e-commerce Archives - Counterpoint

Vietnam’s Q3 2022 Smartphone Shipments Up 34% YoY on Increased Economic Activity

Samsung led the market followed by OPPO and Xiaomi.
Apple shipments surged 139% YoY.
$200-$400 price band shipments grew 159% YoY.
Online channel shipments increased 67% YoY.

New Delhi, Jakarta, London, Boston, Toronto, Beijing, Taipei, Seoul – December 1, 2022

Vietnam’s smartphone shipments increased 34% YoY in Q3 2022, according to Counterpoint’s latest Monthly Vietnam Smartphone Channel Share Tracker. The results highlight the strong economic growth in the country during the quarter, driven by the increasing manufacturing activity and improving consumer sentiment, despite moderate inflationary pressures. The launch of new smartphone models along with increasing demand for budget and high-end models were also among the key factors responsible for the quarterly growth.

Apple’s shipments surged 139% YoY in Q3 2022 as more consumers in Vietnam bought premium smartphones. The iPhone 11, iPhone 13 and iPhone 13 Pro Max were among the most preferred models during the quarter. Apple distributors are opening more official stores in Vietnam, which is helping the brand reach more customers.

Shipments of major Chinese players like Xiaomi, realme and OPPO also grew during the quarter. Xiaomi was boosted by the POCO C40 series as Vietnam was the first country where the model was released. realme was driven by its C-series smartphones, while OPPO was helped by the A57 and the newly launched Reno8 series.

Source: Counterpoint Monthly Vietnam Channel Share Tracker, Q3 2022

Q3 2022 shipments in the <$200 retail price band remained flat YoY due to weaker shipments from Samsung. The segment was mostly driven by Xiaomi and realme. The $200-$400 band saw the biggest growth during the quarter as demand for mid-budget smartphones increased in the country. Brands have been launching most of their newer models in this range. In Q3, some of the popular models in the price segment were OPPO’s Reno8 4G and A96, Redmi’s Note 11 and vivo’s Y22s. Meanwhile, the strong growth in the $400-$600 price band was driven by Apple. Vietnam is one of the fastest growing markets for iPhones.

Commenting on the price range, Research Analyst Akash Jatwala said, “Shipments in the >$600 segment grew 17% YoY in Q3 2022 driven by Apple and Samsung. Vietnam has increasingly started to prefer premium smartphones and among them the iPhone 13 series and the Samsung Galaxy S22 are the most popular.”

5G smartphone shipments jumped 129% YoY in Q3 2022 and accounted for 34% of the overall shipments during the quarter as brands launched more of such models. 5G is not present in Vietnam yet but the technology might be commercially launched here in 2023, which could further boost economic activity in the country. However, there is no news regarding a spectrum auction and telcos are only just conducting trials with vendors in major provinces.

Online channels grew 67% YoY in Q3 2022 and contributed to 18% of Vietnam’s total shipments as customers were attracted by discounts, cashbacks and easier financing. Pre-orders along with replacement options and bundling of devices with TWS at a discounted price were some of the other appealing promotions from online channels.

On the issue of smartphone manufacturing, OEMs are increasing investments in the country and looking into newer areas to diversify. Apple is set to start manufacturing iPads, Apple Watches and MacBooks in Vietnam, and Google is also planning the same for its Pixel smartphones. Manufacturing activities have helped Vietnam in creating jobs and increasing economic growth, which in turn has increased consumers’ buying power. As OEMs are increasingly preferring Vietnam as a manufacturing hub, more companies are likely to expand their presence in the country, which in turn will foster economic growth.

Outlook

For Q4 2022, we are optimistic about the Vietnamese smartphone market. We expect shipments to grow in the final quarter. This is based on Vietnam’s reported growth in GDP during Q3 2022, an increase in manufacturing activity and a moderate rise in inflation.

In Q4 2022, smartphone shipments in Vietnam are likely to receive a boost from the iPhone 14 series and new model launches from various brands across different price ranges. Increasing consumer spending in the lead up to the Lunar New Year will also help in driving shipments.

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

Akash Jatwala

Follow Counterpoint Research
press@counterpointresearch.com

Indonesia’s Q3 2022 Smartphone Shipments Down 21% YoY on Macro Concerns; Good Q4 Seen

The <$250 price band took the hardest hit.
OPPO led the market followed closely by Samsung and vivo.
The $500-$699 price band grew 134%.
Online channel shipments increased 8% YoY in Q3 2022.
5G smartphone shipments increased 42% YoY.

