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Insights Tag: Ecommerce
Apple’s Pay Later Option May Impact US Consumption Patterns
In the latest Worldwide Developers Conference (WWDC), some key updates were announced for Apple Wallet. Besides the Tap to Pay feature, which allows users to skip the use of a POS terminal, Apple has introduced the Pay Later option, under which the cost of a purchase can be split across four payments over six weeks for US users. Given the US’ big iOS user base, the Pay Later option is expected to impact consumption patterns and payment behaviour there.
Buy-now-pay-later (BNPL) has been a rapidly growing payment method in recent years. Even as digital/mobile wallets are increasingly becoming popular, the fintech sector is developing further, with BNPL catching on with consumers, particularly in the US and Europe. BNPL is a short-term financing service that allows consumers to trade first and pay the total amount in instalments within a specified period after the product purchase and delivery. It helps in expanding the consumer’s purchasing power. It should be noted here that BNPL is not a replacement or alternative for credit cards or debit cards. It relies on the user’s original bank account (credit card or debit card) to offer a time gap between consumption and payment.
How Apple’s Pay Later works?
When the consumers choose Apple Pay to make payments at Apple stores or merchants adopting the Apple Pay API, the payment can be split into four equal instalments spread across six weeks, without incurring any interest or fees. “Built into Apple Wallet and designed with users’ financial health in mind, Apple Pay Later makes it easy to view, track and repay Apple Pay Later payments within Wallet,” the company said in a press release on Monday.
Apple Pay Later is operated on its own database set mainly. It is the latest technologies being used in financial services that differentiate BNPL from the traditional credit card system. These technologies enable a new way of assessing personal credits and managing risk levels. BNPL needs to update the database to adjust the risk control model quickly to be much faster than the credit card repayment cycle, generally no more than three months. Each cycle (from borrowing to repayment) is considered to have run out of data once. The BNPL companies need to continuously run the data to improve the risk control system. With the tons of data on transactions and purchasing behaviour via Apple Wallet, Apple possesses a healthy and trained risk management model to support its operation on Pay Later.
Pay Later Advantages and Risks
Just like Apple Cash and Apple Card, Apple Pay Later will launch in the US initially. After all, Apple Wallet enjoys the biggest base in the US. Furthermore, the US has some of the best banking and credit systems globally.
Klarna, Afterpay (owned by Square) and Affirm are the world’s largest BNPL companies and they all have operations in the US. Moreover, the US is among the top countries in terms of BNPL consumers.
It is a good move to launch Tap to Pay together with Pay Later because Pay Later has a strong link with merchants. The typical business model of BNPL companies has most of the operating income coming from merchants. With Apple Pay’s new functions, merchants can benefit from Tap to Pay with less system integration investment and extra transactions from the Pay Later users. The Tap to Pay and Pay Later combination is the unique selling point for Pay Later over other BNPL providers.
At the same time, Apple Pay Later may experience the shared risk of other BNPL companies – uncertainty cropping from macroeconomic changes. The BNPL companies have to pay more for funding when the central bank or federal government raises benchmark interest rates. Furthermore, if the debt carries floating interest rates, it gets more expensive when the Federal Reserve raises its benchmark rate. Some companies can pass higher funding costs to merchants through higher fees, or to their borrowers. However, raising the fee for merchants may affect the business relationship. Even if some companies choose fixed-rate debt funding, the attendant risks will come along. But Apple may have less to fear as it has a solid cash flow.
Also, Apple can only encourage its current installed base because the business model leverages Apple Wallet. This can make it easier for the current Apple users to buy more or upgrade Apple products at an early stage.
Apple’s Pay Later will probably be released after the new generation of iPhone and iOS 16 upgrades. Its popularity is expected to grow within years because it is more like an ecological development.
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India 2021 Festive Season to See Record Smartphone Sales at $7.6 Billion
- The smartphone retail average selling price (ASP) during the festive season will grow 14% to reach its highest ever at $230.
