May 15, 2020

NetComm This Week - Smartphone Sales After Store Reopenings

005930 KS, 1810 HK, AAPL
By Hartmut Leuschner
Smartphone sales in Europe and North America have begun to accelerate during the first half of May after lockdown restrictions eased in most regions.
  • Weekly sales at 79%-84% of pre-lockdown levels in Europe, North America
  • Pent-up demand, ads from AAPL and Huawei raising consumer interest in Europe; government stimulus checks aiding U.S. demand

Immediate Boost From Store Re-Openings
All 13 smartphone buyers in Europe and North America said smartphone sell-through increased significantly in May immediately after governments on both sides of the Atlantic started to ease pandemic lockdown restrictions. During the lockdown, three network operator sources in Europe said they had some stores open because access to smartphones, SIM-cards and smartphone repair was considered essential in many regions, but pent-up demand was clear as another European manager said total daily sales in his retail stores after reopening went up by around 40% compared with primarily online sales during the lockdown. A manager from a large international European carrier said smartphone sell-through in some regions even topped pre-lockdown sales, but cautioned this was the case just for the first week after re-opening and it remains unclear what the next few weeks will look like. Meanwhile, in North America, a carrier source said 80%-90% of his stores had re-opened by the second week of May.

Weekly Sales Mid-May vs. Pre-Lockdown
(number of mentions)
100% or more2
75%-99%7
50%-74%3
No response1
Average79%-84%
Note: Interviews conducted May 8-13

Smartphone buyers said their weekly sell-through of smartphones averaged 79%-84% of pre-lockdown levels in their areas. Two managers with European-wide responsibility (a large reseller and a leading network operator) said sales were at or above pre-lockdown volumes because of pent-up demand. Sources also said good advertisement spending from Apple Inc. for its new iPhone SE as well as from Huawei Technologies Co. Ltd. for its new P40 series helped increase consumer interest. Meanwhile, the two North American sources said stimulus checks sent by the U.S. government had helped sales. “We are at about 75% weekly smartphone sales versus our weekly smartphone sales before COVID. One of the biggest drivers of sales has been the stimulus checks from the government. This is really helping our weekly sales,” one said.

Doubts About Longevity of Trend in Europe
European buyers remain cautious despite the boost; five of 11 said they are not sure whether the increase is sustainable. The executive of a large European operator said, “Around 40% of people visiting our stores [with a required appointment] buy a device, so that shows a level of pent-up demand, though we don’t know if it will be sustained. … We are quite nervous, as economies are going to be very bad and people will have to spend less on devices.” He also believes consumers will keep devices longer, which would hurt future demand.

ADDITIONAL QUOTES
Europe
“We had full store closure only for two weeks, then reopened more and more and are now fully open. Sales are quite good. I think we are at 90% compared to pre-lockdown. People are buying a lot of accessories for their home offices, too.”

“We increased online from 15% to 25% [of total sales] and offline is back by 80% [of pre lockdown volumes]. We are quite happy with this.”

“Europe-wide, we have about 70% of our shops open. We are doing OK.”

“We are now allowed to open all stores at full capacity. Restrictions are on the allowance of people per store. My impression is that despite the store opening, the store traffic is lower anyway because the shopping mood isn't there yet in full. People come in, pick up what they intended to buy and leave; they’re not strolling through the aisles and pick up things here and there as much as they usually do. This will take time and getting the daily [pandemic] headlines out of their mind. ”

“Restrictions have eased, but it is still a problem in many regions in the South of Europe. Only up to 10 people are allowed to meet. A lot of stores are still closed in large cities, like in Madrid, Barcelona, Rome and Milan.”

“Our own stores have all been open for quite some time and the launch of new products -- specifically from [BBK Electronics Corp. Ltd.’s] Oppo -- has helped to maintain sales close to pre-lockdown levels.”

North America
“People are beginning to get out again and spend. The lockdown is easing. But everyone is watching. If we have another lockdown, then smartphone sales will drop again. All our stores are pretty much open, and people can purchase smartphones at the stores again.”

“Since the re-opening of our stores, sales have started to come back in a meaningful way. We have also been able to attract a new younger demographic to our smartphone portfolio, and the low price of the iPhone SE has really helped.”