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USA: Online Smartphone Sales Remain Strong at 13% of Total Sales in Q2 2018; Prime Exclusives by Amazon Drive Sales

Apple iPhones remain the most popular models across both online and offline channels.

San Diego, Buenos Aires, London, New Delhi, Hong Kong, Beijing, Seoul August 29th, 2018

According to the latest research from the Counterpoint Smartphone Channel Share Tracker service, the share of online smartphone channels grew to 13% of total US smartphone sales in Q2 2018 compared to 12% in Q1 2018 (see here). However, total online volumes dropped 9% QoQ due to a weak Q2 sales cycle. In fact, total sales in H1 2018 are down 12% compared to 2017. Despite these downward trends in the US smartphone market, online market sales have held steady due to savvy consumers jumping on online-only deals and other online exclusive events such as Amazon’s Prime Day. They are not the same level as China (see here) or India (see here) but the trend is surely shifting.

Commenting on the competitive landscape in Q2, Research Director Jeff Fieldhack highlighted, “Once again, Amazon.com led in online sales with 23% of total smartphones sold online. Prime Exclusive smartphones such as the Moto G6 and the Moto Z3 were successful in driving sales. Beyond Q2, Prime Day was once again a success and saw several unlocked phones such as the Samsung Galaxy Note 8 and Huawei’s Mate 10 Pro get a boost in sales due to steep discounts. Carriers were able to hold their sales somewhat constant in Q2, offering some online-only discounts that savvy consumers took advantage of. BestBuy and Apple are jostling for third and fourth place as Apple saw a slight downturn in online sales due to customers holding off on new phone purchases until the new iPhone series is announced in the coming month.”

Q2 2018: % Share of Overall Smartphone Sales via Online Channels

Source: Counterpoint Research – Smartphone Channel Share Tracker Q2 2018

Research Director Peter Richardson, commenting on price bands added, “Online sales in the mid-tier and upper mid-tier price band segments have higher shares compared to offline sales. Many solid unlocked phones are sold in these price ranges, such as the Prime Day LG V35 ThinQ, which was discounted $300. This is a sweet spot for many consumers looking for a quality device, often unlocked, without having to spend a lot of money on more premium devices that may come with certain carrier restrictions or contracts. Offline sales tend to do better at the low end. Sub $100 price band smartphones are most often purchased in brick and mortar stores in national retail and prepaid channels. The premium price bands for both offline and online sales had similar shares. However, online sales in this segment are mainly driven by Apple’s online store and to a lesser extent Samsung’s. It is true that people still want to come in and try devices out first-hand. However, their final purchase decision is split between online and offline channels. Convenience for the customer plays a big role here. Is the device available at the store? Do they need to order it? Can it get delivered with two-day shipping? All these factors come into play.”

Q2 2018: Online and Offline Smartphone Sales by Price Band

Source: Counterpoint Research – Smartphone Channel Share Tracker Q2 2018

Commenting on the US online market dynamics, Research Analyst Maurice Klaehne said, “Amazon has really proven that they are able to capture a significant share of the online smartphone market compared to carriers. In their Q2 earnings calls, all the Big Four carriers commented that their device sales have dipped (see here). Amazon remains very competitive with its pricing and Prime-only deals. These offerings fit nicely within their Amazon Prime membership strategy, as often they can deliver smartphones faster than carriers can. Prime customers are also not locked into buying the limited and sometimes overpriced accessories that carriers have in their stores both online and offline. They have a whole marketplace for accessories to choose from and often these will arrive at the same time as the smartphone.”

Q2 2018: Revenue by Select Online Channels

Source: Counterpoint Research – Smartphone Channel Share Tracker Q2 2018

Mr. Richardson added, “When you compare online smartphone revenues from Amazon to two of the national retail giants Best-Buy and Walmart, you can see how well it is outpacing the competition. The sheer scale that the online retail giant is able to create with its large device portfolio creates revenues that are larger than both Best-Buy and Walmart combined. Walmart caters more towards low-end devices, both unlocked and prepaid and relies on foot traffic to make sales. Best-Buy on the other hand has very similar products, especially in the premium segment. However, it can’t keep up with the volumes of devices sold by Amazon.”

Commenting on offline channel trends, Mr. Fieldhack added, “Brick and mortar stores will still be one of the main channels for smartphone sales. Physically touching and testing high-end devices is still important for the consumer as flagship ASP’s continue to climb (see here). Stores also provide a better opportunity to up-sell insurance. While Amazon is doing well, carriers still have the upper hand. Online sales will continue to grab small amounts of market share, but it will not spike outside of key flagship launches, holidays, and special online sale days. This is because prepaid remains a considerable amount of the US market. Prepaid subscribers are often credit challenged and limited in buying online.  In addition, the refurbished market is growing in the US, and this incentivizes many customers to trade in a used device in-store when purchasing a new smartphone. Devices brought into stores are seen as more likely to be properly wiped of all data and disposed of properly by customers.”

This is an excerpt from our smartphone channel share tracker service across different geographies providing highly detailed insights and analysis – answering the why, backed by a solid granular sales database mapped across different channels – offline and online.

Background:

Counterpoint Technology Market Research is a global research firm specializing in detailed industry analysis of the TMT sectors. It services major technology firms and financial firms with a mix of monthly reports, customized projects and detailed analysis of the mobile and technology markets. Its key analysts are experts in the industry with an average tenure of over 16 years in high tech industries.

Analyst Contacts:

Jeff Fieldhack
+1 858 603 2703
jeff@counterpointresearch.com

Maurice Klaehne
+1 617 336 8383
maurice@counterpointresearch.com

Follow Counterpoint Research
analyst(at)counterpointresearch.com            

Jeff has 25+ years experience in technology research, business development, competitive intelligence, and business management. Prior to joining Counterpoint Research, Jeff held various research & product development roles at Microsoft, Nokia, Roth Capital Partners, and Gartner. Jeff is a member of many telecom industry organizations including Colorado Wireless Association, repair.org, CommNexus, and is a regular speaker at major telecom industry events. He was a 4x NCAA all-American in tennis and is a 12-time finisher of the Hawaii Ironman World Championships.

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