- High consumer demand in the mid and premium segments will drive the sales.
New Delhi, Hong Kong, Seoul, London, Beijing, San Diego, Buenos Aires – October 19, 2021
India’s festive shopping season this year kicked off during the first week of October when online platform giants Amazon and Flipkart announced their marquee Great India Festival and Big Billion Days sales. The season will end on November 4 with the Diwali festival.
Commenting on the overall market dynamics during the season, Senior Analyst Prachir Singh said, “The festive season has been driving smartphone sales in India due to high consumer demand during Dusshera and Diwali. This trend has been accelerated this year by the high pent-up demand backed by aggressive promotions in the mid and premium segments. We estimate that almost $7.6 billion worth of smartphones will be sold during the ongoing festive season. This highest ever number is coming at a time when the global smartphone industry is facing component shortages. As a result, OEMs have been forced to increase prices, which will have a higher impact on the mass market and budget segments.”
Research Director Tarun Pathak said, “Although the growth in market value during the 2021 festive season is expected to be 1% YoY, the retail ASP will grow at 14% YoY. The overall consumer sentiment has been positive going into the festive season. Many consumers have decided to spend from their accumulated savings for something that is more personal. This trend will drive a faster smartphone upgrade during the festive season. Apart from this, the 2021 festive season is seeing higher trade-ins and aggressive EMIs that increase device affordability and help consumers bypass multiple price barriers. This has helped drive the sales of mid-to-high tier (>$200) smartphone models and, subsequently, the overall ASP. Many OEMs sensed this trend and brought out aggressive offers on premium devices. The relatively higher sales of premium segment smartphones also helped offset the losses in the mass market due to price hike.”
Background:
Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.
Analyst Contacts:
Prachir Singh
Tarun Pathak
Follow Counterpoint Research
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Online Smartphone Sales in Key SEA Countries at Record High in Aug
Southeast Asia (SEA) has been facing a fresh wave of COVID-19 for the past three months. While the cases are coming down in most of the region, full recovery will take some time. The pandemic has impacted the mobile phone OEMs’ business as most of the region, including the four biggest markets of Indonesia, Philippines, Vietnam and Thailand, is dominated by offline sales channels. However, the restrictions on movement triggered by COVID-19 have pushed the region’s e-commerce sales and revenue to new levels, just like in other parts of the world.
Counterpoint Research’s SEA Channel Tracker shows that in August 2021, online smartphone sales share in SEA’s key markets, including Indonesia, Philippines, Thailand and Vietnam, reached a record high at 20% of the overall shipments. Apart from the immediate reason of the pandemic, there are other factors pushing this e-commerce growth:
- Big Chinese e-commerce players, like Alibaba, JD.com and Tencent, and some Singapore investors continue to make strategic investments in SEA markets.
- Local investors and tycoons are also keen to be a part of the growth story.
- With a median age of around 30, Southeast Asia’s population holds big potential for e-commerce as young people are more likely to try and adopt new things. During the lockdown in September, Vietnamese were told to book vaccination slots online via government channels. Besides helping their families book these slots, young people also assisted them in buying food online.
In the past three years, essential conditions have improved to accelerate the development of e-commerce in the region:
- Development of e-wallets and payment gateways: E-commerce giants, ride-hailing services, banks, carriers and even governments are pushing e-wallet penetration. In the past, with the traditional banking systems, the rate of bank account ownership was relatively low in SEA. This was due to the inability of many to provide the documents required to open a bank account. But this changed with the new technology and mechanism of e-wallets.
- Logistics improvement: Besides the traditional local logistics companies, foreign logistics giants and investors have also set up subsidiaries or invested in existing players in the region to support e-commerce.
- Platform incentives: Typical cases are the e-commerce giants Shopee and Lazada, which have big sales events every year. These have more than 30 big and small promotions in which the platforms, together with the merchants, offer various subsidies and discounts to encourage online purchases.