Jakarta, London, Boston, Toronto, New Delhi, Beijing, Taipei, Seoul – November 14, 2022

With macroeconomic conditions showing no signs of improvement, Indonesia’s smartphone shipments declined 21% YoY in Q3 2022, according to Counterpoint’s Monthly Indonesia Smartphone Channel Share Tracker. High smartphone demand in Q3 2021 after the lifting of COVID-19 lockdowns resulted in higher shipments which made this quarter look even worse.

OPPO managed to regain the top spot in Q3 2022 driven by its A16 model family, A57 series and Reno series. Aggressive marketing and models spread across price bands also contributed to the good show.

Major OEMs cut their shipments as inventory piled up. In the $150-$249 band, Samsung’s dominance weakened, thereby placing vivo and OPPO as the main OEMs with a combined share of 51%. The <$150 price band was led by OPPO and vivo with a 34% share. Infinix has increased its presence in this segment by introducing the Hot 12 series.

Source: Counterpoint Monthly Indonesia Channel Share Tracker, Q3 2022

Smartphones priced ≥$500 are unlikely to be affected by macroeconomic headwinds due to the consumer group’s capacity for discretionary expenditure. Therefore, OEMs have increased the options for this price band. OPPO with its Reno series once held the crown in the $500-$699 segment. In Q3 2022, Samsung and OPPO led the segment with a share of 63%.

Commenting on the price range dynamics, Senior Analyst Febriman Abdillah said, “The $500-$699 price segment can be an attractive market given its high growth in economically turbulent times. In Indonesia, OEMs are offering specifications like 8-12GB RAM, 256 ROM, 4000-6000mAh battery capacity and 5G capability. These in-demand specs can help in better targeting of consumers.” The OPPO Reno 8’s Portrait Expert mode claims enhancements in photography technology. realme’s GT Neo series has come up with a “speed” differentiator that improves smartphone gaming. Samsung’s Galaxy A73 5G was one of the top mid-range phones.

Smartphone online channels grew 8% YoY in Q3 2022 to reach 22% of overall shipments. Product availability is one of the key drivers that motivate consumers to visit online platforms. Aside from price promotions, cashbacks, free shipping and bonus points from e-finance providers, the opportunity to get the latest products through pre-order schemes is another attraction of the online channel. Among e-commerce players, Shopee maintained its top spot followed by Akulaku, Lazada, Tokopedia and Blibli.

In addition to marketplaces, OEMs have improved their own online channels, such as Xiaomi, OPPO, realme and Samsung’s online stores. Virtual shopping stores like Samsung Experience Store could be a leap in the application of technology in connecting products with consumers. Here, 5G-ready phones can provide a better virtual experience.

5G smartphone share reached 25% in Q3 2022, which is a bit slower than Indonesia’s Southeast Asian neighbors. 5G smartphone shipments grew 42% YoY. This growth mostly came from the $250-$349 price band as most smartphones in the higher price band were already 5G-ready. In the $250-$349 band, Samsung and vivo led the 5G growth with the Galaxy A33 series, M33 series and vivo Y75.

Outlook

Entering Q4 2022, we expect progress in macroeconomic recovery, which may stir the smartphone market. Abdillah said, “There is optimism for a possible increase in demand for budget and mid-range smartphones during the shopping season. We may see further enhancements in specifications here for the new models. This may trigger demand by way of smartphone upgrades, especially when there is also a possibility of pent-up demand in Q4. The challenge will be how to attract consumers effectively. Consumers will have a wide choice of smartphone brands and models and will be more conscious of what features they need.”

Although the smartphone market declined in the last two quarters, there has been significant market movement towards online platforms. The smartphone ecosystem is getting better in terms of providing the latest and relevant product technology.

Feel free to contact us at press@counterpointresearch.com for questions regarding our latest research and insights.

Background

Analyst Contacts:

Febriman Abdillah

Glen Cardoza

Philippines Smartphone Shipments Decline 3% YoY in Q2 2022; Apple Fastest Growing Brand

The Philippines’ Q2 2022 smartphone shipments declined 3% YoY to 4.7 million units.
Apple, Infinix and TECNO were major YoY gainers in terms of shipments.
Chinese players except Xiaomi and realme saw a decline in their smartphone shipments.
5G smartphone share in shipments increased from 7% in Q2 2021 to 34% in Q2 2022.
Online shipments increased 15% YoY with Lazada leading with a 46% share.

