The manufacturer landscape is changing. The big five players are now facing increasing competition from new and more aggressive manufacturers who are fighting for a sizable share of the market.
RIM, Apple and HTC are now grabbing share from top players Nokia and Samsung, as smartphones become mainstream in the mid end of the market.
At the same time, new players are also entering the prepay market. ZTE, Alcatel, and Huawei are also taking on Nokia and Samsung’s offerings for the Christmas period, while more established own-brand handsets are emerging from the operators.
More players in the market will mean greater competition and, ultimately, more choice for consumers, say sources. However, Sony Ericsson and Motorola, which have been struggling in recent months, are likely to be nervous of being knocked out of the top five.
In terms of volume, there will always be a top four or five manufacturers in all markets, says Strategy Analytics director of wireless practice Neil Mawston. But, it is still a question of who the top five are. He says: ‘There is a wave of second tier players – HTC, Huawei, RIM and Apple are all looking to get in, and Motorola and Sony Ericsson will be looking over their shoulders.’
Sources say ZTE also stands one of the best chances of beating Sony Ericsson and Motorola on volumes globally. However, in the UK it could be Apple that gets into the top five, says Mawston. He adds: ‘Apple is expanding its portfolio and retail presence and is becoming more price competitive. In the second half of 2010 you could start to see a realistic change.’
Motorola, despite the recent launch of the Dext, has negligible share after mothballing its UK activities at the start of 2009. The move left a ‘big four’ in the UK – Nokia, Samsung, LG and Sony Ericsson. Motorola holds around 1% in terms of volume, but the industry expects the manufacturer could grow to 4% next year.
Meanwhile, despite the success of the Hero and Tattoo handsets, HTC is struggling globally. In the UK, pressure from Apple, RIM, Samsung, and operator branded handsets may stop the manufacturer from taking a stab at the big five.
Smartphones are having a big impact on the postpay arena, while Nokia, Samsung and Sony Ericsson are making an impression on prepay.
But while the flurry of competition will be bad news for some manufacturers, it is good news for consumers, especially for those who are buying handsets as gifts for Christmas. One operator source says: ‘The majority of sales for prepay come in quarter four. It is good to see new players in the market.’
Another adds: ‘More manufacturers mean more choice, so more competition and the consumer will benefit. ZTE is keeping them on their toes.’
In the prepay segment, Nokia is dominant in the UK, although Samsung has stolen some share.
And although there are lots of new, low-cost manufacturers launching computer-centric devices, Mawston says it is unlikely that they can go mass market, as yet. ‘They just don’t have the distribution channels,’ he adds.
Brand awareness is also a big challenge – there is low brand recognition for most of the low-cost manufacturers. ‘The lower the brand awareness, the lower the result,’ says Mawston.
Marketing and promotions
It takes time and money, marketing and promotions, plus persuading operators to put more on the shelf.
And Carphone Warehouse’s Alcatel promotion, where it offered handsets for £9.50 in a joint promotion with The Sun newspaper, was a good move towards tackling these issues (see below).
Mawston says: ‘It ties in nicely with distribution share – The Sun has 10 million readers, so Alcatel’s mind share and shelf share went up dramatically. The price [£9.50] helped too.’
However, he asks: ‘Was it profitable or sustainable? Giving devices away for £9.50 – is that profitable? The margin is probably 1% to 2% at best.’
According to Mawston, there are three things needed to grow market share: greater ‘mind share’, a greater portfolio, and larger shelf share.
Marketing new handsets means distributing to more operators, as well as fighting with Nokia and Samsung, which are also battling for all important shelf share.
Nokia has its 1200 series, Samsung the C series and Sony Ericsson the Walkman. But now with so much choice in the market, software and services will also be a focus.
Christmas will see the smartphone wars, but it will also see the low-end, candybar handset wars. The question now will be whether new players can take share from their bigger counterparts in both segments at this key time of the year for sales.
Carphone Warehouse’s Alcatel promotion
Carphone Warehouse’s Alcatel OT-203 was its fastest selling prepay handset ever, the retailer reported last month.
The £9.50 Alcatel promotion, with £10 free credit, was sold in partnership with The Sun newspaper. It went on sale on 14 October and was available to customers who had collected four tokens from The Sun.
Carphone sold 14,000 handsets in the opening two hours of trading, with queues forming outside stores in Liverpool and Glasgow.
In total, 47,000 phones were sold over the three day promotion, making the Alcatel OT-203 the fastest selling prepay handset in the company’s history.
Carphone CEO Andrew Harrison said at the time: ‘The speed at which this handset flew out of our stores was simply staggering.
‘We saw an extra 100,000 customers over the three days the promotion ran, which just goes to prove that customers still love brilliant value handsets.
‘We shouldn’t forget that for every customer who wants an iPhone, there is another customer looking for the best value on the high street.’