Smartphone OEMs are becoming more and more mature in online channel strategy and planning:
- OEMs or local distributors have dedicated teams to manage online channels.
- Online-exclusive models are being designed. They have a special channel margin structure. An attractive price point is one of the most essential requirements for online sales conversion.
- Factors such as flagship online stores and 7-14 days unconditional return policy are convincing the consumers about the credibility of online channels.
We strongly believe that Southeast Asia will be the next e-commerce hotspot and smartphone OEMs will surely ride this wave.
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Amazon’s Big Fall Launches and Their Impact
Amazon recently held its annual Big Fall Event during which it introduced many devices mainly focusing on the smart home segment. Companies are increasingly focusing on this segment to cater to the changes in customer preferences arising from work from home, hybrid work model, need for greater comfort and security, and desire for more home entertainment options.
Major products launched at the event
- Alexa-powered robot Astro: The robot is equipped with a rotating screen and a voice assistant that has the capability to roam around and perform tasks that can’t be undertaken by Alexa on its own. This is a classic example of a brand leveraging advance AI algorithms in new ways to automate tasks and ensure personal safety. The device has been launched at an introductory price of $999.
- Amazon Smart Thermostat: To compete with Google Nest, Amazon has partnered with Honeywell to launch its first smart thermostat product. It is well integrated with Alexa and comes at a $60 price point. The device helps save energy by using geofencing technology to adjust the temperature based on someone’s presence.
- Amazon Echo Show 15: This is the largest display launched by Amazon so far. It is capable of video streaming, making calls, showing live feeds from the security camera, and controlling other smart home devices. The device is priced at $250 and can be mounted easily on the wall or placed anywhere inside the home.
- Amazon Glow: It is a video-calling device that comes with an eight-inch LED display targeted towards kids to enable them to interact with their loved ones and play virtual games.
- Amazon Halo View band: Priced at $80, it is a fitness tracker that comes with different workout modes and health measuring features. Compared to its predecessor Halo Band, it has an addition in the form of a display while microphones are no longer there.
- Ring Always Home Cam: It is an indoor camera-based drone that is ideal for home security. It gives a full view of the house by roaming around when a person is not at home.
- Ring Alarm Pro: It is a home security system that has an alarm base station along with a built-in Wi-Fi 6 router by Eero. It is ideal for professional monitoring and threat protection.
- Blink Video doorbell: The Blink line-up expands with the introduction of this first video doorbell, available for $49.99.
Other significant software and service developments
Apart from the hardware offerings, Amazon also announced new features, services and updates for Alexa to maintain consumer stickiness towards this segment:
- Alexa Together service, which is available for $20 per month, is designed to help elderly people in emergency situations. It has an ‘Urgent Response’ feature that is available 24/7 for professional help.
- It is now possible for consumers to teach Alexa specific skills and recognize custom sounds, like providing notification in case refrigerator sound is heard when it is left open. Also, consumers can list their preferences to Alexa so that it can give recommendations accordingly.
- Amazon is also partnering with Disney to launch a platform, Hey Disney, to enable children to interact with their favorite characters. It is basically a new kind of voice assistant developed by Disney using Alexa technology. It will be available in the US at the Amazon Alexa skills store starting 2022.
- Amazon has also introduced Ring Virtual Security Guard, a third-party subscription-based security service where a customer can opt for a professional security company to monitor home and cameras.
Implications for the brand
- This time we have seen Amazon expanding its product portfolio by entering new product categories like thermostat, video doorbell and robot. This shows the company’s vision of building a strong smart home portfolio.
- This launch of new devices also represents Amazon’s efforts to further improve user engagement and increase service revenue through a subscription-based model.
- Also, a lot of emphases has been put on kids content generation by forming partnerships with leading players like Disney, Mattel, Nickelodeon and Sesame Workshop.
