Why Oppo and Vivo are losing steam in Chinese smartphone market

SC Yeung February 22, 2018 12:29

China's smartphone market has seen intense competition over the past few years with four local brands capturing more than 60 percent of sales in 2017.

Huawei Technologies, Oppo, Vivo and Xiaomi Technology recorded strong shipment growth on a year-on-year basis. But some market experts warned that Oppo and Vivo may see the growth of their shipments slow this year as users become more discriminating.

Huawei, Oppo, Vivo, Xiaomi and Apple were the top five smartphone brands in the country last year, with market shares of 19 percent, 18 percent, 17 percent, 12 percent and 11 percent respectively, according to market research firm Counterpoint Research Market Monitor.

The top three brands saw their market shares increase by 3 percentage points from the previous year.

Oppo and Vivo, both owned by BBK Electronics, are seen as aggressive players in the domestic market, expanding their offline retail points-of-sale in the inner cities, while other brands like Huawei and Xiaomi focus on online sales.

The offline strategy has helped Oppo and Vivo boost their market shares in the mid- to low-tiered segments as users are attracted to their smart and sleek designs and fast battery-charging time.

However, some industry analysts noted that the two brands seemed to be losing steam in 2017. The brands sold a combined 15 million handsets in January last year, but the shipments dropped 27 percent to around 11 million in December.

Meanwhile, Xiaomi shipments jumped 97 percent in the same period while shipments for the entire market declined 6.3 percent.

The figures indicate that Oppo and Vivo are facing some pressure in the market.

One undeniable thing about the China smartphone market is that it is quite big to accommodate many players, especially during the current high-growth period.

Oppo and Vivo have adopted a unique strategy, focusing on offline sales by opening more than 240,000 retail stores and points-of-sale in third- to sixth-tier cities to sell their products directly to their target customers, most of whom cannot afford an iPhone but would like to gain access to mobile internet service.

Oppo and Vivo were right there where their customers need them. But another way of looking at it is that their customers bought them because they really had no choice; they only wanted a good enough mobile phone to call, send and receive text messages, and browse the internet.

Amid the remarkable success of Oppo and Vivo, rivals such as Xiaomi and Huawei started strengthening their offline sales networks too.

Xiaomi, for example, announced a bold plan to open 1,000 outlets across China in three years and targeted a revenue of 70 billion yuan (US$11 billion). Huawei also redirected its attention to physical stores.

As a result, customers in lower-tiered cities can now compare different models at retail shops in their hometowns. And as they do, they realize that their old smartphones were not as great as the other brands in design and functions.

The widened choice also allowed customers to aspire for better, if more expensive, brands with new features not found in their old handsets.

This upgrading mindset of smartphone users soon started taking a toll on the sales of Oppo and Vivo.

By the fourth quarter of last year, analysts said, Oppo and Vivo's shipment growth was slowing down considerably, as Xiaomi and Huawei pressed on with their offline forays.

Amid such intense rivalry among smartphone makers, Oppo and Vivo may need to consider tweaking their strategy.

They have to come up with higher-quality offerings, upgrade their brand image and boost their presence in first-tier cities to be able to compete with stronger players.

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CG

SC Yeung

EJ Insight writer