Jakarta, Hong Kong, London, Boston, Toronto, New Delhi, Beijing, Taipei, Seoul – Sept 9, 2022

The Philippines’ Q2 2022 smartphone shipments declined 3% YoY to 4.7 million units, according to Counterpoint’s latest Monthly Philippines Smartphone Channel Share Tracker. The figures show the country’s macroeconomic stability, low inflationary pressure and an increase in consumer spending due to its markets returning to normal.

Commodity-exporting economies in Southeast Asia like the Philippines are expected to outperform the commodity-importing ones because of improved terms of trade. The economic impact of the Ukraine-Russia war is gradually fading out from Southeast Asian countries even as COVID-19 weakens its grip, pushing up tourism. New launches, along with customer preference for premium models, also played a key role in the Q2 2022 smartphone shipments.

Source: Counterpoint Monthly Philippines Smartphone Channel Share Tracker, Q2 2022

In terms of market share, realme took the top spot with a 22% share driven by the launch of its reasonably priced smartphones, particularly the C series and 9 series, in Q2 2022. Samsung took the second spot with a 20% share driven by its newly launched Galaxy A series models and ongoing promotions. OPPO had a 15% share driven by its Reno A series while vivo had a 14% share driven by its V series and newly launched X series. Xiaomi took the fifth position with a market share of 10%.

Demand for 5G smartphones increased considerably during the quarter as their shipments increased to 34% share from 7% in the same period last year. To stay competitive, major telecom providers Globe Telecom, Dito and Smart have been actively extending 5G coverage. With the introduction of DITO Tele-community, telecommunication infrastructure investments have more than tripled. The primary factors driving growth in the telecom industry are increasing coverage, lower costs, better service, rising data demand, and smartphone adoption.

Source: Counterpoint Monthly Philippines Smartphone Channel Share Tracker, Q2 2022

Apple, at 50% YoY, saw the biggest growth during the quarter with Filipinos preferring premium smartphones. Reduction in the iPhone 13 series prices contributed to the growth.

Chinese players Xiaomi and realme ran several promotional campaigns online, particularly on Shopee and Lazada, which helped with their shipments. On the other hand, shipments of other Chinese brands decreased in Q2 2022 as the brands faced inventory issues. The e-commerce industry is expanding quickly in the region. Around 18% of all shipments in Q2 2022 were made through the online channel, an increase of around 15% YoY. Apart from online channels, social commerce is gaining popularity, especially through TikTok. realme became the first brand to launch its official store in TikTok live shopping.

Commenting on mobile gaming, Senior Analyst Glen Cardoza said, “The Philippines is a key gaming market in Southeast Asia and is seeing rapid growth. Manufacturers are keeping up with the demand. High-end gaming smartphones like the Black Shark 4 Pro, Asus ROG Phone 5s and 5s Pro, and ZTE’s Nubia RedMagic 7 are doing well in the market. Major companies are following suit and joining forces with gaming leagues to serve as official sponsors. In May 2022, there was a gaming competition.”

Smartphone brands are also organizing e-sport tournaments, like vivo’s PUBG, OPPO’s Game on Cup, or Samsung’s MLBB All-star Showdown in partnership with Moonton.

In the coming months, the economic impact of the Ukraine-Russia war will gradually fade. Also, COVID-19 restrictions in Southeast Asian countries are likely to be relaxed, bringing back tourists and, in turn, increasing cash flow in the market and purchasing power. On the other hand, China, with its zero-Covid policy triggering partial or full lockdowns in various cities, and global inflation may impact smartphone shipments. The Philippines posted a GDP growth of 7.4% in Q2 2022 with recovering consumer sentiment. We expect the market to expand further. As a result, the smartphone shipments in Q3 2022 may increase a bit but the TAM will be on the flatter side.

Feel free to contact us at press@counterpointresearch.com for questions regarding our latest research and insights.

