Approximately a decade ago, when online marketplaces like Amazon and Flipkart were in their nascent stages and smartphone sales through these platforms were in its infancy, the annual smartphone sales were less than 100 million units.

Undoubtedly, the advent of 4G and Jio significantly contributed to the growth of smartphone sales, as 4G or Broadband Wireless Access (BWA) began to impact our daily lives in a substantial manner. We experienced the tangible benefits and value of connectedness.

However, it is crucial to acknowledge the significant contribution of online marketplaces, such as Amazon and Flipkart, to this growth. While marketplaces have often been criticised for offering deep discounts and potentially predatory pricing, which has been perceived as detrimental to the prospects of offline traders, these same marketplaces also made smartphones more affordable for a substantial portion of the population, enabling them to purchase devices that were previously beyond their reach.

Analysing historical data, particularly up until 2019, when deep discounts were a common practice among marketplaces, it is evident that the average discounts ranged from 25% to 30%. These substantial discounts had a profound impact on driving sales and subsequently increasing smartphone adoption.

Over the past decade, the average online sales contribution has hovered around 46-48%, while until 2019, the average online sales contribution was 42-44%. This indicates that online sales, driven by marketplaces, facilitated the purchase of approximately 60 million smartphones annually. Furthermore, it is important to note that during this period, the smartphone user base was also experiencing significant growth, indicating that online sales were not solely focused on replacing and upgrading existing devices. Back then, approximately 40-45% of sales were attributed to new smartphone users.

In 2019, the Indian smartphone market reached approximately $24 billion, with online sales contributing 44%. Although the online direct-to-consumer (D2C) market was still in its early stages, Xiaomi achieved significant figures through its mi.com store. However, online marketplaces accounted for 78% of total online sales, with Amazon holding a 57% share of the channel contribution by value.

In 2019, online marketplaces generated $8 billion worth of smartphone sales. Factoring in a 25% discount rate, they injected $2 billion into the market to stimulate sales through this channel. For their business growth, these marketplaces had to allocate substantial resources, including marketing and other efforts. They had to alter customer buying behaviour, which requires significant time, money, and other resources.

In essence, these online marketplaces indirectly stimulated the smartphone market by investing over 8% of total annual sales and passing this directly to customers. This effectively lowered their barriers to purchasing smartphones. This trend has persisted over the years, with online marketplaces consistently incentivising customers to buy smartphones.

This intervention has yielded several positive outcomes. Firstly, it enabled India to surpass the 100 million units mark of annual smartphone sales. Within a few years, the country reached 140 million units, and since then, annual sales have hovered around 150 million units, with a steady growth pattern. Secondly, it accelerated the distribution access for smartphone brands. Previously, only Nokia (which operated as Microsoft Lumia smartphones until 2017) and Samsung, with a robust nationwide distribution, held significant market presence. Other Indian brands, despite their decent presence, were gradually losing market share. Online marketplaces provided quick access to millions of customers for several emerging brands of the time, which have since become top 10 brands. Examples include Motorola, Xiaomi, Realme, and OnePlus.

The third contribution of online marketplaces to the system was the establishment of a bi-directional platform that enhanced customer interactions and provided valuable insights. Brands gained the opportunity to gain a deeper understanding of their customers, while customers could express their views and opinions about their products, whether positive or negative. Furthermore, online marketplaces provided brands with insights and data that they could utilise for their own purposes.

The fourth addition to the ecosystem, primarily driven by online marketplaces, was the emergence of technology bloggers and reviewers. As consumers began exploring online channels for product purchases, they also required information to conduct thorough research and make informed decisions. Since they could not physically experience the products before making a purchase, they had no choice but to seek reliable and credible third-party sources that could provide product immersion feedback. Today, technology has become one of the leading sectors in India, driving influencer and social media marketing.

Lastly, the benefits of online marketplaces extended beyond the virtual realm. Even offline retailers began purchasing from online marketplaces at significant discounts and subsequently retailing these products to customers at market price, sometimes even at a premium. In 2018, approximately 60% of online sales were cross-sold in offline channels. In fact, direct customer sales accounted for only around 15-16% of the total sales volumes.

In response to the evolving market landscape, online marketplaces are now focusing on profitability. The revised regulatory framework and strengthened antitrust laws have made it challenging for them to offer deep discounts on products. In fact, during recent online marketplace sales days, there have been minimal discounts, primarily originating from banks and other financial institutions.

The channel contributions have reached equilibrium, with both online and offline channels now contributing 50% each. However, during festive periods, online channels do have a slight advantage of 2-3 percentage points. Nevertheless, the market growth is not substantial. Our next milestone of 200 million smartphone unit sales annually remains distant, and there is no apparent fast lane, such as online marketplaces, that could catalyse the growth.

The smartphone industry and the government must collaborate to identify measures and strategies for market expansion, which is crucial for the overall ecosystem. Our Digital India mission will remain incomplete without near 100% smartphone penetration in the country, as only smartphones remain viable digital devices that enable Internet access.