- There is a good opportunity for the brand to drive sales by using the bundling approach as a marketing tool. For instance, combining Astro with Ring Protect Pro, bundle smart display with other smart home products.
Implications for the market
- There is going to be increased competition in the growing CIoT market with plenty of new launches also expected from Apple and Google.
- Customer adoption of smart home devices is likely to increase as there is an increased focus on making these devices affordable. For instance, the launch of smart home security solutions like Blink Camera at $50 and Smart Thermostat at $60.
- We will see more integration between different sets of smart home devices, which will help in their smooth functioning and close interaction. According to the company, more than 200 million smart home devices have already been connected to
- There will also be an exploration of commercial use cases in different settings apart from home. For instance, the new voice assistant, Hey Disney, will be integrated with Disney World Resorts Hotel to help visitors find various attractions. Hotel chains are also increasingly adding smart speakers and voice assistant support to entertain guests and enhance their experience.
Conclusion
With the kind of devices launched by Amazon, it is quite evident that it is rapidly expanding its portfolio towards the smart home segment. A major emphasis has been put on applications like surveillance, monitoring and caretaking. Going forward, it is evident that it will target personal entertainment, security products, home appliances and fitness categories more aggressively, utilizing its strong Alexa user base. Amazon has an edge in developing new AI capabilities and driving innovative products in the market. However, with devices like Astro, we need to see how consumers perceive them. Also, privacy and security are going to be major concerns that need to be addressed.
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COVID-19’s Online Handset Sales Impact: Temporary or Long Term Trend?
COVID-19 has had two major impacts so far with respect to the global smartphone market. One is negative growth and the other is a rapid shift to online device purchases. The former is likely to be temporary, as it is driven by lockdowns and supply chain shocks which will be resolved in time. The latter is likely to last for a considerable period of time and the question is whether the spike in online buying will be permanent.
In Korea, one of the first countries outside of China to suffer an outbreak, online transactions soared 25% YoY in February, with 28% of all retail sales coming from online channels. Handsets mirrored the trend. Online sales of home appliances, electronic products, and mobile devices such as smartphones, also increased 39% YoY. It should be noted Korea did not impose a compulsory lockdown, implying online numbers could have been even higher.
Online share of handset sales varies by country, but has remained stable in most over the past few years. India is by far the highest, while the US, Korea and Japan trail much farther behind.
Online share of handset sales by country, 2019
The coronavirus has changed buying dynamics, with share of online spiking over the past few months of 2020. According to Counterpoint Research’s US online channel tracker, the share of online handset sales in the US more than doubled from January to April. 16% of all handsets sold in the US between January and February were traded online, which rose to 21% in March and soared to 33% in April, when the full-fledged impact of COVID-19 began
A similar, but less extreme pattern can also be seen in China. Share of online device sales reached 35%, their highest ever in February during the height of the country’s pandemic. This is very high compared to China’s average annual online sales share of 25%, and the online share between November and the end of the year, when there is the largest e-commerce festival, Single’s Day, is about 28%.
Monthly online share of total handset sales, China & US
To what degree these numbers will remain elevated remains to be seen. In China, which is gradually moving away from the COVID-19 crisis, handset sales in April are expected to be 29% which is still higher than the annual average. It can be argued first-time online buyers learn about the benefits of online purchases – the lower price and less time-consuming, and continue to use the channel for future purchases, resulting in a significant bump to historical baselines. This could also serve as an opportunity for broader expansion of the O2O industry, as a positive purchasing experience with this big ticket item would trickle across other products.
E-Commerce Giants Driving Smart Agriculture Adoption in China
Facing stagnating revenues, e-commerce giants, such as Alibaba, Baidu, JD.Com and Tencent are leveraging their AI expertise to modernize agriculture in China
Seoul, Hong Kong, New Delhi, Beijing, London, Buenos Aires, San Diego
September 3rd, 2019
Faced with falling productivity, high labour costs and a dwindling and ageing rural workforce, China’s agriculture industry is under severe pressure to feed its expanding population. At the same time, there are demands for better quality food driven by an increasingly affluent middle-class population as well as demands for improved food safety to curb the many food scandals in the country.
