Russia Online Smartphone Sales Highest Ever in Q2 2020

  • M.Video-Eldorado led online smartphone sales with a 35% market share during Q2 2020
  • Total online smartphone market share reached its highest ever with 32% in Q2 2020
  • Huawei, including Honor, led online platform sales, followed by Samsung and Xiaomi

San Diego, Buenos Aires, London, New Delhi, Hong Kong, Beijing, Seoul – August 18, 2020

Online smartphone sales in Russia grew by more than 56% YoY during Q2 2020, according to the latest research by Counterpoint Research Model Sales Tracker June 2020. The total online smartphone market share reached its highest ever at 32% during Q2 2020. The increase in online channel sales is due to the shift in consumer behaviour, upgrade of devices to work from home smoothly and the availability of popular smartphones on online platforms. After the restoration of normalcy in retail operations, online smartphone sales will stabilize while competition will increase among online smartphone platforms. The COVID-19 pandemic had a huge impact on the Russian smartphone market. After seeing a record decline in April, it bounced back in May. Top five smartphone brands — Huawei, Samsung, Xiaomi, Apple and OPPO — accounted for 86% of the total smartphone market during this quarter.

Commenting on the market dynamics, Research Associate Soumen Mandal said: “M.Video-Eldorado and Svyaznoy are leading players among online smartphone platforms while Citilink, Megafone, Beeline, MTS and DNS are emerging players. More than one-third of smartphone sales happened on the M.Video-Eldorado platform during Q2 2020. The balanced operation between online and offline platforms and promotional activities helped M.Video-Eldorado to maintain a dominating position in online channel sales. Contactless online delivery through Yandex.Taxi, Gett Delivery or local partners helped it cover 90% of people under its next-day delivery. Besides, dark store automation, partnerships with Ozon and X5 Retail Group, and the shifting advertising focus towards online business accelerated online smartphone sales on the M.Video-Eldorado platform.”

Mandal added: “Small players like Black Fox, CAT, Ginzzu, Dexp and Coolpad are still relying on offline channel sales. Among the top five smartphone players, Apple is the most dependent (74%) on offline channel sales. The average cost of a smartphone purchased from an online channel increased by 15% to reach $210 during Q2 2020 compared to $182 in Q2 2019. This also shows the recovery of Russian economy from the global pandemic. On offline platforms, the best-selling models are the Samsung Galaxy A51, Honor 8A, Apple iPhone 11, Samsung Galaxy A10 and the Samsung Galaxy A30s. Apple leads in total revenue during this quarter, but it slipped to the second position after Samsung in online channel revenue.”

Exhibit 1: Russia Online Smartphone Market Share by Channel – Q2 2020

Counterpoint Russia Smartphone Channel Share Q2 2020


Commenting on brand performance, Associate Director Tarun Pathak said: “Huawei remained the market leader in online channel sales with 35% market share. Samsung Galaxy A51 was the top model for online channel sales, followed by the Honor 8A, Honor 20 Lite, Honor 10i and the Apple iPhone 11. Xiaomi took the third position in online channel sales after Huawei and Samsung but was second after Huawei in terms of online share of total brand sales. Online market share at the end of 2019 stood at 15.7% only. We believe COVID-19 has acted as a catalyst to change consumer behaviour in Russia. However, people still prefer cash on delivery for online smartphone sales. The penetration of online channel sales will increase in the future with the adoption of digital payment systems.”

Pathak added: “The growth of premium smartphones like the Apple iPhone 11 and iPhone SE 2020 on online channels was noticeable due to change in the Ruble exchange rate and the desire of consumers to upgrade their old devices. Moreover, the decreasing spend on vacations allowed Russian consumers to upgrade their existing devices. Premium brands like Apple may face problems in coming times if the Russian government implements its decision for mandatory installation of Russian-made software on a smartphone from January 1, 2021.”

