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China Based Vendors Gaining Ground In Tier 2 And Tier 3 Cities: IDC

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MUMBAI: According to International Data Corporation’s (IDC) monthly city level smartphone tracker, the Tier 1 cities namely – Delhi, Mumbai, Chennai, Bengaluru and Kolkata accounted for 26.4 percent of the entire smartphone market in Q1 2016 as compared to 29.9 percent in Q4 2015 clearly indicating that the smartphone market is gradually deepening towards Tier 2 And Tier 3 cities.

Click to Tweet: China based vendors gaining ground in Tier 2 and Tier 3 cities says IDC #IDCIn

According to Navkendar Singh, Senior Research Manager, IDC India, “As Tier 1 markets saturate, the next growth frontiers for smartphone players are clearly the smaller cities and towns. China based vendors have understood this trend and are gradually building & investing significantly in the offline distribution network in Tier 2 cities and beyond. This really shows that the offline channel remains significant and the vendors have understood that offline must go hand in hand with the online channel.”

China based vendors have already captured more than 20 percent of the smartphone market in 25 Tier 2 and Tier 3 cities of India and are expected to penetrate further as their offline presence increases.

“Majority of the sales for the China based vendors like Lenovo, Motorola, Xiaomi, LeEco are still coming from the online channel in these cities due to their superior positioning as quality brands, with a value for money proposition. Others like Oppo and Vivo are expected to grow in coming months in these markets with their huge marketing spends and increasing retail presence” adds Singh.

Customers across the city tiers are getting future ready, by choosing more 4G than 3G devices, with more than 65 percent of the smartphones being 4G compatible across all city tiers. Also, with Telecom operators gradually increasing the 4G footprint and promoting 4G services, this is expected to see exponential growth in coming months.

“In Tier 2 and Tier 3 cities, China based vendors are eating into the 4G device share of global brands, with almost 40 percent of the demand being generated by them” says Varun Singh, Market Analyst, Channels, IDC India. “This is a clear indication of the acceptance of said brands in these markets with their affordable & quality smartphones” adds Singh.

Price parity between offline & online channels has been a constant concern for the traditional distribution channel. “While online exclusive models will continue to generate demand, the new government regulations forbidding the predatory pricing and dominance by a few sellers on the e-commerce marketplace will help in bringing back the pricing hygiene across channels and a level playing ground for all brands” says Upasana Joshi, Senior Market Analyst, Channels, IDC India.


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