South African smartphone stores hit hard by lockdown

The COVID-19 pandemic and the national lockdown have put a significant strain on smartphone retailers.

This is in line with many industries in South Africa that have struggled massively as a result of the lockdown.

According to research from Stats SA, about 10% of people who were employed before the lockdown are no longer employed.

Government’s recent announcement that it would be easing the lockdown further, allowing 8 million more people to resume work, has therefore been praised by business leaders.

Despite this, the impact of the national lockdown could be long-lasting for many businesses – including the smartphone retail industry.

To find out how local businesses are coping, MyBroadband spoke with Cellucity and Technomobi about how the lockdown has affected the sale of smartphones.

“The lockdown has put a strain on the business and as we have no clear indication of when business will return to normal,” said Cellucity.

“We have had to make prudent decisions on spending to ensure business sustainability.”

Technomobi agreed that business has been tough, and said a significant reason for this was that is stores have been closed – or operating at half of their capacity – for an extensive period of time.

It said an issue that remains unclear is the position landlords will take as they, along with the banks, “hold the key to the sustainability, and indeed, survival, of many small and mid-sized retailers”.

It said banks and landlords can help to develop a roadmap for the next 6-9 months to ensure mutual stability, and a gradual transition back to profitability for businesses.

Technomobi added that the rand’s weakness against the US dollar, the currency in which most handsets are purchased, has meant that pricing has increased upwards of 20%.

This, combined with customers looking to save money in these tough times, has created an economic “perfect storm”, Technomobi said.

Customers looking for value

According to Cellucity, it has seen customers increasingly prioritizing mid-tier smartphones as they have needed to be more prudent with their spending.

It said this is a trend that began last year, but has been continued thanks to the lockdown.

Technomobi said it has also seen a priority being placed on lower-priced smartphones.

“The average price point of the sale is lower than pre-lockdown, which speaks to a cash constrained/conservative consumer, which is not too surprising,” said Technomobi.

It added that cash sales have fared better than contract, and believes this is because customers are reluctant to sign up to 24-month contracts at the moment.

Cellucity expects this trend to continue moving forward.

“We expect to see a more sober approach to purchasing of mobile handsets and consumers not necessarily being swayed by the latest device, but more by the actual value proposition of the device,” said Cellucity.

This includes the consideration of certified pre-owned (CPO) smartphones, which has resulted in Cellucity recently introducing a new CPO iPhone range to deal with this demand.

“We would not be surprised to see new challenger brands make a successful debut in South Africa in the coming months,” Technomobi added.

Staying connected

Another interesting trend noted by Cellucity is a focus on connectivity solutions.

It told MyBroadband that at the beginning of the lockdown, there was massive demand for MiFi routers (small Wi-Fi routers which use a mobile SIM for connectivity).

It also saw a rise in interest in affordable tablets, specifically among a younger audience.

It said that these tablets were both to assist with home schooling during the lockdown, as well as to keep children entertained.

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South African smartphone stores hit hard by lockdown