Smartphone C-brands
Over the last three years C-brands have driven a reshaping of the price tier dynamics within the mobile phone market.
Chinese mobile brands continue to grow, despite COVID-19
Chinese brand smartphones (C-brands) have grown beyond their borders and become popular all over the world due to their competitive pricing and attractive product range. We’ll look at their current market share, what this means for the premium brands, and their potential for further growth in the post-COVID world.
The impact
of C-brands
The growth of brands such as Xiaomi and Huawei mean that they have now become as familiar as the more established names such as Apple, Samsung and Nokia.
Over the last three years C-brands have driven a reshaping of the price tier dynamics within the mobile phone market.
From Kantar’s Worldpanel ComTech panel, it is possible to see that C-brands now represent 26% of the market in the EU5 (UK, France, Germany, Spain and Italy), 12.5% in Australia and 4.3% in the United States (a smaller share in-part due to the on-going China/US trade war).
The foundation of C-brands’ success is down to creating a compelling low-mid tier range of smartphones.
C-brands largely capture low-income consumers, offering them the attractive position of low prices with the accessibility to new high-quality devices.
Although the positioning of C-brands is ideal for consumers wanting to upgrade from legacy brands (such as Sony and Nokia), smartphone leaders Apple and particularly Samsung have not escaped the pressure of the growing popularity of C-brands globally.
However, the rise of C-brands have been met by challenges; the China/US trade war, Google’s announcement to pull Huawei’s Android license and more recently the UK government’s ban on Huawei from its 5G network. At least for Huawei, this will limit their future growth potential across many markets.
Competitive positioning
In the wake of COVID-19, with the economic uncertainty that many are suffering, a competitively priced smartphone is an attractive prospect for consumers looking to rationalise their spending.
Latest data from Kantar’s Worldpanel ComTech panel
shows that consumers are highly concerned about their finances.
56% in China, 31% in Australia, 23% in EU5 (the highest levels of concern in Italy at 39% and Spain at 35%) and 33% in the US. The level of financial concern is correlated to personal financial impact: the greater the financial concern, the greater the proportion of consumers whose personal income has been impacted.
Many consumers who plan to buy a smartphone within the next six months, have decided to delay spending; 31% in China, 47% in Australia, 25% in EU5 and 27% in the US, where the proportions skew higher among those financially impacted by COVID-19.
Among financially impacted consumers, the likelihood to spend less on a smartphone is disproportionately higher than those unaffected, thus fuelling the demand for low-mid tier devices.
Demographically, across all markets, the consumers financially impacted are more likely to be under 45 years old, employed, with low personal income and (with the exception of China) have children present in the household, indicative of a family set up.
The threat to
leading brands
In the current economic environment, there is a strong chance that people who normally buy Samsung and Apple could be tempted by lower prices. This provides an opportunity for C-brands to continue to strengthen their position.
Future brand preference share, among current brand
owners intending to purchase in six months’ time
In most markets, among consumers who have been financially impacted by COVID-19 Samsung smartphone ownership is high and iPhone over-indexes vs. those financially unaffected by the pandemic. Therefore, for both brands, the implications associated with spending less and delayed smartphone purchases are significant.
In the EU5, financially impacted iPhone and Samsung owners who plan to buy but want to spend less on their next smartphone are more likely to churn to a competitor.
For iPhone, although intended loyalty is still high at 83%, intending churners from iPhone have a greater preference for C-brands (particularly Xiaomi), followed by Samsung. For Samsung, intended loyalty is at 60%, 5 points lower than all Samsung purchase intenders. Of those intending to switch from Samsung, 17% prefer C-brands and over-index by 68 points for Xiaomi.
Xiaomi’s European launch initially focused on Spain, gaining share rapidly through superior marketing execution at the point of purchase. Consumers were responsive to Xiaomi’s compelling range of low-tier models: they were innovative and recognised as a brand that was setting new trends.
Since their emergence
into Europe in 2016, Xiaomi’s
clear business strategy has proven very fruitful.
A key component to this strategy involved new retail opportunities, notably Xiaomi’s ecommerce channels such as MI.com and their partnership with Amazon (accounting for 33.8% of sales in EU5 in the 12 months to Q4 2019).
Additionally, over the last two years we have seen notable investment from Xiaomi into bricks and mortar stores, which has coincided with increased sales through this channel (27% in Q4 2019 up from 22% in Q4 2018).
This two-pronged retail strategy allows them to sell directly to consumers, establishing a wider presence and significantly building up word of mouth.
In the EU5, 35% of Xiaomi purchasers stated they were influenced through hearing good opinions about the brand, along with 22% also being influenced by somebody else’s recommendation so the ‘buzz’ for Xiaomi products is massively assisted through word of mouth.
The largest sources of acquisition for Xiaomi in the EU5 were from previous Samsung and Huawei owners.
Responding to the rise of the C-brands
With the rapid growth of C-brands and the increased share of low to mid-price tier smartphones, it is unsurprising that leading brands are also focused on offering devices that play in this growing space.
In 2019 Samsung refreshed their Galaxy A series, with boosted specs and a sleeker design, the launch helped to stall the surge in C-brand sales. Since the A series release in Q2 2019, Samsung has boosted their share in the low, mid and high spend tiers. They have also slowly reduced the number of consumers churning to the likes of Huawei. Their strong performance continued through Q1 2020 with five models of their 2019 launches appearing in the list of top 20 sellers.
In April 2020, iPhone SE 2 launched with the strapline “Lots to love. Less to spend” and the timing couldn’t have been more acute. iPhone SE 2 offers the latest A13 chip, the same chip used in the flagship models iPhone 11 Pro, enabling an advanced camera system for photography and videography.
The camera is among the top feature drivers for consumers specifically choosing their device above others.
The iPhone SE 2 provides the latest technology at low cost.
The importance
of premium
While there is much activity in the low-mid price tier, it is important for manufacturers to also continue delivering at the super-premium tier, using their flagship products to carry the launch of first-to-market cutting edge innovation.
Flagships should continue to act as the model markers of what “best” looks like, create desire and aspiration.
A broader portfolio is an opportunity for manufacturers to set out clear models/series differentiation through a tiering structure to meet the needs of more consumers, widening appeal and protecting an established existing base of consumers. This is what will give the market leaders a distinct edge over C-brands.
Food for thought
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