BBK, Vivo, OPPO – Fathers, Sons and Cousins

Counterpoint Research is frequently asked about the relationships between Chinese handset brands BBK, Oppo and Vivo. The simple answer is they have the same origin: BBK and BBK’s chairman Duan Yongping. It is also likely no coincidence that share a similar positioning in the market – young and design/fashion orientated, which is a result of sharing the same DNA. However, both brands developed independently and are effectively rivals; they don’t have any business relationship.

At the beginning of 1999, BBK split into three companies which were independent of each other and had no subordinate relations. BBK mobile phone company head Shen Wei was responsible for the communication service; Huang Yihe, now retired, was responsible for education and electronic business; and Chen Mingyong was responsible for the audio-visual services.

The three companies don’t hold shares of each other. Their relation is only that some individual shareholders (Duan Yongping, Shen Wei, Huang Yihe, and Chen Mingyong) hold the shares of all three companies, and for a time these three companies shared the BBK brand and their channel to market.

Because of the two brands shared BBK’s brand and original BBK channel in the initial period, there are many similarities between them. Both OPPO and VIVO are influenced by Apple to a certain extent – strong emphasis on design. But at the same time, they also try to mimic Samsung’s strength – by paying attention to advertising.

Current Performance

  • The two brands pursued different geographical strategies in the early stages. VIVO concentrated on the domestic China market, while OPPO developed a stronger international profile. However, from Q1’2015 Vivo is also strengthening its international presence slowly and its became even stronger in Q3 2015. One of three Oppo handset now sell international market.
  • Vivo is one of the fastest growing brands in China, growing 28.9% over the Q3’2014 and reaches 8.02 Million units of shipments in 3Q2015
  • Oppo also managed to reach 9.35 million shipments in China in Q3 2015 and grew 161% compare to Q3’2014 in China. Oppo global shipments in Q3’2015 reached around 12.1 million — impressive growth from the 5.6 million it achieved in Q3’2014.

Basis of success

  • Brand differentiation: from the beginning of 2011, OPPO engaged stars, Song Hye Kyo and Leonardo di Caprio with a substantial investment in advertising, entertainment and film assets. VIVO has used a Hi-Fi & Smart ‘gene’ to target younger demographic groups.
  • Design differentiation: OPPO and VIVO do not set out to specifically compete on a feature basis but opt to place more emphasis on the design and user experience when communicating about their products.
  • Price differentiation: High-end product with ASP > USD $400 is mainly the domain of Apple and Samsung. Coolpad, Lenovo and smaller Chinese brands such as Daxian, Konka etc have average smartphone prices below USD $150. The middle ground is occupied by products from OPPO and VIVO as well as other
    highly regarded Chinese vendors such as Gionee and Huawei. This affordable premium segment is a small part of the overall market in volume terms.
  • Oppo has created a unique brand value with its slick design and high-end specification with value for money strategy pricing compared with international counterpart like Apple and Samsung

Challenges Ahead

  • Dynamic Environment: The environment of China mobile phone market is changing. The domestic mobile phone market is slowing down. The shift to 4G is well under way while operators’ subsidy policy has changed and the operator channel share consequently reducing. Partly as a consequence, vendors are using a multi-channel (offline/online) strategy to bring products to market.
  • Product Differentiation: The key challenge facing OPPO and VIVO are similar those facing all other vendors. How to differentiate in a crowded market in which the OS platform is largely fixed and hardware offers limited scope for differentiation. OPPO and VIVO respectively have demonstrated they can bring innovations to market with premium quality specification and slick design. However the most powerful area of focus for both companies should be continuing to create a strong and differentiated brand identity and compelling ownership experience. Xiaomi is doing this effectively. VIVO and OPPO currently have limited reach beyond the hardware.
  • International Expansion: OPPO began to expand into operator channels in 2013, resulted in broader reach in domestic market. However, creating a similar localized ecosystem will be a key challenge for both the OEM in international market. VIVO also began focusing expanding to South East Asian markets– setting up branches in India, Indonesia, and Malaysia among other places. MEA and Latin America represent market opportunities where there remains substantial growth potential.
  • Patent Issue: In addition to the problem international expansion, another important factor is patent issues outside china. Patent holders will be quick to attack any vendors that show-up in markets where they can stand a good chance of asserting their patent rights such as the US and larger European markets. This can limit the expansion opportunities for Chinese vendors. However there is still a substantial market opportunity in places where the patent litigation risk is low.

Detailed quantitative data is included in Market Pulse (sell-through) program & Monitor (Sell-in) Program. Please send a mail to analyst@counterpointresearch.com for any query.

 Author: Peter & Pavel