COVID-19 outbreak in China takes toll on retailers at Lajpat Rai market

With the price of products increasing following supply chain disruptions in China, buyers in the Capital are just window shopping

Usually brimming with shoppers, particularly on a weekend, the popular electronics wholesale market in Chandni Chowk — Lajpat Rai market — wore a forlorn look on Saturday. The retailers here have begun to feel the pinch as demand has nosedived due to increasing prices of products such as mobile phones, speakers, and televisions, following supply chain disruptions in China as a result of the COVID-19 outbreak.

Shahid Ansari, one of the retailers at the Lajpat Rai market, said prices across all the products have gone up, which has directly affected the demand.

“The impact on business is now very much visible. We open shops at 10 a.m., and it is usually only by 2-3 p.m. that we are able to make our first sale,” said Mr. Ansari, who sells a range of electronic items, mainly from China, including speakers, hair straighteners, electric kettle, fans and tripods.

For accessories such as mobile phone covers and tempered glass, the price hike is in the range of ₹25-50, while for speakers it goes up to about ₹50-₹500 depending on the size, and for Chinese TVs, it is ₹1,000 onwards. Another shopkeeper in the area, Eshaan Siddiqui, said almost all phone accessories come from China and with the price increase, buyers are just window shopping.

With anticipated shortage of products, the dealers have increased prices, forcing retailers to pass on the cost to the buyers. “We buy products from distributors but they are releasing very limited stocks thinking about possible shortage in the future so that is impacting the prices,” Mr. Siddiqui added.

India is heavily dependent on China to meet its requirements for electronic goods. India’s electronics industry imported over $20 billion worth of items from China in 2018-19.

Harish Bhasin who deals in wholesale LED TVs said price for a ₹5,000 TV has gone up by ₹1,000. “So now customers are delaying purchase. Until a couple of weeks ago, we used to sell four-five TV units in a day... we are not even selling one unit a day now,” he said.

Wait and watch mode

While the situation is not as bad for bigger retailers and brands yet, they are in a wait and watch mode. Harpreet Kohli, owner of Kay Dee Electronics, Noida, said while there has been no official communication, all major mobile phone and television brands have indicated that there is uncertainty with regard to supply chain. “If the situation does not improve soon, we have been told that supply for products such as LEDs could be impacted by as much as 50%. With the summer season approaching, AC supply and sales could be hit too,” Mr. Kohli said.

However, given that India largely has a good manufacturing eco-system refrigerators and washing machines, should not feel any negative impact of the situation, he added.

Consumer Electronics and Appliances Manufacturers Association president Kamal Nandi said as of today he doesn’t see much impact of supply chain disruption till March. “If manufacturing activity does not get streamlined by end of this month, then we will see production constraints as a lot of components and even some finished goods come from China, said Mr. Nandi who is also executive vice-president & Business Head, Godrej Appliances. The supply for ACs could be badly hit as most compressors are imported from China, along with microwave ovens which many manufacturers import as finished good from China, he said.

An industry representative who did not want to named said that LED TVs sales are generally low in January-March quarter mainly as it follows a buying (festive) season. This has further been aggravated. “So a lesser demand might mitigate some impact or pressure on any supply chain.”

Smartphones segment, however, is likely to see lower sales and increase in prices due to heavy reliance on components from China. For a smartphone enthusiast, this may even mean a delay in new device launches by various companies.

“Xiaomi has already increased the price of Note 8 Pro device by about ₹500. Usually, prices of old smartphone models drop as newer models arrive. But this is not happening now because there is a shortage of supply. There has been no formal communication, but almost all companies have indicated that due to a shutdown in China, supply chain constraints may continue. We are also seeing an increase in prices of accessories such as headphones, speakers, phone covers etc.,” said Arvinder Khurana, president of All India Mobile Retailers Association.

He added that earlier there was a smooth supply of iPhone 11, but now the allocation (by distributors) is being rationed.

Exploring channels

A Xiaomi spokesperson said, “The extended shutdown in China is likely to have an impact on our supply chain and, there is a risk of impact on overall quantum of component supplies. While we are working to explore alternative supply channels for components and raw materials, the immediate impact is that the short supply might cause some negative pressure on prices of these components.”

However, another Chinese smartphone maker Vivo has said that it may not immediately hike prices of its handsets in India.

Additionally, market research agency Counterpoint estimates a 10%-12% decline in smartphone sales in January-March 2020 in India due to COVID-19 outbreak.

“This is likely to have an impact on Q2 also. Assuming situation will start getting better in March, we expect impact on new launches to be pushed by at least 4-5 weeks and the ones which are being launched will have limited stock,” Tarun Pathak, associate director at Counterpoint Research said.

“If the virus is contained in March it will still take two months for commercial activities to normalise in China,” Mr. Pathak added.

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Printable version | Jul 3, 2020 3:00:55 PM |

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