China’s smartphone market grew 5.8% YoY and 3.6% QoQ in the third quarter of 2016 – and for the first time ever, it’s being driven by upstart OEMs OPPO and Vivo as their differentiated marketing strategy finally pays off.
That’s according to IDC’s latest Asia/Pacific Quarterly Mobile Phone Tracker, which says that OPPO and Vivo are topping China’s smartphone sales charts for the first time – beating local champions Huawei and Xiaomi – because the Chinese market has evolved beyond operator and online driven channels over to an offline structure that dovetails with OPPO and Vivo’s strengths.
There were three key growth phases of the Chinese smartphone market seen in the past few years. The first phase (before 2014) was when it was driven mainly by operators. Samsung, Lenovo, and Coolpad led the smartphone market then with the help of huge subsidies offered by operators.
In the second phase (2014-2015), with e-commerce booming in China, Xiaomi was one of the first vendors that rode on that e-commerce wave and disrupted the market by selling its phones online through its flash sales. That kicked off another trend as other vendors soon tried to follow suit and created their own online brands and sold their phones through their own websites and that of eTailers.
The third phase unfolded this year, where the share of phones sold online has started to stabilize. OPPO and Vivo triumphed due to their strengths in the offline channels, especially in Tier 3 to Tier 5 cities. That, coupled with their other strengths in marketing and advertising, helped them to see strong growth in the market in Q3 2016.
OPPO’s success is not something that was achieved overnight, notes Xiaohan Tay, senior market analyst for Client Devices Research at IDC Asia/Pacific. “Back in the earlier years when vendors depended on operator subsidy to grow, OPPO was clear in its direction and focused on expanding its offline channels. It also had key strengths such as its VOOC fast charging technology and in the elegant design of its phones. This, coupled with its aggressive marketing tactics, helped it succeed in the market.”
Huawei continued its momentum with its P9, and IDC expects the momentum for Apple to pick up in Q4 2016 thanks to the release of the iPhone 7, which is forecasted to do better than the 6s. Key highlights for Xiaomi includes the Q3 launch of its Redmi Note 4 and Redmi Pro.
Looking ahead, says Tay, “As the growth in online channels stabilizes, many other vendors have expressed interest in increasing their offline channels. However, given the huge amount of cost involved in this, vendors need to focus on targeting key customers in specific cities or provinces where they can find their target audience. Blind expansion may eventually lead to higher risks and losses.”
Tay adds that it’s also important for vendors to focus on investments in technology to have a key flagship product that stands out in the market. “We have seen in the case of OPPO how its single product, the R9, played a huge part in increasing its shipment numbers and in getting people to talk about its brand.”
For the fourth quarter, IDC expects the market will continue to see both a QoQ and YoY growth and lead to a low single-digit YoY growth for 2016.