In a strategic move to counter the fierce competition in China’s booming smartphone market, Apple recently took the unprecedented step of offering substantial discounts on its iPhones. According to Reuters, the US tech giant slashed retail prices by as much as 500 yuan ($70) on select iPhone models. The decision to reduce prices comes as Apple faces increased challenges in the world’s largest smartphone market, with homegrown competitors like Huawei Technologies and Xiaom
Xiaomi gaining traction with their competitive models. The latest iPhone 15 series, despite its technological advancements, has experienced lacklustre sales in China, with Jefferies analysts reporting a 30 per cent drop in Chinese iPhone sales in the first week of 2024 compared to the same period the previous year. Apple’s price cuts come after the company chose not to raise prices for the iPhone 15 series during its September launch. This deviation from the norm suggests a proactive response to the increasingly competitive landscape, which has seen online shopping platforms, including Pinduoduo, slashing prices of the iPhone 15 and iPhone 15 Pro by up to 16 per cent since the beginning of the year. As the battle for market share heats up, industry experts point to the resurgence of Huawei and the patriotism-driven decision-making of some Chinese consumers to return to using domestic brands. To gain further insights into the trends shaping the industry, we interviewed Kiranjeet Kaur, associate research director for mobile phones research at International Data Corporation (IDC), to shed light on the broader mobile phone landscape in the APAC region. The story so far According to Kaur, apart from the usual festive sales periods associated with 11.11 or 12.12, people are anticipating better promotions from vendors. In the case of the iPhone promotion in China, she observed that price cuts are happening all over APAC too. “In the past, you would not see iPhone prices dropping, unless a newer version comes out, and the older ones get cheaper. But now, we are seeing item prices drop a lot earlier in a lot of markets within APAC,” she told Inside Retail. She speculated that perhaps this is part of the channel and vendor strategy to prop up sales, as demand is slowing down a little bit across the board. She believes the price cuts, partner discounts and incentives for vendors could be all part of the mix to increase sales. Spending patterns have evolved Another factor that needs to be taken into consideration is that spending patterns in the electronics marketplace have significantly changed. According to Kaur, during the pandemic, spending on electronics was at an all-time high. But these days, based on retail reports from key markets like Singapore, Indonesia and Australia, consumers are spending more on services, travel, food and beverages, clothing and footwear. So, spending on electronics has been significantly reduced. Kaur also said that consumers are venturing out more, and going to physical stores to compare prices on electronics, but are still doing a lot of research on products online. Most are hunting for the best bargains, so the purchasing decisions are becoming more complicated. The rise of online shopping During the Lunar New Year festive period, Kaur expects retailers to readjust their pricing strategies on a real-time basis to ensure that offline and online pricing is stabilised to ensure sales activities are not adversely affected. When it comes to online shopping, countries like Singapore are perfect for this mode of sales, as logistics is also not a challenge with deliveries that can happen in a matter of two to three hours. But in countries like Indonesia, logistics can be a challenge. “If you look at Indonesia, deliveries outside of Jakarta from e-tailers like Lazada and Shopee will have extra costs. If you’re talking about some remote island, things can get quite challenging and cost increases for logistics becomes a real issue,” she said. The macroeconomic perspective As the Lunar New Year festive season approaches, many retail businesses are facing supply chain issues stemming from the attacks on merchant ships going through the Red Sea shipping route, but Kaur does not expect phone manufacturers to be adversely affected by this latest bottleneck. She mentioned that most phones are being sent via air freight and not by sea freight, so they would not be affected in the near term. “In the last couple of years, most of these manufacturers have figured out how to manage their supply chains, and there was even a time when there were excess components and slowing demand. So you are now seeing companies being savvy about their supply chain risks,” she noted. The big picture Kaur also pointed out that while Apple commands the premium segment in the smartphone marketplace, a lot of Android players are challenging its position through offerings of their own. “Players like Samsung, Oppo, Xiaomi are aspiring to build this premium positioning with a range of cutting-edge smartphones. While these products may only be 10 per cent of their portfolios, there will be a trickle-down effect to other products,” she added. She has also noticed that vendors are bundling a lot more items as freebies or bundles with smartphone purchases these days. Kaur believes that vendors want to lock in purchases with pre-order promotions and bundling promotions too. “For example, in Singapore, Honor recently launched a $2,000 folding phone with $1,000 of bundled products. Samsung also launched a pre-order for their new Galaxy phone with some bundled offers, too,” she noted. The latest iteration of the Samsung flagship product will have a lot of AI technologies at the forefront. According to Kaur, this is where the training of retail staff in physical stores becomes very important. “For example, there were articles about how much training Apple staff and retail employees had to go through for the Vision Pro launch, and going forward, a lot of phone companies will need to concentrate on this aspect for successful physical retail operations,” she concluded.