A report released on September 13 by Sino Market Research showed that China's smartphones sold last month through offline channels fetched a new record of nearly 40 million units, of which 4G phones accounted for 94%.
Contrary to a general trend of low-priced products losing market share while high-end ones gaining, Apple (NASDAQ:NASDAQ:AAPL) and Samsung (OTCPK:SSNLF) smartphones dropped in both sales numbers and market share. Sina Technology predicted iPhone's weak performance to continue in September as the iPhone 7 furor was short-lived.
iPhone Market Share Down To 7.2%; Samsung No. 5, Down To 5.2%
A total of 2.861 million iPhones were sold in August, a drop of 348,000 units or 10.8% from a year ago. Its share of China's offline market dropped by 1.1 percentage points to 7.2%, remaining at the No. 4 spot.
Samsung remained one spot lower. It sold 2.064 million units, a drop of 103,000 units or 1.43%. Its market share slid 0.4 percentage points to 5.2%.
All Chinese Brands' Total Market Share Nearly 90%
China's offline sales of smartphones in August jumped 3.3% to 39.51 million units. Chinese producers together accounted for 86.7% of the offline market. Four top Chinese producers OPPO, Vivo, Huawei (including its second-line brand Honor) and Gionee won a total market share of 48.2%.
Vivo was the best performer. It sold 6.214 million smartphones, a jump of 0.81 million units or 15%. Its market share also jumped 1.6 percentage points to 15.7%, catching up fast to market leader OPPO's 18%.
Performance of Top 10 Brands in Chinese Offline Smartphone Market, 8/2016 | ||||
Brand Name | Market Share | Change | Sale (,000 units) | Change (,000 units) |
OPPP | 18.0% | +0.8% | 7,122 | +545 |
Vivo | 15.7% | +1.6% | 6,214 | +810 |
Huawei | 9.7% | -0.2% | 3,833 | +52 |
Apple | 7.2% | -1.1% | 2,861 | -348 |
Samsung | 5.2% | -0.4% | 2,064 | -103 |
Gionee | 4.8% | -0.1% | 1,911 | +21 |
Honor (Huawei ) | 4.1% | +0.5% | 1,608 | +246 |
Meizu | 3.4% | 0.0% | 1,361 | +46 |
Le | 3.3% | +0.2% | 1,285 | +131 |
Lephone | 2.3% | -0.1% | 906 | +2 |
Source: huanqiu.com |
Sina Technology said Chinese smartphones now could compete with Apple and Samsung on hardware configuration, user interface design as well as product quality. They also know Chinese consumers' needs better. Chinese brands also are better in product innovation, marketing, sales network built-up and investment in human resources.
Sina Technology said the iPhone 6 Plus, which launched two years ago, has dominated the Chinese large-screen smartphone market but Apple then has offered nothing interesting to follow up.
iPhone 7 Furor Cools After "One-Day Crazy Buying"
A reporter from Sina Technology visited Apple shops several times and found the furor around iPhone 7's September 16 launch lasted just one day - much of the queue of buyers disappeared the next day.
Source: news.jinghua.cn
Sina Technology said Apple stayed ahead of its Chinese counterparts only in its processors. The iPhone 7's dual cameras did not stand out in photo quality, the website claimed.
The market shares of Apple and Samsung have been sliding steadily for a year. Sina Technology expected iPhone 7 to lead to a small rebound of iPhone sales, but it could not reverse the downward trend. Samsung's decline will accelerate due to the explosion incidents of its Note 7 smartphones.
Chinese Brands Excel In Marketing, Product Innovation And Network Build-up
Chinese brands are fast catching up with Apple and Samsung thanks to their efforts in three domains: marketing strategy, product innovation and channel construction.
All four top Chinese brands have been differentiating themselves from competitors by focusing on a specific market segment. They try hard to satisfy the needs of target customers. By contrast, Apple and Samsung adopt a "one fits all" strategy and think their products will be welcomed by different users. That is why they now find their products having no edge over their local competitors, observed Sina Technology.
OPPO and Vivo have been building and refining their marketing efforts for more than a decade. When they produced simpler electronics like the MP3 and cell phones, they were already the favorite electronics producers for Chinese students and women. Into the smartphone era, they sponsor entertainment programs loved by teenagers.
