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The latest statistical study from the GfK company shows some very interesting patterns to analyze in the mobile phone market. It reports on two main trends: the rise in prices over the past year and a slight stagnation in global demand.
Higher prices, irregular demand
According to the study, and through PhoneArena, the price of the new terminals launched on the market rose, on average and globally, by 10% compared to 2016. This is a significant increase, and the explanation for which can be found in the new technologies used in the new terminals: OLED screens, QHD resolution, facial recognition, double cameras… improvements are paid.
Nor should we forget the phenomenon derived from competition. The fact that Apple continues to be the benchmark brand and has generally maintained higher prices than the rest of the companies has ended up affecting the adversaries themselves deciding to match the price levels, seeking to match the image of a premium product.
What effect does this price change have on demand? Do you suffer? The GfK study concludes that global demand has not been affected by this escalation, with an increase of 3% in the last year. Now, the world is very big, and it is convenient to see how this demand is distributed in the different areas of the map.
While in Western Europe the demand for telephones fell by 4 percent compared to last year, in Central and Eastern Europe it was up 9 percent. Demand also increased in the US, by 2 percent, and in Latin America, by 9 percent.
The main counterweight is in Asia. In China, a major and influential tech market, sales were down 1 percent from last year. Japan and South Korea also saw their demands reduced by as much as 6 percent.
How far will we go?
No high-end of the main brands (Samsung, Google or Apple) and launched this last 2017 under 700 euros. The appearances of the iPhone X and the Galaxy Note 8, with a base price that exceeds 1,000 euros, and the fact that neither has been a clear failure of sales shows that the demand is willing to absorb these prices.
Why can consumption suffer? At the time when the mobile is a common product, there are fewer and fewer new buyers, and among those already veterans, not all have the need to change models every year (and more, at certain prices). Therefore, in Western markets, where the smartphone has penetrated before, it is normal for this effect to occur.
And in that context, a generalized price increase is the best option to maintain profits. Apple has always had this strategy: without being the company that sold the most mobiles, it was always the one that made the most money.
How is it possible? Circumscribing your product to the luxury sector. Other companies have found that this operation was more profitable, and therefore brands such as Samsung, LG or Huawei have been putting their efforts in promoting their most expensive models, while the medium and low ranges lost prominence in their catalog. Also in the middle ranges there has been an escalation, with a standard price ranging between 350 and 450 euros.
The question is, will prices ever stagnate? Is 1000 euros a ceiling that will no longer be exceeded? It is difficult to know, and it all depends on the effect that the new technologies offered have on the demand. When it comes down, it will be a warning to manufacturers that it is time to turn back.
