THE VOLUME of smartphones shipped to the Philippines declined in the second quarter as local vendors faced tougher competition from their Chinese counterparts, a report by research firm IDC showed.
According to International Data Corp.’s (IDC) Asia/Pacific Quarterly Mobile Phone Tracker, four million smartphones were shipped to the Philippines in the second quarter, posting a 10% year-on-year decline.
“OPPO and Vivo disrupted the smartphone retail space through cash-rich marketing, aggressive sales promoter incentives and previously unseen levels of retailer support. This challenged the traditional vendor-dealer relationship smartphone vendors have been accustomed to. Smaller players with less marketing and merchandising budget at their disposal were unable to do so, thus suffering drops in market shares,” Jerome Dominguez, market analyst for client devices at IDC Asia/Pacific said.
Local vendor share of the smartphone market was down to 41% in the second quarter from 49% last year. Despite increasing competition from Chinese smartphone vendors, however, local vendors in the Philippines performed better relative to local vendors in Southeast Asian countries. Shares of the smartphone markets in Indonesia, Thailand, Vietnam and Malaysia were now down to 19%, 11%, 6%, and 1%, respectively.
Global vendor shares of the smartphone market in the Philippines remained flat, recording a share of 27%, with only Samsung as the strong performer. Chinese vendor shares jumped from to 22% in the second quarter from 15% last year.
Local smartphone brand Cherry Mobile maintained its lead in the smartphone market, with below $50 smartphones driving its high volume. In response to heavy promotions from global and Chinese vendors, it beefed up its marketing spending with ad placements and airtime on popular noontime shows.
Samsung came in at second, with the J series making up majority of its shipments for the 1st half of 2017. It focused on improving above-the-line marketing and sales promoter incentives with the quick rise of Chinese vendors.
OPPO was the 3rd biggest vendor, its growth related to an aggressive approach in marketing, merchandising, and sales. Like Samsung and Vivo, the company benefited from its partnership with Home Credit, allowing it to offer smartphones at 0% interest installment without the credit card requirement, making its offerings more accessible to mass market consumers.
Cloudfone placed fourth with its marketing and promotions focused on sports events like its partnerships with the National Basketball Association (NBA) and the Philippine Basketball Association (PBA). Its efforts on the below-$25 segment pushed its volume for the quarter.
Vivo was the 5th biggest vendor, as the Stephen Curry endorsement helped establish its brand presence on the local scene. The company also produced a lot of road shows, with Vivo Perfect Selfie Tour covering most of the major malls in Metro Manila and other key cities.
IDC said the rise of OPPO and Vivo, which are sister brands under one Chinese mega company, BBK Electronics, affirmed the importance of combining a wide sales and distribution approach with strong marketing and advertising strategies to capture consumer mindshare. To preserve brand equity among consumers, leading global and local vendors who have reduced marketing spending last year were seen to shift their resources to funding actively on integrated marketing campaigns this year.
IDC also said in its report that global vendor shares of the smartphone market in the countrty remained flat at 27% compared to a year ago, with only Samsung as the only strong performer. Meanwhile, Chinese vendor shares jumped from 15% to 22% year on year.
For the third quarter, IDC said it expects the Philippine smartphone market to stay subdued due to an increase in component prices, weaker currency, and forthcoming exits of a number of smartphone vendors. Shipments are expected to pick up during the last quarter of the year, with pre-Christmas buying kicking in.
“As the battle for mindshare intensifies, top global and local mobile phone vendors were left with no recourse but to double down on marketing spending to maintain the brand presence. Aside from the tried-and-tested formula of appointing A-list celebrity endorsers and conducting road shows, new marketing strategies such as co-branding and strategic product placements are being explored by local and global vendors as means to remain competitive against Chinese vendors,” Mr. Dominguez added.
Mr. Dominguez told BusinessWorld that they expect leading local vendors to at least maintain the market shares in the short term.
“These vendors have already made adjustments on their marketing and pricing strategies to combat increased aggression from big Chinese and global vendors,” Mr. Dominguez said in an e-mail.
Smaller vendors, however, face prospective market exits in the face of Chinese and global aggression: “As for smaller local vendors, some of them have already shown signs of weakening and we are looking at possible exits of a number of these after a few quarters.” — PPCM