Pump up the volume: Online sales help Samsung's phone division weather a brutal year

Chaebol's e-commerce efforts surged compared to 2019

Preliminary Q3 forecasts for Samsung's smartphone division show operating profit up 52 per cent to ₩4.45 trillion (£3bn) thanks in part to a renewed focus on leaner online sales channels.

Volume also rebounded after a challenging Q1 and Q2, and Samsung grew global sales to 80 million units, up 50 per cent from the previous quarter. While this could be attributed to stronger economic conditions and the gradual easing of lockdown restrictions, there is additional evidence that Samsung has tried to "COVID-proof" its retail approach.

These strategies varied between markets, but consumer financing invariably played a huge role. In the UK, Samsung partnered with Swedish fintech startup Klarna to offer more flexible payment plans. US customers also got a promotion as Samsung dangled 50 per cent discounts on some devices to eligible customers willing to buy directly and take out a loan.

The dynamics helped Samsung increase its direct online consumer sales to 40 per cent, up from 15 per cent in Q3 2019, according to Nikkei. In turn, this has allowed Samsung to reduce marketing costs as well as the amount of excess stock held at physical locations.

This shift to e-commerce mirrors other developments in the wider economy. A research post by US investment bank Morgan Stanley in June predicted "e-commerce to account for 32 per cent of all softline retail sales – a 9 per cent annualized increase" for 2020. Logically, sharper jumps occurred during the months when the strictest lockdown measures were in place. In April, the sector grew 58 per cent year-over-year, for example.

While online sales have continuously expanded over the past decade plus, it's the pace that's most striking. April's e-commerce growth was four times faster than the same month in 2019.

These figures come at the expense of bricks-and-mortar retail. Samsung in particular has attempted to capitalise on high-street footfall, with the company opening a global network of "Experience Stores". Conceived as an answer to the Apple Store, these allow users to get hands-on time with Samsung's latest wares. Predictably, these outlets suffered due to the COVID-19 pandemic, thus shifting more pressure to online and third-party e-commerce channels.

Still, there's a larger story at play for Samsung, particularly when you interrogate its product lineup, which has included newer, cheaper devices intended to compete with competition from Xiaomi and Realme. These include the India-only Galaxy F lineup, which industry observers predict will see a wider international release, and a cheaper version of the Galaxy S20 flagship, as well as cheaper 5G devices like the Galaxy A42 5G. ®

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