The competition in China 2017, the biggest smartphone market around the globe in terms of sales volume, has become increasingly fierce with higher replacement demand. Thus, we’ve witnessed a tough year for smartphone OEMs to drive the purchasing behaviour among Chinese consumers, who, surrounded by a rich array of quality choices, may probably be the pickiest and most demanding “decision makers” in the world. Despite all the efforts made by smartphone OEMs in new product development, channel expansion and marketing promotions in 2017, Chinese smartphone market ended the year with flat YoY growth.  Bezel-less products made a big buzz in the market starting from 2H, yet many OEMs did not convert its “popularity” into real sales as originally expected.  In such a competitive scenario, what brands/products stood out in the Chinese market, winning consumers hearts? What were their success factors in 2017?  Key summary and insights in this regard from Counterpoint’s Market Pulse service are below:

1. OPPOR R9s topped the best-selling models chart, achieving 3% of market share. The competition was toe-to-toe among Top 5 players.
2. Local OEMs, such as Huawei, OPPO and VIVO out-paced other players in the competition, occupying 7 slots in the Top 10 models. Apple was the only foreign brand that managed to get a position.
3. Most of the best selling models were in the middle-tier segment. The iPhone 7 series was the only exception.
4. Average monthly sales volume of all top 10 models crossed 1 million in 2017.

  Comments on top performers:

• OPPO R9s was the best selling model in China in 2017. Apart from OPPO’s extensive offline penetration, success of R9s could be mainly attributed to its product and pricing strategies that were in sync with the demand of the Chinese market.
• In terms of product strategy, OPPO has realized the importance of using a smartphone to take selfies and share on social media among Chinese consumers. Therefore, they focussed on development of products with an automatic “selfie”-beautification function. The R9s concentrated on “selfie” taking with its “More clear at this moment” slogan and coupled with its ultra-thin body and diverse colours, managed to win the most Chinese consumers’ heart in 2017.
• In terms of pricing strategy, OPPO has targeted the middle-tier market, pricing most of its models between “$200-$450”, which is the most popular price band in the Chinese market.
• Instead of filling the market with an extensive selection of models (like Samsung), OPPO has comparatively offered a limited number of models and put more effort behind promotion of key products. Despite limitations in number of products on sale, OPPO has managed to impress the market, with 3 models occupying slots in the Top 10 board.
• Suppliers for R9s, including Samsung display and Sony IMX also benefited from the popularity of this model.

 

• Apple is the only foreign brand occupying a spot in the Top 10 board in the Chinese market, thanks to the success of its iPhone 7 series.
• iPhone 7 series picked up in the second half of 2017 due to the implementation of price-cuts.
• After the price cut of the iPhone 7 series , the competitiveness of the product increased. This was showcased especially in the iPhone 7 Plus with 128 GB storage, which got a 16% price cut, lowering its price to $900.
• The iPhone 7 Plus performed better than the iPhone 7, demonstrating that currently, price may not be the only concern amongst consumers  in the Chinese market.

 

• VIVO X9 occupied the 3^rd  place in the Top 10 board.
• Similar to its counterpart, the OPPO R9s, the popularity of VIVO X9 could also be attributed to the product strategy with the price reasonably positioned at middle-tier segment.
• VIVO X9 defined itself as a selfie focused smartphone and highlighted the dual camera set up at both front and back, that would help take amazing selfies, which, as mentioned above, was essential among Chinese smartphone users.
• In addition, VIVO X9 offered a rich selection of colours to cater to the different tastes of consumers; it also kept launching new versions of the model in the market, E.g. An NBA version with a glossy blue body, to grab the attention of consumers and thus extend the product life cycle.

 

• HUAWEI being the leading smartphone brand in China didn’t shine in terms of individual models. Two models from HUAWEI entered the Top 10 board occupying the 8^th and 10^th position respectively.
• Since HUAWEI offered a wide variety of models covering all price sectors, it could achieve the top spot in terms of brand sales, combining sales of all the models, yet this made it difficult for a single model to stand out, unlike in the case of OPPO R9s or the VIVO X9.
• HONOR 8 Lite made its way into the Top 10 for its fashionable design and mirror-glass body that was popular among young consumers, while HONOR Enjoy 6X attracted the market with its dual-camera and affordable price (under the Sub $200 price band).
• HUAWEI HONOR with its expertise in online sales has created close ties with major e-commerce platforms in China, thus able to offer attractive promotions on a frequent basis. The strength of HONOR in on-line channels is also a key factor for its success in the Top 10.

 

• Having experienced a tough year in 2016, Xiaomi managed to survive in the market, and began to rebound in 2017, thanks to the organizational restructuring and improvement in supply chain management, directly monitored by Founder & CEO Leijun.
• Redmi note 4X, designed by the leading ODM, Huaqin Telecom, occupied a spot in the Top 10 board.
• Targeting cartoon loving teenagers, Redmi 4X offered a range of vivid colours and “invited” an extremely popular virtual idol Hatsune Miku as spokesperson. This helped it gain popularity amongst Chinese teenagers.
• In addition, Xiaomi re-built and improved the relationship with both supply chain and distribution partners in 2017, to secure the product availability and the quality of both delivery and customer service. Gaining support from key partners was also one of the factors for Xiaomi’s rebound in 2017.

  Summary of key drivers that lead to success in the Chinese market:

1. Supply chain management:

To secure an adequate supply of products into the market is the foundation for success in the smartphone industry. It is of great importance for OEMs to improve its R&D and manufacturing capabilities, which may include cooperation with ODM partners or investment in production lines. Moving forward, with more innovative technologies coming to the market, the ability for an OEM to source and gain the supply of limited components from the value chain, will also play an important role in development of new flagship models to meet consumers’ demands.

2. Offering of competitive prices:

The Chinese market is now saturated with smartphones making up over 90% of the annual handset shipments, however, products in the middle tier & middle-to-lower tier price bands still represent the biggest demand in the market.  Brands trying to expand in terms of sales volume should offer cost-effective products with better prices rather than fancy, innovative products with very high prices.

3. Concentrating resources on “HOT” models:

It is estimated that sales trend to lead in the Chinese market has shifted from “excessive offering tactics” to “fewer-but-better offering tactics”. It’s smarter for OEMs to focus on building flagship models and put more effort behind “the few” to make them popular in the market.

4. Product specifications:

From the features of the Top 10 models in 2017, looking at the winner OPPO R9s and the 3^rd runner-up VIVO X9 in particular, we can see the importance of photography features that drive sales of a model and make it successful. Looking forward to 2018, bezel-less display is expected to be a new standard feature that will be included in models in the Top 10 best selling chart.   Contact us at [email protected] for further questions regarding our latest in-depth research, insights or press inquiries.