As a result, the Chinese government is anxious to modernize the country’s agriculture industry. In its recent 5-year National Strategic Plan for Rural Revitalization, it declared that it had decided to promote use of Smart Agriculture using “the A-B-C-Ds,” i.e. Artificial Intelligence, Blockchain, Cloud computing and Big Data technology.
China is home to some of the leading AI technology companies in the world, which are heavily supported by the government. Until recently, companies such as Alibaba, Baidu, JD.com, Tencent and DJA were experiencing rapid growth rates. With some now facing stagnating revenues, these big tech companies are diversifying and have identified agriculture as an excellent opportunity to leverage their AI technology expertise, while at the same time contributing to the rejuvenation and modernization of a vitally important sector of the economy.
While smart agriculture adoption in North America and Western Europe was initially mostly focused on crop farming, in China, the main focus is livestock farming, particularly pig rearing. China is the largest pig producing country in the world and also the largest consumer of pork. However, pig farming in China is woefully inefficient and Chinese tech companies see an opportunity to use AI-based technologies to drive up efficiencies.
Companies such as Alibaba, Baidu, JD.com, Tencent and gaming company Netease are already trialling their own SmartAg AI platforms:
- Based on its City Brain AI platform, Alibaba recently launched its Agricultural Brain platform, which improves pig husbandry by monitoring individual animals 24/7 using small IoT sensors. In a trial with pig farming company Tequ Group, Alibaba claims to have raised the Pig Per Sow Per Year (PSY) index from 15 to 23 and is targeting a PSY of 25 by 2019, a level on a par with countries such as the US.
- JD.com subsidiary JD Digits, has developed the JD Intelligent Stock Breeding Solution, which uses AI, IoT, robotics and edge computing, and according to the company, delivers better quality pork plus a 30%-50% reduction in pig rearing costs.
- Netease subsidiary Weiyang is using its parent company’s AI platform to breed non-genetically modified (non-GM), organic speciality black pork which is sold to affluent Chinese consumers.
“Apart from improving farming efficiencies, a major driver behind these initiatives, particularly from the government’s perspective, is to curtail the spread of infectious diseases” said Wei Sun, Senior Analyst at Counterpoint Research. “The outbreak of the African swine flu in 2018 resulted in the slaughter of more than one million pigs and its effects are still being felt today. By monitoring the pig population on a 24/7 basis, it will be possible to detect diseases much earlier and thus minimize contagion” she added.
Another key objective is to improve food traceability. China has a history of food safety scandals from melamine-tainted eggs, smuggled and out-of-date frozen meat to crops tainted with heavy metals. Alibaba and JD.com are exploring ways to secure the food supply chain using blockchain ledgers that record the quantity and transfer of food as well as link products to serial codes and RFID tags.
Meanwhile DJA, the world’s largest drone manufacturer, is focused on developing autonomous spraying drones to reduce fertiliser and pesticide overuse, a problem rife in China, and a major source of environmental pollution. Its latest agridrone, the massive T16, is equipped with advanced AI machine vision and 3D point cloud location capabilities coupled with an integrated ground radar. This enables extremely precise altitude determination and autonomous routing, even in fog or at night, and enables the drone to spray only when directly above fruit trees rather than while moving between them, thus minimizing environmental pollution.
The big tech companies are also active in developing a smart agriculture ecosystem and are funding an increasing number of start-ups, including Alesca Life, DeepIntell, InnovationAI, McFly, Sanan Bio Sciences, Plenty, Oasis Biotech SmartAHC, Hydro Biotech and Yinkzi Technology.