Background

Analyst Contacts

Glen Cardoza

Follow Counterpoint Research
press(at)counterpointresearch.com

Indonesia’s Q2 2022 Smartphone Shipments Decline 11% YoY as Macro and Currency Issues Hobble Low-End Segments

Indonesia’s Q2 2022 smartphone shipments declined 11% YoY to fall below 9.4m units
The broad preference for budget, sub-$150 devices made Indonesia especially vulnerable to macro weakness and currency fluctuations
Of the top OEMs, only Samsung managed to grow shipments YoY
Most major Chinese brands saw double-digit declines
Online channels ticked up, highlighting its continued importance
We are ‘not bullish’ on 2H, but device upgrade cycles a bright spot with 5G devices more than 20% shipment share during Q2

Jakarta, London, Boston, Toronto, New Delhi, Beijing, Taipei, Seoul – August 16, 2022

Indonesia’s Q2 2022 smartphone shipments fell 11% year-on-year to 9.4m units, according to Counterpoint’s latest Monthly Indonesia Smartphone Channel Share Tracker.

The disappointing results reflected broader regional and global trends where macro headwinds and currency issues made for a tough quarter. Base effects were also in play, as severe lockdown restrictions last year boosted demand for smartphones as more people spent more time online, magnifying the impact of this year’s economic woes.

Q2 2022 Indonesia Smartphone Shipment Share by Key OEM

Source: Counterpoint Monthly Indonesia Channel Share Tracker, Q2 2022.

Demand for budget devices (<$150), which account for a big portion of the market, fell the most, with shipments falling after Ramadhan and Eid Al Fitr. The latter half of the quarter was especially bad; June was off by almost 1m units compared to last year in the budget category.

Samsung was the only gainer in terms of unit shipments, which grew by a massive 33% – though much of it was due to base effects as the vendor struggled last year from supply issues stemming from its Vietnam factory shutdown.

Nevertheless, Samsung flooded the market by launching various low-to-mid end devices like it’s A and M series, which did especially well in April, accounting for 14% of total domestic shipments during the festive month. It was enough to help the company take pole position in terms of market share for the first time in three years, but not enough to match pre-COVID levels.

Xiaomi saw the biggest slide as chipset supply issues continued to plague shipments after its record Q2 2021. The latest quarter saw shipments fall YoY by an astonishing 47%.

Q2 2021 vs. Q2 2022 Indonesia E-Commerce Rank for Smartphone Shipments

Source: Counterpoint Monthly Indonesia Channel Share Tracker, Q2 2022.

More broadly, online channels ticked up as OEMs and major e-commerce sites offered promotions to help drive sales. Almost one out of every five smartphones shipped last quarter were through online channels. “What’s interesting to see is the fast rise of domestic fintech player Akulaku, which grabbed third spot last quarter in online shipments,” notes Senior Analyst Febriman Abdillah. “One of the ways they grabbed share was by providing buyers with Akulaku instalment plans. This ‘pay later’ pricing strategy will be important in growing the mid-end of the market, especially considering the current macro climate.”

Looking forward to 2H, our expectations for Indonesia remain tempered. Although it is less vulnerable to a recession than some of its regional and global peers, currency fluctuations will likely play a strong role in driving or hampering smartphone demand and our global macro outlook implies elevated inflation risk. Reduced spending power will hit segments shopping for low-to-mid end devices the hardest – making domestic smartphone demand especially vulnerable over the second half of 2022. However, there is room for some optimism as the upcoming 3G shutdown and continued digital transformation efforts will lead consumers to upgrade their phones.

“We’re expecting to see not only 3G replacement drive the lower end of the market, but consumers upgrading from 4G to 5G, which reached 1.96m units for Q2, to help boost higher-value segments as people look to enhance their online experience,” says Senior Analyst Glen Cardoza. “This is good news for the mid-end of the market, which today delivers some incredible value in terms of specs.”

“We are also keeping our eye on e-sports and smartphone gaming in the region. We expect specs to support this type of gaming to become mainstream across mid-end devices. Hence, beyond 5G, we see this as another upgrade driver, particularly amongst younger users – a massive demographic in Indonesia.”

Background:

Analyst Contacts:

Febriman Abdillah

Glen Cardoza

Follow Counterpoint Research

press(at)counterpointresearch.com

Samsung Regains Top Position in Philippines Smartphone Market in Q3 2021

Hong Kong, Beijing, Taipei, Seoul, New Delhi, London, Boston, Toronto – November 24, 2021

The Philippines smartphone market saw a 9% YoY decline in Q3 2021, with Samsung regaining its top position, according to Counterpoint Research’s Monthly Philippines Channel Share Tracker. Southeast Asia witnessed a fresh wave of COVID-19 during the quarter, causing supply chain constraints triggered by lockdowns and movement restrictions. This was also a major reason behind the decline of the overall Philippines smartphone market in Q3 2021.

