Smartphone retailers urge brands to end zero-cost EMI schemes to make handsets more affordable
Smartphone retailers have suggested to brands that instead of zero-cost payment plans, consumers should buy devices on regular interest-bearing loans. This will bring down the baseline prices of smartphones, making handsets relatively affordable for customers.
Intelligence analysis by Llama
Smartphone retailers have urged brands to end zero-cost EMI schemes to make handsets more affordable. They suggest that consumers should buy devices on regular interest-bearing loans, which will bring down the baseline prices of smartphones.
Imagine you want to buy a new smartphone, but the company is giving you a special deal where you don't have to pay any interest on the loan. This sounds great, but it actually makes the phone more expensive for everyone. Retailers are suggesting that companies stop doing this and instead let people pay interest on their loans, which would make the phone prices lower and more affordable.
Analysis
A Heavy Financial Burden
The All India Mobile Retailers Association (AIMRA) has written letters to Samsung, Vivo, Apple, Xiaomi, Oppo, and Realme, suggesting that they end zero-cost EMI schemes. These schemes cost smartphone brands 17-19% of the product price, which they bake directly into the retail price of the phones, thereby artificially inflating prices.
A Standard Practice
AIMRA chairman Kailash Lakhyani proposed that the industry phase out the no-cost schemes in favour of standard, interest-bearing consumer loans. This would offer significant advantages for all stakeholders, including lower baseline prices and higher profit margins for brands.
Improving Approval Rates
Lakhyani said that charging direct interest on consumer loans is already a standard practice in major sectors like automotive and housing. Adopting this model would improve approval rates by financiers, to as high as 75% from below 50% at present, allowing more consumers to access financing.
Shifting the Interest Burden
Industry executives said that doing so would shift the interest burden directly to the consumer purchasing the product on loan, while those paying upfront would be able to secure it cheaper. They added that consumer loan interests are lesser than the cost paid by the brands to offer zero-cost schemes.
Key points
- Smartphone retailers have suggested to brands that they end zero-cost EMI schemes to make handsets more affordable.
- The retailers propose that consumers buy devices on regular interest-bearing loans, which would bring down the baseline prices of smartphones.
- Charging direct interest on consumer loans is already a standard practice in major sectors like automotive and housing.
- Adopting this model would improve approval rates by financiers, to as high as 75% from below 50% at present, allowing more consumers to access financing.
If this development plays out positively, it could lead to lower prices for handsets, making them more accessible to the end consumer. This would be a win for consumers and retailers alike, as it would increase sales and revenue for the industry.
However, there is a risk that shifting the interest burden directly to consumers could make the phone prices higher for those who cannot afford to pay upfront. This could lead to a decrease in sales and revenue for the industry, as consumers may be priced out of the market.