However, despite this rapidly expanding ecosystem, most of these initiatives are only at the trial stages. Smart agriculture in China faces numerous challenges, which must be overcome before we see widespread adoption. These include the high cost of implementing smart agriculture solutions coupled with the fact that the vast majority of Chinese farms are very small and cannot afford these new technologies.
“With the heavy involvement of the state government, however, we expect that many of the challenges will be overcome in the medium term (5-10 years) and that AI-based smart agriculture, driven by the latest advances in machine vision, deep learning algorithms, intelligent robotics and UAV technologies, will have a significant impact on agriculture in China” said Gareth Owen, Associate Research Director and Counterpoint. “We also expect to see the rapid implementation of other emerging technologies such as blockchain for food source tracing, 5G for real-time data transfer and cloud platforms for data storage and sharing” he added.
Counterpoint Research’s “E-Commerce Giants Driving Smart Agriculture Adoption in China” report provides a complete overview of the latest developments in smart agriculture in China, highlighting the key market players spearheading the application of AI and other emerging SmartAg technologies. It also discusses the key issues and challenges, which must be overcome for smart agriculture to be widely adopted across the China.
Background:
Counterpoint Technology Market Research is a global research firm specializing in Technology products in the TMT industry. 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 13 years in the high-tech industry.
Analyst contact:
Follow Counterpoint Research
press(at)counterpointresearch.com
The Rise of Pinduoduo: The New E-Commerce Challenger in China
It came as a surprise when Pinduoduo, a four-year-old e-commerce platform, started to challenge the duopoly of JD.com and Alibaba in China. Founded by an ex-Google engineer Colin Huang in Shanghai in September 2015, Pinduoduo made its debut on NASDAQ in July 2018. The company’s business model is different from traditional e-commerce platforms and uses a ‘Disney + Costco’ model, which combines elements of entertainment and value into sales. It provides a more interactive shopping experience for customers by offering discounts when they make group orders with friends or family.
There are several reasons for the rise of Pinduoduo in such a short time. The following is a closer look at some of these factors：
- Increasing penetration of internet users in rural areas
China’s increasing internet users in rural areas provides a fertile ground for the development of e-commerce platforms like Pinduoduo, which is more focused in lower-tier cities and rural areas. According to the latest statistics from CNNIC (China Internet Network Information Center), the number of internet users in Chinese rural areas reached 209 million while internet penetration has significantly increased to 36% at the end of 2017, compared to just 7.4% in 2007.
- China’s large and fragmented consumer market
Given how large and fragmented China’s consumer market is, Pinduoduo’s initial strategy was to tap into lower-tier cities and rural markets. Pinduoduo carries more affordable products that are often unbranded or white-labeled. It quickly became a success in China’s less urbanized areas, where consumers are more price-sensitive and care less about brands. Despite China’s rising income per capita, there is still a significant discrepancy in income levels in urban versus rural areas. GDP per capita in China’s top tier cities is 5.2 times more than that in third-tier cities, based on data from NBS (National Bureau of Statistics). Pinduoduo expanded quickly with the right products in the right markets. Building on its initial success, Pinduoduo has also gradually entered top-tier cities.
- Ubiquitous use of WeChat in China
WeChat is China’s most popular messaging app with over one billion users in the country. With Tencent being one of the investors for Pinduoduo, the company easily shared links on discounts through the WeChat platform. This level of access on WeChat is not allowed for Tencent’s rival Alibaba. Many netizens in China’s rural areas have just started to use mobile internet and find it much easier to navigate on Pinduoduo and make the payment directly through WeChat. Using Alibaba’s platform requires an extra step to set up Alipay and is challenging, especially for elderly users.
