The Smartphone market of 2020 has been something of a roller-coaster ride for many manufacturers. The Covid pandemic has clearly had a big impact with many people tightening their belts due to reduced incomes. However, on the other hand, the introduction of 5G has created an incentive to upgrade to newer models. On balance the year has come out negative. Gartner estimates 2020 sales were, in the final analysis, a full 12.5% down on 2019. Q4 saw a more positive picture, bolstered by the holiday season, and launch of several new phones, like Apple’s iPhone 12. Nevertheless, Q4 still ended up 5.4% down overall. With covid likely to have an ongoing impact in the first half of 2021 the jury is out as to whether such things as the 5G rollout and new model launches will be enough to help stimulate a imminent reversal in this trend.
There was a time when virtually all analysts and market researchers were happy to post a seemingly endless procession of graphs proclaiming a Smartphone market that seemed destined to continue experiencing exponential growth indefinitely. And ten years ago, they would have been doing so with good cause. But today, although it is true to say that the recent slump is largely down to the extraordinary nature of the pandemic, it is not the only factor serving to depress sales. The other key factor is market maturity.
Looking back at 2019 and 2018, in terms of units sold at least, globally the market has been flat. Individual manufacturers have been able to buck this overall trend with innovation or by maximising revenues from similar volumes, but we are clearly looking at a more mature market now than was the case ten or even five years ago.
However, with 5G now being rolled out and new 5G models being launched, this is likely to provide a growth stimulus over the coming year. 5G rollout is still at an early stage, in the UK, Ofcom stated that only 1% of UK Smartphone users were on 5G in September 2020. However, in countries like the UK, rollout can be expected to proceed apace during 2021 and we are likely to have very widespread coverage during 2022. Other western countries are likely to see a similar adoption trend.
Taking into account the ongoing negative impact of Covid, a reasonable view would be that 5G rollout in itself is likely to stem but not necessarily reverse sales declines in the first half of 2021. However, by the second half of the year we might see 5G starting to have a significant impact.
In the age of selfies, Instagram and TikTok, the ability of phones to provide great quality visual images is clearly a key factor in their appeal. The phones on the market today now offer a quality of camera that could not even have been dreamed of a few years ago. Having the best camera that can take the best pictures and make the clearest videos has become almost like an arms race amongst the higher end phones.
Indeed, 2020 has seen a gradual move away from smaller screened phones. Larger screens mean larger images and provide a better experience when, for example, watching a film or a video clip. The trend is going to continue to favour devices that can provide great images.
However, many phones can now provide this, so the question is how much higher quality do people want? There is of course a technical limit to the human eye itself. It is pointless having a camera that offers more than 52 megapixels because the human eye is unable to resolve images of higher quality than this. There is also likely to come a point of diminishing returns, even before we get to 52 megapixels. Perhaps now it is more important to have cameras that cope well with poor lighting, or which have great zoom or strong video editing functionality etc.
Maybe future opportunities exist here for identifying niches of phone users who have requirements for specific kinds of camera functionality. It is likely to become more complicated than simply continuing to stick more powerful cameras into phones.
Samsung is continuing to pursue the foldable phone route to achieve differentiation. So far the foldable phone remains a high-end product and, by and large, a product that appeals to the tech-lover rather than the mass market. However, as this technology continues to evolve it may become an increasingly important sector of the market.
Concerns remain about the robustness of this technology in some people’s minds and, currently, it remains expensive. That said, we might consider what it has going for it that might see it really take off in the future. Issues over robustness and cost represent two objections that can probably be overcome. However, just because the reasons “not to buy” can be made to disappear – what about the reasons to buy? Why bother with a foldable phone at all?
As a concept the foldable phone offers two potential advantages that will count in its favour. First, as it is foldable, it allows you to carry a larger screen around with you. A large screen means bigger images – better for watching videos and for photos in general. That is a significant potential advantage in the modern world.
The second advantage is that, because these phones have bigger screens, it is easier to use them in a split screen mode. Split screen or dual screen working is now virtually a ubiquitous practice when working on PCs – so why not mobile phones? Many people already do it, although the smaller screen size can be limited and not all apps run well in a split screen. Some of the tech here needs further development but ultimately one of the main USPs the foldables can potentially offer is a better split screen experience.
Adapting to a Maturing Market
Perhaps it is all too easy to view the prospect of a maturing market with dread. 5G may provide a welcome boost over the next two years but does not alter the basic dynamic that most people now have Smartphones and, what’s more, many of them have fairly powerful Smartphones.
But if we look at other mature markets there are a variety of different ways in which brands are able to navigate them effectively – a number of different strategies that can be adopted to maximise the chances of success as the Smartphone market continues to mature.
The Way Ahead
- Niche marketing: If you are not already one of the dominant players in a mature market then it is difficult to significantly improve your market position without making a substantial investment. The alternative to this is niche marketing – to identify and target specific segments and particular segment needs rather than the whole market. If you are up against large, well established competitors then marketing to particular segment needs are often the only way to make any headway.
- Product innovation: Having an innovative product or, at least, a product that includes some design features that mark it out from the competition, is another way to stand out from the crowd. The difficulty is that innovation in a mature market often costs a lot of money. That said, looking for creative ways to stand out is a key way in which brands can thrive in mature markets. And it doesn’t always need to be ‘bleeding edge’. Sometimes a clever application of existing technology can offer a real competitive advantage.
- Branding and design: Standing out can be as much about branding as it is about product functionality. In the Smartphone market Apple has been especially successful in using its brand and design aesthetic to promote its phones. Many Apple customers are Apple customers as much because of the brand and the design as because of the technology itself. So, branding and design can definitely have an impact.
- Customer Loyalty: As markets mature, brands naturally become increasingly dependent upon repeat business from existing customers and less and less reliant on finding new customers. For that reason, promoting brand loyalty and looking for ways to keep your existing customers engaged with your brand become increasingly important. In mature markets not many people switch brands and finding new customers to the category will be a rarity. Promoting customer loyalty is therefore a critical tool.
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