OPPO, Vivo snap at Ap­ple’s heels in China mo­bile mar­ket

The Pak Banker - - COMPANIES/BOSS -

Be­yond China few may have heard of OPPO or Vivo, but th­ese lo­cal hand­set ven­dors are ris­ing up the rank­ings in the world's largest smart­phone mar­ket, us­ing lo­cal mar­ket­ing savvy and strong retail net­works in lower-tier cities.

In­dus­try ex­perts say th­ese cities - there are more than 600 of them and some are big­ger than many Euro­pean cap­i­tals - are the next smart­phone bat­tle­field as China's ma­jor cities are sat­u­rated. In­ter­na­tional brands such as Ap­ple (AAPL.O) and Sam­sung Elec­tron­ics (005930.KS) have mostly not yet reached this part of the mar­ket - which ac­counts for more than 56 per­cent of China's over­all con­sump­tion, ac­cord­ing to Bei­jing All China Mar­ket­ing Re­search.

In an econ­omy grow­ing at its slow­est pace in a quar­ter of a cen­tury, buy­ers in th­ese smaller cities - with pop­u­la­tions of up to 3 mil­lion - tend to­wards cheaper phones, which is good news for Guangzhou-based OPPO and Vivo, as well as Meizu Tech­nol­ogy Co, an af­fil­i­ate of Alibaba Group Hold­ing Ltd (BABA.N). "OPPO and Vivo have al­ready over­taken Sam­sung and ZTE Corp (000063.SZ) in China, and are work­ing to chase down the big three of Huawei [HWT.UL], Xiaomi [XTC.UL] and Ap­ple in 2016," said Strat­egy An­a­lyt­ics an­a­lyst Neil Maw­ston.

To be sure, th­ese lower-priced new­com­ers lack the fire­power of the pre­mium brands, and op­er­ate on ra­zor-thin mar­gins or at losses. They need mass vol­ume sales to keep go­ing, the in­dus­try ex­perts said. OPPO sold 10.8 mil­lion smart­phones, giv­ing it a 9 per­cent mar­ket share and a top-5 rank­ing, in the fourth quar­ter of last year, ac­cord­ing to Strat­egy An­a­lyt­ics - even as the over­all China mar­ket slipped 4 per­cent. OPPO's R7 smart­phone, priced at 1,999 yuan ($304), touts it­self as a "selfie ex­pert", with a big­ger screen than the iPhone 6S and com­pet­i­tive cam­era res­o­lu­tion.

Vivo ranked fourth with 10 per­cent mar­ket share, below Ap­ple's 13 per­cent. The growth among th­ese younger ven­dors comes as Ap­ple, Xiaomi and oth­ers strug­gle to main­tain mo­men­tum in a mar­ket swamped with smart­phones and fad­ing eco- nomic growth. An­a­lysts say the new­com­ers run eye-catch­ing mar­ket­ing gim­micks, in­clud­ing spon­sor­ship with lo­cal TV shows, and have ex­ten­sive retail net­works in low­ertier cities. "There's only so much the in­ter­na­tional firms can do when it comes to lo­cal­ized mar­ket­ing in China," said Ni­cole Peng at Canalys. "For for­eign com­pa­nies like Sam­sung, their mar­ket­ing strate­gies don't re­ally cater to the Chi­nese con­sumer." Ap­ple last week fore­cast a first rev­enue drop in 13 years and posted the slow­est-ever in­crease in iPhone ship­ments as the Chi­nese mar­ket showed signs of weak­en­ing. China has nine of the world's top-12 smart­phone brands, with nearly a quar­ter of the mar­ket share, ac­cord­ing to Coun­ter­Point Re­search, but turn­ing that into vol­ume sales be­yond China will be a chal­lenge.

Over­seas, Chi­nese brands lack strong dis­tri­bu­tion net­works and can run into in­tel­lec­tual prop­erty is­sues. OPPO is al­ready in sev­eral Asian and Middle East mar­kets, while Vivo is in Malaysia and In­dia. And at home, Chi­nese de­vice buy­ers are no­to­ri­ously fickle, switch­ing be­tween brands in a cut-throat mar­ket.

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