Exhibit 2: Russia Online Smartphone Top Brands Share – Q2 2020

Counterpoint Russia Online Smartphone Market by Brands Q2 2020


Analyst Contacts:

Soumen Mandal

The Branding Source: New logo: Twitter

Tarun Pathak

The Branding Source: New logo: Twitter

Counterpoint Research


The Branding Source: New logo: Twitter

Key Trends Driving Russian Smartphone Market in 2019

The Russian smartphone market has seen consistent YoY growth over the past few quarters despite a decline in the global smartphone market. This has made it a key country for smartphone OEMs looking to growing in Central and Eastern Europe in CY 2019 and beyond.

Samsung, Huawei and Apple are the three major players, followed by Bright and Quick, Xiaomi, Nokia HMD, etc. The Russian audience is spending on new features and has enough disposable income to buy smartphones.

Source: Counterpoint Research Market Monitor

Despite an emerging smartphone market, there are different variables that are going to be the deciding factor for trade in the Russian market and players should undertake a thorough PESTEL (Political, Economic, Social, Technological, Environmental and Legal) analysis before making any move.

Apart from the global smartphone market trends like 5G, foldable phones, punch hole displays, etc., we see the following upcoming trends in the Russian smartphone market:

  1. Increasing Competition: Growth numbers have made the market look attractive and many global players have already announced Russia as a major focus.
    • Chinese smartphone players like Huawei, Xiaomi, Bright and Quick have been continuously focussing on the market and initial expansion has been aggressive.
    • Vingroup, Vietnam’s top company by market value has specifically mentioned Russia as the market it wants to target. Recently, Vingroup has acquired 51% stake in BQ (Spanish smartphone maker) and plans to enter Russia with this partnership.
    • Yandex is the largest search engine in Russia with penetration of more than 55% in the Russian search engine space. It also has its own app for payment, music, maps, taxi and food. Yandex recently unveiled its new smartphone and this is poised to disrupt the smartphone market ecosystem in Russia, giving direct competition to major players. Yandex has been aggressive in marketing and advertising of its phone and, according to its product page, more than 80,000 people have expressed interest in the device in just the last two months. It is expected to be among the top 10 best-selling models in CY 2019, provided Yandex is successful in scaling production.
  1. App Market Trends: The Russian app market is the fifth largest in the world and is still growing quickly. Analysing the app market and understanding market trends is a productive way for OEMs to design smartphones that align with local users’ needs and usage.
  2. Gaming phones: Russia’s gaming market is huge and smartphone players launching phones to tap into this market are expected in 2019. Out of the total apps downloaded from the app market, more than 45% were games and a major driver for app markets’ revenue. In Europe, Russia was ranked no. 1 in the number of games downloaded through apps. Asus has already launched its ROG Phone in Russia and it is expected that other smartphone players will seek to cash-in on this opportunity.
  3. Spending behaviour: Russian smartphone market has seen a change in spending behaviour in smartphones. Price band $30-90 which was the top selling price band in 2Q17 saw a YoY decline of around 8%.

Source: Counterpoint Research Market Monitor

 Price band $90-150 is attracting more buyers with a YoY growth of around 9% since 3Q2018 and is expected to be the top choice for Russians in the coming months.

  1. US Russia Relations: Recently, a chain of events (for example, escalations in the Ukraine conflict) occurred that did not favour US, Russia relations. If the relationships between the two nations are further compromised, US brands such as Apple may come under increased pressure.
  2. Blockchain friendly phones: Russian programmers have a significant presence in crypto currencies and Moscow ranks no. 1 in the number of Initial Coin Offering projects based on the location of their CEOs. Blockchain has proved to be major income source for around 15% of the Blockchain users and this penetration is likely to increase. Blockchain has made an impact in Russia and is now finding new applications over a diverse set of business fields in Russia. This presents a potential opportunity for smartphone players to offer blockchain supporting products such as the HTC Exodus 1.

Crimean conflict and its impact on the mobile device market – by Peter Richardson

The world is watching the events in Crimea unfold with great trepidation. Russian forces are poised to take the region, potentially by force, from the Ukrainian government. Russia insists it only has the interests of the majority Russian population of Crimea in mind and will not use military force – despite the Russian Government approving its use. However governments around the world are less than reassured by the Kremlin’s protestations of peaceful intent.

