Gadget Prices Set To Go North As Rupee Continues Its Slide; EMIs & Freebies To Ease Pain

Gadget-price-riseFor people looking to buy new gadgets, another painful price hike is round the corner. The rupee which is continuing its free fall and hitting record lows everyday is forcing gadget manufacturers to relook at prices.

Big players including Samsung, which has a 31.5% share of the Indian handset market and, Acer which had a 10.4% share of PC sales last quarter have confirmed that they have or will be raising prices in the coming days.

Amar Babu, Managing Director of Lenovo India told NextBigWhat

This has been recorded as one of the steepest declines and the current proportion of imports utilized by Indian IT manufacturers to deliver products and services (approximately 85 percent at this time), has also been rising with time.

In the last one month, the US Dollar has appreciated from Rs 59 to almost touching Rs 69 (today).

“Heavily import-dependent, coupled with the phenomenon of rupee depreciation witnessed by the country, has been adversely affecting the financial viability of the IT hardware industry,” said Amar Babu, who is also the Vice-President, of the Manufacturers Association for Information Technology.

Majority of smartphones or their components that are sold in the India are imported from China and elsewhere. The transactions happen in US dollars and most companies had hedged the dollar at around the Rs 58-59 mark. Some mobile manufacturers had increased prices by  8-12% last month when the dollar had touched Rs 60.

Last week, Samsung was the first mobile phone manufacturer to take the plunge and has increased prices across the board by about 3-5%. This has translated to a price increase of about Rs 1,500 for the Samsung Galaxy S4 and Rs 2,500 for the Galaxy Note II. Other products have seen a similar rise.

Nokia on the other hand has still not decided about a raise in prices. “We have not taken a final decision on prices of our devices in India as of now and will let you know as and when we have more news on this to share with you,” a Nokia spokesperson told NextBigWhat.

Home grown mobile companies manufacturers like Micromax also said that they were closely watching the situation.

Meanwhile, mobile phone manufacturers have introduced innovative ways to draw consumers even with high prices. Customer friendly measures like buy back schemes and EMIs introduced by Apple last year for the iPhone are now being offered by other companies like Samsung, BlackBerry and Sony.

PC Manufacturers Most Hit

PC manufacturers are in a more precarious position has the industry has wafer thin margins and see just a 2% gross profit. Any swing in the dollar has a major effect and manufacturers have no other choice but to increase prices. This will be the second hike in prices in as many months as most players in this sector had increased prices in the middle of July.

But while companies are forced to increase the prices they are trying to minimize the impact on customers by having bundling special offers and introduction EMIs.

Acer which had increased prices of personal computers by 6-8% in July is set to announce another increase of 4-6% over the next few weeks, said Acer Chief Marketing Officer S Rajendran.

But the computer manufacturer has introduced EMI schemes last month and is also going to offer extended warranties at a discounted price of Rs 999 from the usual Rs 3,500 to Rs 4,500, he added.

While the fall of the rupee is happening on a daily basis the impact is not seen for a few weeks until distributors & retailers run out of old stock. PC manufacturers usually have a two-tier distribution model. The first is the indirect business model where they have distributors and the second is direct from the retailers. Since both usually have stocks which last between two and six week, the price increase usually takes the same amount of time to reflect.

Other manufacturers like Lenovo and HP are still watching the situation.

The fall in the rupee might make it more attractive to pick up a device when travelling abroad. But do keep in mind custom duties. In fact, just last week the government decided to levy 36% customs duty on LCD and LED television sets that passengers bring along with them as part of the duty-free baggage allowance of Rs 35,000 (source).

However, PC manufacturers are riding on a high from last quarter where they shipped a record  3.53 million personal computers on the back of big orders from state governments.

The rise in prices is definitely going to put a dampener on consumer sentiment as the festive season begins next month.

Image credit: Shutterstock

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