Also, why the Government of India should probably have postponed the GST hike on smartphones -- for another six months, at least.
Key smartphone players including Realme have been lobbying to bring smartphones under the ambit of “essentials” so e-commerce platforms can resume their sales during India’s nation-wide coronavirus lockdown. The Government of India did give a glimmer of hope when it announced that it would ease some of the existing restrictions on Flipkart, Amazon and others, so they would be able to operate “fully” from April 20. Smartphone brands would seemingly be back in business. The Government of India took a U-turn on this, on April 19, though, much to their disappointment.
It’s not just Realme, or x, y, or z brand, that wants the Government of India to reconsider the “ban” on smartphone sales online, people want to buy smartphones too. If not buy them, at least have the assurance that they could reach out to after-sales should there be a problem — smartphone repair is a genuine concern for many people. This is because as more and more people are forced to stay cooped up inside their homes, in these unprecedented times, smartphone usage has gone up, exponentially.
Financial Express Online spoke exclusively with Realme chief executive Madhav Sheth to understand why smartphones are essential now more than ever. Excerpts.
— Could you talk about the ongoing pandemic scenario and how Realme is dealing with it? Why should smartphones come under the ‘essentials’ category?
We are waiting for the Government’s exit plan. As soon as we get some clarity, we will be able to plan better. As you know, everything has been shut down right now. We are requesting the Government to put smartphones under the “essential” category because connectivity is one of the most important aspects right now. Smartphones help people to connect with each other (they’re not luxury items). At the same time, there are also people now looking for repairs and replenishment of their phones. A smartphone is not just a communication device anymore, it’s also a mobile hotspot for instance, so on and so forth.
Even if we talk about other countries, a smartphone is (being) considered as an essential item nowadays.
The same goes for maintenance and repairs also. We get multiple requests every day for this, because people have been extensively using these devices for nearly 40 days now, right from staying in touch to working from home. But we are not allowed to do so (repair and offer after-sales). What I am trying to say is that we should have a stricter SOP (standard operating procedure) and devise an exit plan thinking about the (needs of the) consumer.
— Could you suggest some middle ground, because safety of the consumers is also very important. Curbing the spread of COVID-19 is the top priority right now.
There are multiple ways to avoid the crowd. We need to put stricter SOPs in place. For instance, you can book your appointments online, and only then you’ll be allowed to go to physical service centres. You schedule appointments in such a way that at any given time, there are going to be only a limited number of people (say, five) in the service centres. Limiting the number of people going to the service centres and opening service centres according to people’s requirement only is a viable alternative (to having them closed altogether).
We can also let people book an online appointment, and then our technicians can go to their place in person to repair their phones — that’s another way.
Online sales should be allowed. Digital platforms should be allowed to book the request. Thirdly, we can open a few service centres in the green zones.
Not just Reame, every consumer brand is responsible and we want to ensure that everything is followed strictly and closely monitored. We can come up with safer SOPs and we are also open to following the SOPs put forth by the Government. We are open to every sort of suggestion and discussion. Consumers are facing a lot of problems, and we have no solutions as of now.
— What are some of the short term and long term impacts of the pandemic from a pure industry point of view?
Financial health is as important as physical health. We need an exit plan on how the economy will be able to survive (the pandemic). We were planning to have another 10,000 workforce by the end of 2020 in the beginning of the year. Now we have to curtail our plans. So there will be impact in terms of jobs and in terms of demand also. It’s an entire cycle. If we are not able to create jobs, we are unable to create the demand and the production will also go slow at the same time. So, there is a bigger impact on the industries and bigger impact of job loss. It will also impact the “Make in India” plan because maybe the practice which we are planning to increase the number of clients, looking at curtailing the demand of the people, we won’t be able to do so. There are multiple impacts that can happen in the industry.
— How long would it take for the industry to recover from all these things — should the lockdown be lifted on May 3.
To be honest, everything is unclear right now and we have no clear image. If you see all the logistics have been impacted. If you see on ground, people have gone back to their hometowns, and bringing them back again from their hometowns is going to be the biggest challenge for the next one month, if at all the industry starts functioning (post May 3). So, the reduced manpower will lead to reducing output and the reduced output leads to reduced demand. The way we see it, it will take at least three months for the industry to revive from it and then we will be able to understand how much we will be able to recover. So, for now, survival is more important.
— What is your take on the Government of India’s GST hike on smartphones and components?
We honor the Government’s decisions, but we believe that the timing is not right. We have tried to raise this issue as well. The Government should have postponed the GST hike — it should probably have waited at least another six months. The pandemic only makes things worse. The industry has been hit by multiple factors, the depreciating Rupee is one of the factors, the disruption in the supply chain is another factor. GST hike adds to it, making it difficult for smartphone manufacturers like Realme to continue to sell products at cost-effective prices.
— So, considering all these factors, how do you continue to offer feature packed phones at cost-effective prices?
Not just Realme, every brand will be affected by all this. Smartphone prices will go up (mostly). Realme has always been a product-oriented company, focusing on building products and user experience. We have introduced many cutting edge features into different price segments, thus our profit has been thin and low. Before GST hike, our brand has never increased the prices since 2018. The reason we are increasing them now is to ensure we can continue to introduce more flagship and premium experiences into more price segments.
— Some of the brands are probably going to absorb some of these factors like the increased GST?
Taking into account the depreciating Rupee and the GST hike, there will be around a 15 or 20% impact (on smartphone prices). Memory prices are also going up, that’s again also a factor. We believe that the only brands who’ll be able to absorb all of this, are those who already sell their products at high prices. Realme sells mostly at cost. We are a more consumer-friendly brand. We are not in the position to absorb these things.