There was a time when Chinese handset makers used to struggle everywhere but in China and some other low-price markets. Their products were no match for the smartphones from the big boys like Samsung and Sony, and their appeal was limited to only a niche market where low price was the only priority. But as is the nature of the mobile market, things here change more frequently than you change your smartphone. Such has been the change in the last few years, that after Nokia, now bigger players like HTC and Sony are struggling as well. Not even these companies, but the current trend has got even the market leader Samsung worried with dwindling sales and plummeting profits. Who’s to blame? Companies from China of course.
Forget the older players (like Lenovo and Huawei) who’re doing well for themselves, companies like Xiaomi have risen in the last couple of years and are now bigger than players like Sony. Their model being fairly simple, sell phones with high end specs at extremely affordable prices which cannot be matched by the larger players, even if that means wafer thin margins. Even customers who’ve traditionally ignored brands from China are now starting to look towards these brands, given the features that they offer and their rising brand appeal. These new age companies don’t really invest much into setting up a physical presence or customer experience places in the markets that they enter and rely on third party services to reach the customers at the minimum cost possible. These savings are passed on to the customers who in-turn buy these phones in such huge numbers that these companies do make out with some profits in the end.
Companies like Xiaomi and OnePlus have been able to distinguish themselves from their fellow Chinese players and build a brand that isn’t looked upon as a cheap iPhone clone. Using the invite only model, they’ve also managed to successfully create a hype around their products which makes sure they don’t get lost in a crowd of me-toos.
While these brands have been thriving, the older players it seems, have been completely caught off the guard. They’re still recovering from the initial blow and it seems like they have no strategy in place. Consider Sony as an example. They’re known to build some of the best phones in the industry. But with their pricing and same old designs, they’re standing on a limping leg. It wouldn’t be impossible for such a company to make a Motorola style comeback in the market. Instead, we see them delivering the same models at price points that have now become irrelevant.
To add to their woes, Apple has put a huge dent in their market share in the upper end market by releasing a larger iPhone last year. With Chinese players in the low price segment and Apple and Samsung in the high end segment, these other players find themselves between the hammer and the anvil.
So what’s the solution? Either innovate, or go so cheap that Chinese makers aren’t a threat anymore. Of course, bringing down the prices would mean lower margins and some of the manufacturing going to China. But it’s that or extinction. If we’ve learnt anything from the stories of Nokia and BlackBerry, it’s that nobody is safe, not even Apple or Samsung, but these companies have a plan to stay relevant in the market by either projecting themselves as the premium choice or by innovating enough. We’ve also seen Motorola make a strong comeback after almost going irrelevant. Others, need to come up with a strategy soon enough or perish.