vernacular or regional languages to access the Internet.
Nayar also feels that with the launch of OTTs, smartphones are hugely preferred for video viewing in tier 2 or below towns which are leveraging the sales of communication devices.
The wave of growth in India’s internet penetration is expected to come from tier II and tier III cities. That is fuelled by the availability of low-cost smartphones, low rates of data plans and the development of smart cities in rural areas. The government-led initiative Digital India/ Smart Cities will certainly bring a boost for the mobile sector concluded Nayar.
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