China Smartphone Market Shifting to Replacement Users, says IDC
• Apple continues to reign in the high-end segment. In the >US$500 price band segment, Apple dominates strongly at 86%. This is followed by Samsung at 12% and Huawei at 2%. Although Apple’s iBooks and iTunes Movies services are now banned in China, this will not have any immediate impact on iPhones locally, especially since these services were only launched a few months back and Chinese consumers have other alternative platforms they can turn to. With Apple still seen as one of the most premium smartphone brands in China, it is unlikely for Apple users to switch over to local Android brands.
• OPPO and vivo are two Chinese vendors that have seen their shipments pick up largely due to investments made in marketing as well as increasing their distribution channels. Both target a younger demographic in China and invests heavily on sponsorships of popular entertainment television shows. OPPO’s marketing highlights its strengths in photography and fast charging, while vivo focuses on promoting its good audio quality. Both vendors have seen the ASPs of their smartphones increase quarter-on-quarter (QoQ), proving their strong brand image in the Chinese smartphone market. They have proven that it is still possible to use traditional marketing strategies to succeed in this day and age in the smartphone market.
• There are no major changes to the various channels in the China smartphone market. However, eTailers such as jd.com has been aggressive in its expansion activities to attempt to reach out to more lower tiered cities. This, along with its constant promotional activities, will help it to compete against the retail channels in the lower tiered cities.
• It is becoming increasingly harder for vendors to differentiate themselves through hardware. Thus, vendors such as Apple, Huawei and most recently, Xiaomi, have launched their payment services in China.
“Investing on payment services may possibly help vendors to increase their revenue in the long term. But we do not think this will have any short-term impact in helping vendors to gain any new users or help increase brand loyalty,” said Jin Di, Research Manager, Client System Research of IDC China. It will not be easy for new players to enter the market as WeChat and Alipay currently dominate mobile payments in the country.
With a saturated smartphone market, competition in China is even more intense amongst vendors. Not every vendor can be like LeEco who can attempt to get users locked into its ecosystem through subscription to its online video content. The ranking changes amongst vendors shows that the smartphone market is extremely volatile and consumers generally lack brand loyalty.
“Vendors must constantly be on their feet to think of different ways to engage consumers. There is an opportunity now in the mid-range smartphone market with replacement users seeking to upgrade their phones and vendors should try to tap on that segment of the market,” said Tay Xiaohan, Senior Market Analyst with IDC Asia/Pacific’s Client Devices team.
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