Gionee, the No. 4 offline Chinese smartphone brand, has been building up its image and sales networks since it was founded in 2002. It mainly serves mature men, executives and professionals. That is why it has signed movie director Feng Xiaogang and Hong Kong movie star Shawn Yue as spokespersons.
Gionee also finds that mature Chinese men have two seemingly contradictory psychological needs. On one hand, they want to be regarded as elites with a high IQ. So, Gionee sponsors an IQ challenging reality show, "The Brain", as well as the Chinese premier league of Go competitions. Go is a complex board game and has been a favorite hobby for Chinese intellectuals for more than 2,000 years.
On the other hand, mature Chinese men want to let their heads rest after work and relieve work pressure. So, Gionee sponsors the Chinese national soccer team Chinese people love to hate.
As China's most international brand, Huawei targets mature men of different nations and cultures. It finds their common hobby is soccer. Therefore, it sponsors the Spanish soccer club Atletico Madrid and signed an endorsement contract with Argentinean soccer super star Lionel Messi.
Besides satisfying customers' psychological needs, the top 4 Chinese producers have also made frequent product innovations to enhance the user experience.
OPPO proclaims itself as a selfie expert and has tried hard to make selfies beautiful. Its latest model is equipped with a best-in-industry 16MP front camera with a software capable of beautifying every part of facial image. Sina Technology praised OPPO for getting full marks in making selfies and grasping the core needs of Chinese girls. OPPO and its offshoot OnePlus have also introduced a quick-charge technology for their phones.
Vivo is the first smartphone maker to use a Hi-Fi grade DAC chip to optimize sound effects. It thus satisfies the core needs of Chinese music users.
Gionee targets business users. Its latest model has a built-in encryption chip. It also manages to squeeze in an oversized 6020mAh battery to achieve super endurance - a core need for business users.
Huawei's core business is making telecommunication equipment and networks. Hence, its smartphones excel in phone signal strength, according to Sina Technology. It also satisfies the needs of users who demand high reliability. Huawei also introduced double cameras five months before Apple.
In short, Chinese brands focus squarely on their target users and introduce new technologies to satisfy customer needs, noted Sina Technology. Users of different market segments thus find smartphones of Chinese brands more suitable for them.
Three of the four top Chinese manufacturers also have built up huge distribution networks after more than a decade of hard work and dedication. Apple set up in 2015 a goal of opening 40 stores in China within two years. Now it has set up 35. However, OPPO, Vivo and Gionee have set up tens of thousands of shops all over China. In many small towns, OPPO and Vivo have even set up shops on the same street.
Take Gionee as an example. After 14 years of network build-up, it has set up more than 70,000 agent-operated shops as well as more than 50,000 special zones and 200,000 counters in big boxes. With a strategy shared with OPPO and Vivo, Gionee also sends more than 70,000 shopping advisors to different shops to help customers choose the right phones. Gionee has also signed a strategic agreement with China Unicom (CHU) - China's second largest carrier - in 2016, further enhancing its channel service capabilities.
Huawei, in view of its small domestic network, launched at the end of last year the "Plan of Thousand Counties" in a bid to set up shops in major counties. So far, Huawei has set up shops in nearly 300 counties and hopes to meet the target by end of 2017.
Samsung has tried to innovate and change after its sales were overtaken by Chinese counterparts. Yet, it faces a quality control problem after the batteries of several Note 7s exploded. People began to distrust the brand.
Conclusion: Only Innovative iPhone 8 Can Save Apple
The latest Sino report only showed China's offline market situation in August without the online figures. The report thus excludes most sales number of Xioami as most of its products are sold online. Xioami was No. 4 in overall Chinese smartphone sales in the second quarter this year, one spot ahead of Apple.
But offline channels provide buyers a personal touch because sales persons and shopping advisors provide personal, face-to-face service. Customers have a better buying experience and hence a higher loyalty towards the brands. That makes offline market report a better indicator for the long-term smartphone market trend.
Apple has been famous for product innovation. The iPhone itself is the most important innovation for the smartphone industry. Yet, Apple now lags behind. We are not clear if Apple has the dedication to build up a sales network comparable to those of its Chinese counterparts. We have also not seen any sign Apple would give up its "one fits all" product design and marketing strategy. In short, Apple cannot reverse its sales decline in the Chinese market unless the iPhone 8 to be launched next year really has some spectacular product innovation.