Talking tech since 2003

Over the last decade, the way in which we buy phones has drastically changed. It’s hard to believe that the iPhone was only released back in 2008; it was the flame to the powder keg, the catalyst of the smartphone industry as we know it today.

The number of smartphone users worldwide is expected to reach five billion by 2019. It’s almost unheard of for phones these days not to have a touchscreen and Wi-Fi and many have the ability to download and run near console-quality games and PC-rivaling productivity apps too. We’ve come a long way from playing Snake on those black and green screens and having to press buttons repeatedly just to type out a single letter.

There are phones with foldable screens, phones that allow us to pay for goods and services just by being in proximity to the checkout, and you can secure these devices with your fingerprint, or even your own face. A lot has changed, but the industry is large and lucrative which means that it could well change even more.

How the phone industry is already changing

The phone industry may have already undergone a massive amount of change but the way that we buy phones is set to shift again. This is largely due to the fact that people are buying fewer phones than ever before.

In early 2018, many were shocked while reading a Gartner report that detailed the first ever global decline in smartphone sales. In Q4 2017, just 408 million smartphones were sold which represents a 5.6% decline when compared to the sales figures from Q4 2016. While this may seem like a mere drop of water in the ocean especially considering that a smartphone brand (Apple) is the world’s richest company, the fact that this is the first time this has ever happened became a cause for concern.

And even those who are buying new phones are doing so in ways unlike before. An estimated 90% of people are on the wrong phone contract and are losing money because of it. As more people begin to realize this and look for ways in which they can cut money off of their phone costs, they’ve been eschewing contracts altogether, buying older, more affordable handsets outright. They’ve also been buying refurbished and used phones which are also much cheaper and provide greater flexibility when it comes to tariffs and usage (e.g go on a cheaper SIM-only contract instead of going for a SIM+handset deal). In fact, some are even just choosing to keep a hold of their existing phones for longer, deciding not to replace their devices at all.

What can smartphone manufacturers do to increase sales?

If you look deeper into all of the reasons why phone sales are declining, the underlying factor in all of them is cost. People want to save money and while a shiny phone is nice, spending a lot of money on a handset isn’t a requirement for quality. Hence, people look for more ways to cut their phone costs.

In order to increase sales and get the industry back on track, smartphone brands like Apple and Samsung will have to offer their customers more options. One way of doing this is to compete with seller refurbished retailers who are repairing, cleaning and testing second-hand phones before putting them on sale again. Seller refurbished phones are available at a much lower price than brand new, they’re good quality and they tend to include a warranty as well, making them an attractive offer for cost-conscious consumers. Some manufacturers do sell refurbished phones (including Apple) but they are a lot more expensive than seller refurbished devices and this can be off-putting. If they are to draw new customers into their ecosystems, the likes of Apple and co. will need to lower their prices.

Smartphone brands could also lower their prices in general, including brand new handsets. While many are still happy to pay a premium for devices such as the iPhone XS Max and the Samsung Galaxy S9, not everyone can afford to pay upwards of $700 for a new device. The Gartner report specifically points to the rising cost of new handsets as a reason for the decline in sales as manufacturers, in pursuit of a wealthier customer, may be pricing themselves out of the market. Consumers in emerging markets like India are mostly unwilling to pay for phones higher than around $400 meaning that if brands want to grow, they’ll need to lower the price of existing models or bring out more budget-friendly handsets.

The entire smartphone market isn’t about to fall into the sea. However, it still needs to evolve and adapt in order to keep growing or to remain as popular and as profitable as it currently is.

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