Events in Crimea and the Ukraine have moved fast. The consequences of any military action by Russia will send huge waves crashing across the political and diplomatic landscape of Europe and the wider world. British Foreign Secretary William Hague said this had the potential to be the biggest crisis to face Europe in the 21st century so far.

So if Russia does step up from sabre-rattling to sabre-wielding what are the likely consequences for the business environment and, by extension, into the mobile device market?

Should Russia unleash military action on Ukraine there will likely be a swiftly implemented series of political, diplomatic and economic sanctions. It is the economic ones that would have the most impact on business near term. Actions, reactions and their consequences could include:

  • Freezing assets and applying sanctions against Russian firms. Russian operator Megafon trades on the London Stock Exchange as well as on the Russian MICEX. Its stock price was down 14% on 3rd March indicating the level of concern over the crisis in Crimea. Operator MTS was down a similar amount.
  • More broadly Russian companies involved in financial services, energy, chemicals and property could all be adversely impacted, potentially causing an economic slowdown in Russia, which in turn could lead to reduced demand for mobile devices. Nearly $60 billion has been wiped off Russian company valuations in the last two days of trading. The stock market is clearly expecting trouble for Russian companies. It is worth noting that the Russian handset market was already forecast to be marginally down year on year in 2014. This conflict will exacerbate the market’s inherent weakness. We will be tracking the impact of the crisis and may adjust down our forecast for Russia still further.
  • Russia is one of the world’s largest suppliers of oil and natural gas. It is also a supplier of chemicals for industry. Any sustained disruption to fuel supplies from Russia, or even the threat of it, will cause commodity prices to spike upward. The price of crude oil rose to the highest level in 6 months on 3rd March. The consequence will be to increase the cost of business for players in the mobile device supply chain. It will also drive up costs for consumers. With fuel for heating and cooking accounting for as much as 30% of disposable income for the poorest segments in society, these people will be forced to curtail spending on other goods including mobile services and devices. This is an impact we saw in the aftermath of the financial crisis in 2008/9. The result will be reduced demand for ultra-low cost handsets and even some of the low cost smartphones.
  • Preventing companies from doing business in Russia. Russia imports all mobile devices sold in the country from overseas suppliers. If sanctions are applied broadly that hinder this supply line, companies with significant market positions in Russia will be adversely affected. Russia has a more diverse competitive landscape than some markets, nevertheless Samsung, Apple and Nokia would bear the brunt of any sanctions that restrict their ability to supply into the Russian market.
  • Political and economic turmoil: Ukraine has undergone a revolution in the last 2 weeks – President Viktor Yanukovych was dismissed in the last week of February. A prime minister has been appointed in Crimea in a direct snub to the interim Ukrainian government. Any escalation in the standoff with Russia could plunge Ukraine into an extended period of turmoil. This would likely have a negative impact on the mobile market in Ukraine – although this is not a given; natural and man-made disasters often have a short-term negative impact but are long-term neutral to slightly positive relative to the mobile device market.
  • Currency fluctuations: The Russian Ruble is down 10% against the dollar year to date. The Russian central bank has spent billions propping up the currency, but it remains at risk of further declines. Most handsets are likely traded in dollars but the final sale to consumers is typically in Rubles. Extended periods of weak Ruble can lead to the consumer price increasing. Mobile device purchases are price elastic so demand will decline if prices go up, or consumers will switch to cheaper models. Either way the net impact is negative.

Bottom-line: we hope fervently that the situation is dealt with diplomatically and peacefully and that any impact to the general population is minimal. However conflicts like this often lead to extended periods of destabilization in a country or region. Companies active in the region will likely already be taking contingency actions. However all companies should be thinking of the potential broader ramifications of this deeply concerning series of events. Although the conflict will be fiercest in Crimea, Ukraine and Russia – the impacts will be felt far from the conflict’s epicenter.

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