New challenger brands are setting their sights on UK mobile, using lower price points and unique device features to ‘do it better’ than the top manufacturers.
The value of these new players lies in their ability to offer an alternative to consumers who are increasingly looking for top-tier features at a mid-range price.
The tough landscape of the UK mobile market makes it increasingly difficult for smaller manufacturers to compete against Apple and Samsung, which claim the largest market share. This dominance is being challenged across the industry as retailers and distributors offer new ways to differentiate.
The UK is one of the biggest markets in Europe, and the growth of SIM-free has made it an attractive
option for challenger brands such as BQ. Having built up its reputation in its home market of Spain, the manufacturer now believes it’s time to expand into a new market, using 2015 to launch its devices in the UK.
Deputy CEO Rodrigo del Prado says: ‘The UK is one of the biggest markets in Europe so we think we have something to offer that’s not being covered today – it’s part of our European expansion which started last year.
'I don’t know if now is the right moment but three years ago wasn’t the right moment because we didn’t have anything unique, and if you don’t have anything unique, trying to go abroad is useless.
‘Now that we can develop our product and solve the needs of consumers, it’s the time to grow. We don’t want to be 100% of the quota – we know that’s impossible – but we want to become an alternative in the market, as we are in Spain.’
The Spanish manufacturer is not alone in its bid to claim a portion of the UK mobile market. French brand Archos expanded its UK presence this year to take advantage of what sales director Rakesh Odedra claims is a market shift in consumers looking for more than just brand.
He says: ‘The market is shifting as consumers start to look for value and not just brand. While there is demand for the top two, tier-one brands, there are also many consumers and B2B customers now actively doing their research, who see beyond the brand.’
The mobile market is being dominated by Samsung and Apple and this reflects the brand sensitivity of the UK. This makes building a trusted brand particularly difficult for challenger manufacturers who may not have the partnerships or the budget to launch big marketing campaigns. Wileyfox describes UK brand recognition as its biggest challenge, using exclusive launch events and an online presence to ‘quickly and easily’ showcase its brand.
Smartphone brand Honor also uses online channels to boost its brand reputation, using social media competitions to raise awareness.
Richard Jenkins, VP of business development at Wileyfox, says: ‘You have to have an exciting, interesting brand, which we have as we’re challenging the status quo. There’s a number of new brands that have started before us but we think we can do it better and do it at better value. If you look at the typical tier one manufacturers such as Samsung and Sony they are changing where they want to win – and then you’ve got new brands coming in such as Honor.’
However, for BQ, brand is something that needs to develop over time and is grown through quality of product. ‘You should build a brand based on the trust of your customers,’ says del Prado. ‘It’s a promise to your customers that you should fulfil. Maybe there are faster ways to build brand recognition but if that recognition is empty then it’s useless.
‘We are getting a little bit tired of big hype from the big manufacturers, and then when you use the product you feel nothing. We can’t fight these guys as they are 10 thousand times bigger than us, it’s like trying to fight a giant. We can build brand images by investing more in education and helping people to learn about tech from the developer point of view.’
Value in services
The growth of SIM-free in the UK has seen consumers hang on to handsets longer and also look for devices with a low to mid-range price point. There is a shift towards services and a value-for-money product, and that is where the challenger brand comes in.
Carphone Warehouse MD Jeremy Fennell believes there is now greater value in the types of services that can be offered alongside a handset.
He says: ‘Increasingly, as product sales decline there will be a lot more value in services, whether it be the return or the repair of handsets – helping customers bring together connectivity is something we also see a demand for.’
A number of challenger brands are using services to differentiate in the market, with the likes of Kazam offering free screen replacement, remote repairs and a free warranty across all devices. For Wileyfox, its ability to offer after-sale support is what makes it stand out as a challenger brand.
Jenkins says: ‘Consumers know they will get good service and good after-sales; these are things where consumers can say “that’s great value”, and that’s why we’re a challenger brand.’
This is echoed by BQ, which explains that while product is important, it needs to be balanced with a good level of service. Del Prado says: ‘Without having the product it gets very difficult to set a level of service, but having a very good proposition without any services is also a problem.
‘We are not the number ones, there are other companies and there’s nothing they can do that we can’t do. The customer experience should be good and that’s why we are an alternative, because we can provide that.’
For established European brands, one route to market is through distribution. BQ and Archos teamed up with Tech Data Mobile to establish their presence in the UK. These collaborations are equally beneficial for distributors who can see the benefits of having a diversity of partners in a market where some large vendors are cutting back on the number of distributors they work with.
According to Tech Data Mobile MD Matt Child, the shrinking number of manufacturers in the market means that distributors need to have a broad range of partnerships, from top-tier to challenger.
He said: ‘There’s only a finite number of vendors in the market now and it’s probably shrinking.We’ve got a great partnership with Apple – we have that on a very senior level – and that’s certainly helped us with our breadth. We’ve rapidly gone up the ladder with Samsung and I'd say that we are definitely one of their most proactive distributors. And then we’ve got our relationship with Microsoft as well. These manufacturers enable us to cover the three major operating systems, which is a true USP in UK distribution.
‘There are other vendors coming into the market that have growth potential. We work very closely with Lenovo, with Google, with ZTE. Then there are brands such as Archos and BQ, smaller, less well-known brands that make great quality products to accommodate different budgets.’
A number of these challenger brands have adopted an online-first approach to the market. The routes to market come through big e-tailers such as Amazon, which has existed outside of the operator contract market for a long time. The likes of BQ, Honor and Wileyfox have all praised Amazon for raising brand awareness. For Wileyfox, it was also a quick and easy way to bring products to market.
Jenkins says: ‘In the UK we’ve focused our time with Amazon. They’re our biggest partner and we’re a challenger brand so we need someone to help us get our brand and products to market quick and easy – and Amazon ticked that box. Yes, we want to sell direct, but we also want to work with e-tailers that can position us where we need to be so that people find out about Wileyfox.
For many smaller brands entering the UK, a physical high street presence is paramount in order to compete with the big manufacturers. Carphone Warehouse’s Fennell explains that demand for high-end devices has helped increase footfall, but that emerging brands are starting to claim back some market share.
He says: ‘Samsung and Apple have been fighting it out in the premium space with the S6 and 6s and that’s really kept the customers coming in, and we’ve seen strong share gains in the market there as well.
'I was looking at an interesting chart that shows how much the business is converging towards Apple and Samsung and how much market is coming away from the other brands and from the low end of the market, and that is definitely prevalent and we see that continuing.
‘Other challenger and emerging brands are coming out of the Chinese market and it will be interesting to watch and see how much market share they can take.’