Exhibit 1: Annual Active Customers of E-Commerce Platforms in China
Source: Company filings
Pinduoduo posted strong earnings in Q2 2019, beating market expectations. Revenue jumped to RMB 7.29 billion (roughly US$1.02 billion), an increase of 169% YoY. Net loss also narrowed to RMB 1 billion (roughly US$141 million) from RMB 6.5 billion (roughly US$917 million) in the same period last year. Pinduoduo’s current annual active customers as of Q2 2019 reached 483 million, surpassing that of JD.com. Though Pinduduo continues to make losses, it has the potential to turn profitable if it gets enough scale in China’s e-commerce market.
Editor’s Note: Pinduoduo reported its numbers in RMB. The conversion rate we have used is US$1 = RMB 7.08.
Smartphone Sales Grow 4% YoY During the Latest ‘618 E-Commerce Festival’
The popularity of third-party app platforms for shopping is increasing, especially across China’s lower-tier cities.
New Delhi, Hong Kong, Seoul, London, Beijing, San Diego, Buenos Aires –
July 29th, 2019
Due to a slowing smartphone market, smartphone sales during the 2019 edition of the annual 618 e-commerce festival in China grew 4% year-on-year (YoY) to 13 million units, based on data from Counterpoint’s China Channel services. This is due to heavy promotion activity from platforms and OEMs during the festival. The 618 e-commerce festival, first initiated by JD.com, has now become a major sales event in China and is comparable to the Singles’ Day sale for online retailers. The 618 festival now lasts for more than two weeks, with an extended period of promotions running from June 1st to June 18th.
According to Mengmeng Zhang, Research Analyst at Counterpoint, “JD and Tmall were still the two largest players during the 618 festival, accounting for 54% and 23% of market share in the mobile phone category, respectively. However, we are seeing third-party app platforms Pinduoduo playing a greater role in the 618 festival with its large userbase in lower-tier cities across China. Pinduoduo splurged RMB 10 billion (roughly US$ 1.45 billion) as subsidies on more than 10,000 products during the festival. With attractive discounts of nearly 30% on selected iPhone models, sales for iPhones crossed more than 300,000 units during the entire 618 festival period.”
Exhibit 1: China’s mobile e-commerce market share by platform, from June 1-18, 2019
Exhibit 2: Market share of China smartphone market on e-commerce channels, by brand, from June 1-18, 2019
Commenting on the performance of OEMs, James Yan, Research Director at Counterpoint Research said, “There are very few changes in the top four players of the market. However, there has been increasing competition among other OEMs to secure the remaining top slots in the online market. Realme, a sub-brand of OPPO, which achieved success in India, entered China in April and immediately climbed into the top-selling list. Realme stresses on its high cost-to-performance ratio and is particularly attractive for online markets. In addition, OnePlus, with its exclusive JD partnership, also had a strong performance during this year’s 618 festival.”
Ethan Qi, Senior Research Analyst at Counterpoint Research, added, “As for the top 10 best-selling models, HONOR was the biggest winner this year occupying a total of six slots. Further, we saw a wider price band distribution in the top 10 best-selling list this year compared to previous years, where it was predominantly smartphones around RMB 1,000 (roughly US$ 145). When we expand the list to the top 20 best-selling list, we see an even wider price band. There were nine models priced above RMB 2,000 (roughly US$300) based on JD’s top 20 sellers’ list.”
Exhibit 3: Top 10 best-selling models during the 618 e-commerce festival, from June 1- 18, 2019
More Analysis on Brands During the 618 Festival:
- During this year’s 618 festival, the top six brands (HONOR, Xiaomi, Huawei, Apple, OPPO, and Vivo) accounted for 85% of the market share.
- HONOR has solidified its position as the best-selling online smartphone brand, capturing 27% of the market.
- With the trade ban hurting Huawei’s business in overseas markets, Huawei and HONOR have shifted focus to domestic markets. HONOR offered a heavier discount compared to Xiaomi this year, while Huawei’s P30 series achieved strong performance with both online and offline retailers during the 618 festival.
