Price, features and wallet share: Smartphone brands lose label power

The shine is coming off some of the big brands in the business as styles, prices and features converge in the mobile handset market

Not too many years ago, the Indian smartphone market was neatly divided between the premium (global brands such as Apple and Samsung) and challenger labels (a mix of global and local). Not anymore. As consumers are wooed assiduously by Chinese handset makers that follow a design ethic that is similar to other global majors such as Samsung, Apple and Google and offer a slew of features that match the rest, brands are losing the stickiness that the category once promised.  
 

Much like the way special offers and price wars have come to define the airline industry in the country, smartphone companies are being defined by the latest features and the discounts a model carries. The phone is not just a must-have accessory but a necessary commodity. 

The aura around a brand that often led to queues outside stores when a new model was released or caused online marketplaces to crash under the crush of online buyers is fading. This trend towards commoditization is likely to gather force during 2018. Tarun Pathak, associate director, Counterpoint Market Research says that more and more players will have bundled offers where a smartphone is tagged along with a telecom and content provider. Such offers will become mainstream, he says. Historically, bundled offers have been at the fringe, except in case of Reliance’s CDMA feature phones in early 2000s. However, bundled data with new handsets, year-long subscription packs or access to apparently free content is luring consumers more than ever before, indicating that declining importance of brands in the sector. 

Price, features and wallet share

When a product gets commoditized, pricing becomes the key differentiator. This is especially true of markets such as India and China where buyers tend to be more price conscious than their European or American counterparts.

Apart from price, the Indian consumer, especially the new, non-urban customer, is feature conscious. They are utility driven and prefer smartphones that support multiple apps and encourage a sharing culture and this puts brands seeking to create exclusive consumer communities at a disadvantage, say brand experts.  

Also as the desire to phase out old models and create new customers out of old ones drives the launch of new models in the smartphone market, there is a rush to load more and more features on to the new offering. And as brands get more aggressive about customer acquisition, they begin to look more and more like each other. This leads to further commoditization of the segment.

However brands are not giving up on their differentiation efforts. Lenovo, currently the fourth largest player in the sector, is trying to carve a distinct identity for its premium brand Motorola. It is doing so by expanding the Moto Mods (accessories) portfolio. According to Sudhin Mathur, managing director of Motorola Mobility India and country head for Lenovo Mobile Business Group, the firm’s focus in 2018 would remain on positioning Motorola as its premium brand that offers latest technologies. 

Fading star power

The big brands that stood apart even as the rest of the market was being pummeled into a low-price, feature-heavy space were Apple and Samsung. The two held their ground, getting old customers to upgrade to every new model with the fanaticism associated with these brands globally.  However as their brand image took a hit globally and the companies increased their push for the mass consumer in India, they have struggled to separate themselves from the pack. 

While key brands like Samsung, Motorola or Xiaomi continue to play a role in buying decisions, experts observe a sharp decline in the contribution these names make in the mix of influencing factors for the final decision. The Chinese brands like Oppo, Vivo, Le Eco and Xiaomi, among others have played their part in the shift in customer behaviour. Since they entered the market in 2014, they have significantly brought down the acquisition cost of smartphones and added to the quality of devices, experts say. They have led the features war with special functions like finger print scanner and high-definition cameras in the mass market. These were considered to be premium assets before the Chinese handset makers made them a part of every model. 

Similarly market leader Samsung has expanded its Knox security feature that used to be a unique selling proposition for its flagship models like the Galaxy S series and Note series to the medium price range. According to Aditya Babbar, general manager, mobile business, Samsung India, it is positioning readily applicable camera tools at the forefront of its mass market push.

At the same time iconic brands such as Apple have become more aggressive in chasing volume sales in the country. And this has led the US giant to offer its older generation models at less than Rs20,000. But it is risking its brand value, says Harish Bijoor, CEO Harish Bijoor Consults. “It seems they have taken a conscious call to make a compromise, which is unique to India,” he said.

In 2018 the process of commoditization is set to intensify and Counterpoint estimates that the average selling price of a smartphone will increase to Rs15,000 from Rs12,000 at present. “Today, consumers want to have more than what they have. This, while the market is growing at 14-15 percent a year, the average selling price is growing by over 20 percent. This also shows the thirst for higher features is across price points and cuts across rural and urban markets,” Pathak said.