Samsung stood first this quarter with a market share of 23%, followed by realme at 22%. The major growth catalyst in Samsung’s success was its mid-range series, which comes equipped with best-in-class specifications at an aggressive price point. The Galaxy A12 and Galaxy A21s were among the major contributors to Samsung’s growth trajectory. realme continued to strengthen its foothold in the e-commerce landscape while Vivo, driven by its Y series and huge discounts during the back-to-school promotions, secured the third position with a 17% market share. OPPO slipped to the fourth position with a 15% market share. Xiaomi retained its position among the top five with a market share of 13%.

Research Analyst Tanvi Sharma said, “Businesses tried to increase the pace of their digital efforts to keep up with the continued expansion of cashless payments and e-commerce. Smartphone brands offered heavy discounts and exclusive schemes in the 9.9 Super Brand Day Sale. Besides, consumers were seen rapidly moving towards 5G-enabled smartphones.”

Sharma added, “E-commerce growth will continue and is expected to sustain a long-term adoption of online channels. Shopee and Lazada are among the top e-commerce platforms, grabbing most online sales.”

Online retail platforms are increasingly playing a significant role in the purchase of mobile phones and other smart gadgets due to the ease of home delivery and payments they offer.

In Q3 2021, the online channel contributed 16% to the overall smartphone shipments across the region, registering a 13% increase YoY. In online channel sales, Xiaomi emerged as the leader with a 31% market share, followed by realme and Samsung.

5G connectivity continues to spread across the Philippines. 5G-enabled smartphones captured a 19% market share with 666% YoY growth during the quarter. Mobile services provider Smart Communications is aggressively deploying 5G technology, making it accessible for everyone with the release of Signature Plans+. Globe, another big telecom operator in the region, has successfully conducted 5G SA (standalone) trials, getting close to offering the technology to consumers and enterprises.

Analyst Contacts:

Tanvi Sharma

Follow Counterpoint Research
press(at)counterpointresearch.com

Southeast Asia Perks Up, Boosts Smartphones

Southeast Asia (SEA) has been showing consistent economic promise for a while now. The changing landscape is giving the smartphone sector a much-needed boost as well. Four players have a pivotal role in this sector.

While government support in key SEA countries has resulted in a faster rollout of 5G infrastructure, most governments are currently focused on COVID-19 vaccination and jump-starting the economy. In the parallel, Thailand continues to concentrate on advanced 5G utilization, while countries like Indonesia, Philippines and Vietnam are focusing on solidifying their 5G infrastructure and increasing coverage.

Operators

The main operators in the key SEA countries are not only concentrating on increasing their 5G coverage but also making sure they sustain a healthy 4G network. Rural focus is helping them raise subscription levels as well. Their consistent tie-ups with OEMs are giving a push to bundled packages and 5G (especially in metros and Tier I cities). This will continue to increase at a YoY level, even after Q4 2021.

From merging telecom operators in Indonesia to industrial applications being pursued in Thailand, 5G connectivity is growing stronger in this region.

Even consumers who had not considered 5G during their most recent purchase of a smartphone, will consider it strongly in the future.

OEMs

New 5G smartphone launches in the mid-tier price band have been all the rage in this region. The ASPs for these 5G phones will go down for upcoming models from top brands like realme. This will lead to an increase in upgrades.

Brands like OPPO, Xiaomi and realme are adding consumer IoT products, like smart speakers, to purchase deals which is good exposure for their IoT portfolio in these markets. For brands like Xiaomi, the IoT segment makes up 10% of total revenue in some markets.

As the markets open, brands are also increasing their offline footprint. Xiaomi is looking to increase its sales outlets from 38 to more than 100 within this year. The brand is also making sure its after-sales network is geographically widespread. Xiaomi and realme stand out here.

E-commerce

The “9.9” shopping festival saw some big investments and celebrity endorsements on online platforms like Shopee. Other big players across SEA, like Lazada and Tokopedia, also spent on marketing campaigns and tie-ups with brands, events and celebrities.

Online sales are one of the biggest reasons for consumers to indulge in shopping towards the end of the year.