- The gap between HONOR and Xiaomi has widened this year as Xiaomi faces tougher competition from HONOR, as well as online-focused models from OPPO and Vivo. Nonetheless, Xiaomi has moved up the value chain with more of its flagship models entering the top-selling list, i.e., Xiaomi 9 and Redmi K20 Pro.
- Vivo’s determination in putting more efforts into online channels has paid off with sales during June 1 and June 18 increasing 121% YoY. Vivo’s special gift boxes with different themes for various platforms were all sold out.
- Apple showed stronger performance during the 618 festival period compared to Q1 2019. With sales declining in China, Apple started offering hefty promotions on various platforms. The iPhone XR had the best deals and among the top three best-selling models during this year’s festival.
Analyst Contacts:
Mengmeng Zhang
James Yan闫占孟
Tarun Pathak
Flora Tang
Counterpoint Research
press(at)counterpointresearch.com
You can also visit our Data Section (updated quarterly) to view smartphone market share Globally and from the USA, China and India
Why Both Apple and Amazon Win in Newest Deal
Apple has made a deal with Amazon to sell Apple’s range of products including the new iPhone XR, iPhone XS / XS Max, Apple Watch Series 4, and iPad Pro through Amazon’s retail store, though not the Apple HomePod as that competes directly with Amazon’s range of Alexa-powered smart home products.
The deal is international, covering markets including the US, Europe and Japan. Amazon is expected to be ranging products in time for the coming holiday season.
Apple products have only been available on Amazon through third-party sellers. These sellers will now be removed and will have to apply to Apple to become authorized re-sellers if they want to continue selling Apple products through Amazon’s Marketplace. So, what does this move mean?
Overall, we see this as a consolidation of power with and between Apple and Amazon. The main losers here are the smaller vendors that have benefited from selling Apple products through Amazon Marketplace. It’s unlikely that many will achieve authorized status in this new situation.
- Apple is attempting to regain control over its iPhone sales on one of the biggest online channels. This will allow it to better manage pricing, warranties, and the overall customer experience. 3rd party vendors were selling on Amazon and it was near impossible for Apple to control the supply chain, assure quality control, price, etc.
- It likely has little to do with Apple’s latest earnings its move to stop reporting iPhone numbers. This deal was in the works for some time, however it will improve Apple’s service revenues, which has been its goal for some time.
- It will likely not move the needle in terms of increasing flagship sales in the US. Unlocked devices for +$800, even from Apple, will not get a big sales boost. It may have a minor positive in some other markets, like the UK, for example, which is strongly Apple-oriented and a key Amazon market and has a reasonably strong unlocked market. But overall, we would not consider this move to be a reaction to Apple’s CY3Q results.
- Amazon gains with the agreement. Amazon does not compete with its own hardware or bundling opportunities directly with phones, wearables or even directly with tablets; Amazon’s Kindle Fire range is aimed at a different segment than the iPad. The agreement gives Amazon sales and analytics on a segment of the phone market it has hitherto had limited information on—the premium / flagship market. Amazon’s volume sweet spot is in the much lower price tiers. We estimate the weighted ASP of phones selling on Amazon to be under $250.
- Losers are the 3rd party vendors selling new and refurbished Apple products on Amazon. Many will be phased out by January 2019 or not renewed. Not only will this affect many smaller businesses in terms of iPhone sales, their service offerings will also be affected. The refurbished and repair market will also take a hit as companies will either have to move off the Amazon platform or go through the authorization process.
- US carriers will also be disappointed seeing the deal, but to a lesser extent. They too would rather control the customer. Carriers will never turn down a new subscriber, but they would rather sell locked devices in their direct and indirect channels and save money on any kickbacks that may be paid to Amazon for the sale.
- There will be limited impact on other device sales. It is unlikely that customers will now suddenly alter their purchase decision behavior. The sweet spot for unlocked devices is sub $300 and since Apple is pushing much higher end devices, most other brands will be unaffected.
