‘ ₹5 biscuit packs are not selling’ is at the centre of many a debate on the state of the economy these days. But sales of ₹15,000 smartphones are robust . Mint explains how the two outcomes may be exclusive of each other and the truth could somewhere be in the middle.

Why are mobiles more popular than soaps?

Sales of fast moving consumer goods (FMCG) such as soaps and biscuits are weaker than expected, while those of smartphones are going strong. The India smartphone market saw the highest ever second quarter shipment of 36.9 million, with a 14.8% quarter-on-quarter growth, according to International Data Corp. Features phone sales came in at 32.4 million. On the other hand, according to Nielsen, sales of FMCGs grew 10% during April-June, rounding off the January-June sales growth at 12%. This was less than the 13%-14% growth forecast by the market research firm for the six-month period.

Is technology the key growth driver?

The June quarter was the first three-month period when sales of smartphones exceeded those of feature phones. Brand expert Harish Bijoor calls a mobile phone “a high involvement category, a personal and persona extension item". “There’s no competing product. If you don’t have a good smartphone, you have to have a laptop," he says. A smartphone defines a person’s “look, speed, and appetite". The launch of rightly-priced feature-rich smartphones with high-speed processors, big resolution screens and 3 cameras has helped many buyers upgrade. Online sales grew 12.4% compared to 8.5% offline.

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What other factors are driving smartphone sales?

Live streaming of events and better content on platforms such as Netflix are persuading buyers to upgrade. The surge of social media apps like TikTok and cheap data plans have helped too.

What’s impacting soaps and biscuits?

Demand in rural areas, which account for 37% of spends for the FMCG sector, is slowing down at double the rate of urban areas. This is surprising given that the government has pumped money into rural areas through social sector schemes. Usually, low price points are prone to competition from the unorganized sector, new entrants and buyers wishing to upgrade. But none of that seems to have happened. The bulk of sales of low-priced items comes from rural areas—the first to bear the brunt of a slowing economy.

Are the millennials the big culprits?

“Amul and Khadi Village have reported big growth. People are upgrading. There are fundamental changes happening in the economy. Maybe, people are not interested in eating certain biscuits," says consulting firm Technopak’s chairman Arvind K. Singhal. Arguing differently, decision-makers in the two categories are different: the elderly choose the grocery list and they are focusing on health as well as monthly spend, while mobiles are a choice of the end user, many of them millennials.

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