Whether it is ‘live shopping’ on Tokopedia or increasing Korean influence with music groups like BTS, consumers can relate to this association. The main SEA economies may see their highest ever online smartphone shipments in Q4 2021. With COVID-19 infection rates going down in most SEA countries, the only deterrent here is component shortages affecting supply.

Manufacturing

Q3 2021 saw governments in Indonesia and Vietnam giving emphasis to essential items. As infection rates went down in August and September, vaccination for the manufacturing sector was given priority. Starting September, most production facilities in Vietnam resumed normal operations and scaled up to make provisions for Q4 demand.

All the above factors play in favor of a very productive and lucrative smartphone season in Q4 2021. All key SEA countries are likely to show more than 20% growth over Q3 2021 and a healthy YoY increase as well. Indonesia, Thailand and Philippines will show a higher online share in smartphone shipments.

Online Channel Share in the Chinese Smartphone Market Grew in Q3 2019

Combined market share of Huawei and HONOR accounted for 46% of online market share in Q3 2019, reaching an all time high.

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

Dec 23rd, 2019

China’s online smartphone sales increased to 27% of total sales in Q3 2019 from 24% in Q1 2019, according to the latest research from Counterpoint’s China Channel Service. China’s smartphone market continued its slowdown due to the sluggish economy and consumers delaying smartphone purchases for 5G network rollouts. China’s smartphone sales in Q3 2019 registered a 5% YoY decline, but increased 3% QoQ but while China’s smartphone market continued its slowdown, the decline has narrowed in YoY terms.

Exhibit 1: China’s Mobile E-Commerce Market Share by Brand – Q3 2019

This was the first time that online smartphone sales increased during a quarter when there were no major e-commerce festivals. The surge in online sales was mainly attributed to rising online sales of Huawei and HONOR, which have been aggressively expanding domestic sales across all channels. The dual brands have popular offerings across all price brands, from the high-end Mate 30 and P30 series, mid-end Nova 5 series and low-end Honor 9X series. The combined market share of Huawei and HONOR accounted for 46% of the online market share in Q3 2019.

Major OEMs have all been expanding their reach in online channels. Vivo’s strategy to penetrate into online channels through the launch of the online-focused Z series, starting in 2018, has paid off. Vivo’s online market share has increased from 7% in Q1 2019 to 10% in Q3 2019. Seeing the success of the budget Z series in online channels, vivo added a mid-to-high end iQOO series targeting online channels in 2019.

Though OPPO’s online market share was flat, it has also launched an online focused K series as well as a separate Realme brand focusing on online market. However, the expansion into online channels for brands which are traditionally strong in offline channels has created more challenges for Xiaomi, which saw its online market share drop below 20% for the first time.

Exhibit 2: China’s Mobile E-Commerce Market Share by Platform – Q3 2019

In terms of platform performance, JD and TMall remained the two largest online retail players, accounting for 49% and 21% of market share in online smartphone sales, respectively. The two platforms’ large customer base along with strong connections with brands helped to secure their top positions in the online space. Nevertheless, third party platforms such as Pinduoduo continue to gain market share with sizable subsidy campaign of RMB 10 bn (roughly US$ 1.4 bn) throughout the year. Pinduoduo offered the most attractive discounts for iPhones among all the platforms. On Pinduoduo, discounts of RMB 500, 700 and 900 (roughly US$71, $100, $128) are given for iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max, respectively. At the moment, iPhones are the most popular models sold in Pinduoduo’s smartphone category. With its growing presence in China’s e-commerce markets, we expect that Pinduoduo will further grow its market share in online smartphone retail through deepening cooperation with leading Chinese smartphone OEMs.

Online smartphone sales are expected to further increase in Q4 2019 as both 11.11 and 12.12 e-commerce festivals take place during the quarter. We also expect the online smartphone retail space to become more consolidated going forward.

Analyst Contacts:

Ethan Qi

Counterpoint Research

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

Analysis of the winners of the 2018 China "618" mobile phone e-commerce market and 10 major trends

JD + Tmall e-commerce platforms make up 80% of the mobile phone e-commerce market; Competition between Huawei and Xiaomi ends in stalemate.

New Delhi, Hong Kong, Seoul, London, Beijing, San Diego, Buenos Aires – July 11th, 2018

According to e-commerce channel monitoring data from global analyst firm Counterpoint, due to the heavy sales promotions of the “618” e-commerce platforms, nearly half of all smartphone purchases in June 2018 were made over e-commerce channels. Whereas in other months, e-commerce channels would account for approximately 30% of overall sales.

