Concerns about an economic slowdown, diminishing demand and government scrutiny are creating unprecedented uncertainty for Chinese smartphone brands that are already cutting staff and are expected to cut spending on marketing and operations next year, industry executives and market trackers said.
Navkendar Singh, Associate Vice President, IDC India, said smartphone brands start their planning and projections for the next year from October to November. “Right now, there’s a lot of skepticism in (Chinese) companies. No one is committing to the kind of investment in marketing and distribution that’s going to happen next year.”
He added that brands cannot afford to scale back operations after 2022. “But if that kind of pressure continues, then profitability will suffer. The immediate impact could be a lot of uncertainty, some layoffs and voluntary exodus of employees from Chinese brands,” he said. Singh, speaking on government censorship of Chinese smartphone Trademarks.
Chinese brands including market leaders Xiaomi, Oppo, Vivo and Realme make up about 80% of the smartphone market in India.
India’s overall smartphone industry is facing macroeconomic headwinds along with investigations into the operations of Chinese brands such as XiaomiAnd the Oppo And the Vivo by government agencies. Market analysts have already lowered their forecasts for 2022. For example, IDC India predicted an 8-9% drop in shipments in 2022 after a quiet fourth quarter.
Chinese brands have already started to cut back.
“Over the past two quarters, some (Chinese) companies (operating in India) in the smartphone category have laid off around 600-800 employees amid volatile economic conditions abroad,” said Sanjay Shetty, director of search and selection professional and strategic account. Management, Randstad India.
“Moreover, the constant scrutiny due to strict data protection policies has led some candidates and employees to be wary of selecting under-the-radar employers,” he added.
There is also a wave of voluntary exodus among Chinese smartphone brands. One retailer in Maharashtra who asked not to be identified said top-notch executives, especially in sales sectors, face uncertainty, fear of lofty goals they may not be able to achieve, along with staff shortages. He added that most sales jobs at smartphone companies are related to incentives, which make up a large portion of their compensation.
There has already been a 30% decline in the workforce over the past year and a half, an industry executive said, and this is expected to accelerate in 2023 amid concerns about volatile economic conditions. He added that the biggest impact will be on the frontline workers that brands employ to run their retail stores and present their products to customers.
For example, there were 3,200 in-store promoters who previously participated across Mumbai alone for a Chinese smartphone brand in the top five. Now, that number has been halved to 1,600, the retailer said.
Retailers believe this will be shortened by another 20-30% in the next few years, as brands plan to incentivize retailers themselves to push product to customers as a cost-cutting measure.
“The attrition is expected to affect mostly frontline salespeople. Since we are in the middle of rising consumer demand, these people are being chased by multiple opportunities/offers in the market,” said Balasubramanian A, Vice President and Head of Business, TeamLease Services.
He added that frontline workers employed by smartphone companies are not replaceable across the consumer electronics space, so they naturally move to other smartphone companies only, suggesting that the workforce may be absorbed by competing companies.
“This scenario, however, will lead to an adjustment in talent as laid-off employees will be reabsorbed by their peers in the industry. Most of the employees being laid off are a mix of permanent workers and gig workers,” said Shetty of Ranstadt.
“Having said that, these companies make dedicated efforts to retain key employees and maintain business continuity,” he added.
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