Smartphones don’t need to have flashy new features to be top sellers or the perfect tool that helps us live our best life. I already know I’m going to love the Galaxy S10, but, I’m not sure that Samsung is making the right moves to capture people’s hearts, minds, and wallets.
Consumers are willing to pay more for Smartphones. Apple & then literally everyone else selling a smartphone.
What manufacturer wouldn’t take larger margins to cover R&D costs and compensate for the longer update cycles? I think Samsung might have taken things a little far by launching a version of the Galaxy S10 Plus with 1TB of storage that tips the scales at $1600. This is the most expensive Galaxy S Smartphone in the history of the line. We’re not even going to get into the price tag of the Galaxy Fold which in Europe will cost 2000EUR.
Even if consumers are tolerating higher prices, the pricing structure of the Galaxy S10 series of phones has to be right at the edge of what is plausible.
Pricing is just one of the things that just isn’t sitting right with me around Samsung’s strategy.
Todd Haselton over at CNBC thinks “Samsung is making the same mistakes as Apple did with its new phones”
I agree with him, but I think there is more to this story, a bigger picture that he does touch on but there is more to say.
I’ll quickly dive into the three mistakes he thinks Samsung is making and use them as a starting point.
1. The Phones are too expensive
The pricing is the fundamental problem with Samsung’s strategy, the new phones just cost too much. The entry-level Galaxy S10e starts at $749, which looks like mid-range phone with a premium price tag. Sure it’s got highend specs, but we’re seeing that in the mid-range now too. When you look at the main line up the Galaxy S10 starts at $899 and the Galaxy S10+ costs $999.
“Consumers have shown, and Apple has said, that its customers are holding on to their phones longer for a couple of reasons. First, their phones are lasting longer, which means customers aren’t as ready to upgrade as they once were.”
You need to charge more if you’re selling less. Got it.
2. No “Must Have Features”
The S10 line is an elegant iteration, I already know I will fall in love with it. There isn’t a phone out there (apart from the wow factor of the foldable phones) that would get me to open my wallet after just one product release cycle. I’m still waiting for two upgrade cycles not one to pick up a phone.
4G had a clear value proposition, you can now make video calls and stream music. 5G isn’t for consumers and brands should stop trying to convince telco’s they are to get them to upgrade their networks faster. Plus we are a few years away from real coverage and not just pockets of network upgrades. We have a whole rant here about 5G phones
When we look at what Apple did with their last set of Smartphone launches, there are lessons that Samsung could have learned. Todd makes a very solid point:
“We saw a similar innovation lag with the new iPhones. The screens got bigger, the processors got faster, and the cameras were slightly improved. All great features! Millions of people still bought them, but fewer than historically and not in markets where Apple needs to make up ground, like China. If anything, all I heard were complaints about how the new iPhones cost too much.”
Personally, in all my years of reviewing Smartphones, I’ve never had to help so many of my friends leave Apple and join the wonderful world of Android. They held on to their iPhones are long as they could, but 95% of the bought Samsung devices.
I think it’s worth mentioning that this morning I already got our first complaint from a happy Galaxy Note 9 covert that “They updated my phone to act like an Apple, I got used to Android, I don’t want to have to go back to Apple on the same damn phone”. We’re just going to leave that comment here and perhaps revisit Samsung’s new software and if that comment holds water in a different article.
3. Missing the boat on China
“Apple’s fight in China has had an adverse effect on its iPhone revenues, with shipments crashing nearly 20 percent there because of expensive prices. But at least Apple is on the map in China, where it’s the fourth-largest seller of phones. Samsung isn’t even in the top 5.”
Huawei, Xiaomi, Oppo and other local brands are taking advantage of Apple and Samsung’s missteps in the market by selling affordable phones with strong local brand names.
This is where Samsung’s strategy just isn’t sitting right with me and why I wanted to build on Todd’s article.
In a sit down with a German product manager, I asked: “What about Xiaomi?” I was having trouble placing the S10e in the ecosystem. His answer was when you come from zero percent market share any numbers seem impressive. And he’s right, annual growth numbers of 62% seems crazy but in truth, they only have 6% market share.
Let’s take a look at Canalys latest European smartphone numbers, what’s immediately evident is that every company in the top five that doesn’t call China home lost market share.
Let’s take a closer look at this chart. Samsung had annual growth of negative one percent in the European market, you’ll notice that the company actually increased its overall market share ever-so-slightly by 0.4 percent. This is because there were fewer Smartphone shipped in Europe, 4% less which isn’t in the chart, but worth mentioning.
It’s hard to look at this chart and not walk away with the impression that Huawei and Xiaomi are making big swings in the European market and should not easily be dismissed.
The main reason it was felt that Xiaomi wouldn’t be able to scale to volume in Europe is RAM, or Return Merchandise Authorization.
It’s a general misconception that Xiaomi doesn’t know how to handle returns, that their attitude is “It’s so cheap that you’ll just buy a new one”. It’s true that German’s and Europeans, in general, take after sales support as a serious consideration when buying a device. ASUS has had a very hard time with the European market because of it.
Europe has a law in which a two-year limited warranty applies. OnePlus has had no problem building a loyal following and dealing with repairs and returns locally. Sure, there are no physical storefronts, they handle repairs via mail and their volumes are dramatically lower, so it is a little like comparing Apple’s and Oranges, but they have the know-how from their business in China to do it. Huawei has also scaled up its repair presence in Europe to meet the demand.
Xiaomi is also no stranger to building storefronts to gain access to markets. Putting shops into tier 3 and 4 cities was one of the strategies that helped them to dominate China.
Samsung Europe should not dismiss Chinese companies so easily, Canalys also posits that because of the trade issues with China and the US that these companies are more heavily invested in Europe.
To me, the question is now: What can Samsung do to stop losing market share to Chinese smartphone makers?
If you look at Huawei and Xiaomi it’s by offering a palatable price for phones that have competitive features and a unique design. I’m not sure the raising the price and launching a phone with a version that’s more expensive than a laptop is going to win the hearts, minds, and wallets of the consumer. Lucky for Samsung it’s easy to lower the price.