According to Counterpoint Research Director, James Yan: “The 618 E-commerce Festival started earlier this year and ran for an especially long time. During the 618 Festival period, a number of players, including online platform retailers and vertical retailers, also participated in the event, taking advantage of the run-up, official period and aftermath, making the period longer and populated with a richer variety of products and promotions. And the smartphone category became the greatest contributor in terms of sales volumes.”

The following shows a schedule of e-commerce promotions during the 618 Festival:

[Key:]

星期一 Monday

星期二 Tuesday

星期三 Wednesday

星期四 Thursday

星期五 Friday

星期六 Saturday

星期日 Sunday

好货曝光非约不可 / 预定最高省1600元 Great products on sale, order now / Reserve for up to 1600 yuan in savings

年中大促 / 狂欢开场 / 家电每千减白 Mid-year promotion / Grand opening / 100 yuan off any purchase of 1000 yuan in household appliances

抢服饰 / 满300减150 Clothes and accessories sale / 150 yuan off any purchase of over 300 yuan

跨店满减 / 满199减120 : Cross-store sale / 120 yuan off any purchase of over 199 yuan

抢空调 / 爆款低至999元 Air conditioners sale / Top-selling models for under 999 yuan

优惠日 /全场6折起 Discount day / Up to 40% off everything in store

抢电脑 / 领1000元神卷 Computer sale / Grab a 1000 yuan coupon

家电盛典 / 就是低价 / 超级支付日 Household appliance grand event / Low prices only / Super payday

抢洗衣 / 最高直降1500 Washing machine sale / Up to 1500 off

抢生活家电 / 好货9.9元秒 Household appliance sale / 9.9 yuan flash sale for great products

神卷日 / 领618元限量神卷 Coupon day / Receive 618 yuan limited quantities coupon

神拼日 / 抢100减50神卷Shopping day / Grab a 50-yuan-off-for-100-yuan-purchase coupon

抢生活家电 / 超值0元购 Household appliance sale / Super value 0 yuan purchases

抢超市爆款 / 领188减100神卷 Top-selling products sale / Receive a 100-yuan-off-for-188-yuan-purchase coupon

BOOM！年中盛典尽情嗨！ / 2 亿红包主力卖卖卖卖到大满足 BOOM! Mid-year grand event, shop till you drop / 200 million in red envelopes, sell sell sell sell till we’re done

BOOM！/ 2亿红包助力 BOOM! / 200 million in red envelopes

狂欢返场 / 不尽兴继续买 Crazy encore / Not satisfied; Keep shopping

收货Taking deliveries

Part 1. Analysis of channel platform trends during the 618 Festival:

Chart 1: China smartphone market e-commerce market share, by platform, June 1–20, 2018

Source: Counterpoint E-Commerce Channel Market Monitor Service

[Key:]

Market share of e-commerce in China via mobile phones, by platform, during the 618 Festival in 2018

The following is the result of our analysis of this year’s 618 Festival and channels:

JD.com and Tmall were the big winners of the 618 Festival. The market share combined for both retailers in the mobile phone category exceeded 80%.
OEM E-commerce Platforms: 618 is JD.com’s primary battlefield, with Tmall entering the play later. Both retailers therefore invested a large amount of resources this month. The market share of e-commerce platforms for OEMs such as Apple and Xiaomi suffered a drop as a result.
Offline retail channels have already recognized the power and market performance of e-commerce channels and have accepted this reality. During the festival period, they mostly avoided stealing 618’s thunder, choosing to wait for other opportunities to arise .
Channel Integration: During the 618 festival period, offline activities were carried out as well, though mainly from major players such as JD Home and Suning.com. They would set uniform pricing for both their online and offline platforms and offer rebates as incentives.
Impact of the World Cup: As the 618 shopping festival coincided with the hosting of the World Cup major sporting event, we found that the World Cup did have some impact on sales volumes for 618 promotions. However, it had little impact on the sales of mobile phones. Rather, the event helped promote the sale of food and beverages such as crayfish and beer over 618’s channels.
Social E-commerce: Featuring early entrants such as Mogujie.com and current players such as Pinduoduo.com, social e-commerce was incredibly active during the 618 shopping festival. In addition, JD Pingou also entered the ranks of social E-commerce players. The merits of conducting e-commerce business through social e-commerce have long been proven. However, they have thus far had limited impact on the sale of mobile phones and other tech products. Sales of mobile phones thru social e-commerce will be more dependent on the competitiveness of the mobiles phones itself.
Supply Chain Readiness: Through Counterpoint’s supply chain channel surveillance, we discovered that large mobile phone brands prepared for the 618 activities by ensuring a large supply of goods and models, with a few OEMs even arranging a special production line for the 618 festival. In fact, several brands even took advantage of the 618 event to launch their own proprietary phone models.
Internationalization of E-commerce Platforms: On the day of 618, JD.com held a press conference at its headquarters announcing that the globalization initiative of JD’s logistics would undergo an all-around upgrade. For its part, Alibaba had already deployed its international logistics affiliate (Cainiao). But whether it’s the internationalization of JD.com or Alibaba, support for cross-border logistics and back-end systems is needed. The typical method for expanding e-commerce platforms overseas is through capacity building or M&A investment. For example: JD.com built its own logistics platforms and systems in Indonesia and Thailand. In any case, these investments offer more channel convenience and support for the overseas channels of smartphone OEMs.
JD vs TMall Competition—each carry its own characteristics: During the period of 618, both retailers exploited the uniqueness of their own business models to participate in 618. For instance, JD.com excelled at product service and marketing, whereas TMall’s advantages lay in its shopping channels and financial services.
More talk of technology, less of price cuts. Another trend from 618 is that the promotion of e-commerce has evolved from being about just discounts and price cuts to being about the promotion of technology, empowerment, etc. As a result, technological innovation as well as service and value upgrades to the platform have become its greatest highlights. And behind all this is the transformation of e-commerce platforms’ strategic principles.

Part 2. Analysis of the winners in the smartphone OEM market during the 618 Festival and ten trends

Chart 2: Market share of China smartphone market on e-commerce channels, by brand, from June 1-20, 2018

Source: Counterpoint E-Commerce Channel Market Monitor Service

[Key:]

Market share of China smartphone market on e-commerce channels, by brand, from June 1-20, 2018

Ranking Share

1 Xiaomi 28%

2 Honor 27%

3 Apple 17%

4 Huawei 6%

5 Meizu 5%

6 vivo 3%

7 360 3%

8 OPPO 2%

9 Nokia 2%

10 Lenovo 2%

* Others 4%

* Total 100%

We analyzed the channel performance of each brand and model during the 618 festival period:

The three traditionally strongest brands of mobile phones on e-commerce channels–Xiaomi, Huawei and Apple–made up over 70% of overall market share. This was even more pronounced during the 618 Festival period.
The gap between Xiaomi and Huawei is growing increasingly smaller, and their product lines are forming perfect competitive rivalries.
Whether it’s during the 618 festival or a normal sales period, e-commerce is now Apple’s primary sales channel.
The proprietary e-commerce model of Vivo’s Z1 entered the top six.
The return of new products from Lenovo and Nokia marked another highlight of this year’s 618 Festival. Lenovo is rebooting its product line-up after a strategic re-adjustment, while Nokia wants to bring its outstanding performance in overseas markets to China.
Apple, due to the iPhone 8’s discounts and cost performance during 618 , entered the Top 8.
Xiaomi, on the other hand, occupied four places in the Top 10 thanks to its low-end RedMi series. Meanwhile, the newly launched Xiaomi Mi 8 entered the Top 10 as it was given top supply priority in e-commerce channels.
Huawei offered more models than that of other brands, and owing to its own brand and product strength, held five places in the Top 10. Meanwhile, the low-end 7C and 7A models were main contributors.
On Tmall’s channels, the Huawei 10, iPhone X and Xiaomi 6X entered the top 10.
Sales for the Top 10 models approached half of all market sales on 618 e-commerce channels.

Source: Counterpoint E-Commerce Channel Market Monitor Service

[Key:]

Chart 3: 2018 market share for Top 10 selling models of China’s mobile phone market during the 618 Festival (June 1-20)

Analyst Contacts:

James Yan闫占孟
+86 15810182576
james@counterpointresearch.com
@james_a3

Tarun Pathak
+91 9971213665
tarun@counterpointresearch.com
@Tarunpathak

Mengmeng Zhang
+86 18611804269
mengmeng@counterpointresearch.com

Flora Tang
+852 5545 2529
flora@counterpointresearch.com

Counterpoint Research
+852 8191 4813

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Insights Tag： e-commerce

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