Can Chinese smartphone makers win Europe?

By Li Xuanmin Source:Global Times Published: 2018/12/6 18:08:40

Tech firms eye mature market in bid to push premium products

A view of a Huawei advertisement at a plaza in Rome, Italy. File photo: VCG

After winning the Indian and Southeast Asian markets, Chinese smartphone makers are now making aggressive inroads into Europe, including the UK, Spain, Italy, Russia and France.

According to the latest report released by research institute Counterpoint Research, Huawei's market share in Europe rose to 22 percent in the third quarter of 2018, up from 13 percent in the third quarter last year. The brand now ranks No.2 in terms of market share in Europe, trailing Samsung's 31 percent but pipping Apple's 19 percent.

Other Chinese smartphones in the top five include ZTE and Xiaomi, with a market share in Europe of 5 percent and 4 percent, respectively. Xiaomi appeared in the top five list for the first time.

For domestic handset-makers, gaining recognition in a much more developed market, which gave birth to global telecom giants such as Nokia and Ericsson is not an easy task, as European consumers are more selective and demand more product functions. But the rewards are obvious - they can reap proportionately higher profits by selling premium smartphone models.

The average sales unit price of smartphone in Western Europe is $446.7, second only to the North American market, according to a survey by GFK in January.

More importantly, venturing into one of the world's economic powerhouses would also help Chinese smartphone companies establish high-end global brand images that are drastically different from the ones in India and Southeast Asia, analysts pointed out.

"Our Asian neighbors' markets are just like the Chinese market a decade ago… there is plenty of room for future growth but only cheap smartphones are selling well, which somehow impedes smartphone producers' long-term development," said Liu Dingding, a Beijing-based independent industry analyst. "On the contrary, gaining a stable foothold in the European market bodes well for their successful global image."

So far, all Chinese smartphone vendors have ramped up expansion into Europe since the beginning of 2018, looking to repeat their success in a mature market. Vendors like Xiaomi, Oppo and Vivo are new to the market, while others like OnePlus and Huawei have entered the market several years ago, partnering with local carriers to scoop up local market share. 

Strong start

Riding the momentum, Xiaomi has opened retail stores in major European economies including Spain, France and Italy since May. And in the latest push into a European market, it opened its first Mi Store in London in November.

The company seems off to a strong start, as local consumers were reportedly lining up outside Xiaomi's outlets in Europe, rushing to purchase its gadgets. Some market observers even commented that Xiaomi's entry reminded them of the early success of the iPhone in Europe, CNN reported. Xiaomi CEO Lei Jun also said in a Weibo post in May that the brand has posted a staggering 999 percent growth rate in the European market to date.

In addition to Xiaomi, other Chinese vendors such as Vivo and Oppo are also newcomers to Europe. 

On June 19, Oppo launched its flagship Find X smartphone - also the company's first premium phone since 2014 - at the Louvre in Paris. Costing 999 euros and available in France, Italy, Spain and the Netherlands, the Find X model signals the Chinese electronic company's ambition to march into the European market and compete head-to-head with top-tier handset makers.

The launch event generated buzz as Oppo also unveiled a more premium version in collaboration with Italian luxury car brand Lamborghini, priced at 1,699 euros.

"The way Oppo marketed itself shows that the company is leveraging a different and high-end way to elevate its brand recognition in Europe than it does in China," Liu said. 

Market differences

But analysts also warned that it could be quite challenging for newcomers to quickly come up with localized marketing strategies to please European consumers.

"Simply copying Chinese vendors' marketing strategy in Europe may backfire," Liu said.

In November, Xiaomi hosted several "1-pound-fresh-sales" on its UK launch day. The promotion attracted massive traffic to the company's official website, but just seconds after the sales went live, buyers found that the sales page showed the handsets had sold out. This caused some backlash among its fans and some buyers even questioned the authenticity of such sales. 

"A fresh sale is similar to Xiaomi's hunger sale model which worked out well in China and India, but British and European consumers won't just buy into it. Their consumer habits are different," Liu said. 

Another market difference between China and Europe is the way handsets are sold. According to an IDC report, about 50 percent of European consumers buy electronic devices through carrier deals, and the percentage of consumers purchasing at stores and through online platforms only accounts for 40 percent and 10 percent, respectively.

Bingo Liu, head of OnePlus' Europe region, told the Global Times that sales from brick-and-mortar stores represent about 60-70 percent of smartphone sales in Europe. "In some countries the rate can even reach 85 percent." 

Unlike Xiaomi, Vivo and Oppo whose ties with European carriers are weak due to a late start, early comers like OnePlus and Huawei have already forged strong ties with local carriers and are reaping rewards from the cooperation.

For example, OnePlus has inked strategic cooperation deals with Elisa, the largest telecom carrier in North Europe as well as major Nordic carrier Telia. As a result, the Chinese firm's sales in Europe have posted a year-on-year growth rate of between 60 percent to 70 percent, Liu noted.

Huawei's line-ups are also available in major European outlets and telecom operators' stores such as Vodafone, a big boost to its European sales.

Although there are foreign competitors such as Samsung and Apple which jointly claim about half of the European market shares, Liu, the analyst, said he is confident that the sales gap between Chinese smartphones and Samsung and Apple will shrink in the future after  Chinese players learn to adapt to local markets.

"Chinese vendors - whenever they entered the European market - have an overwhelming edge in cost performance, and they are also technologically innovative," Liu said.

Besides, "the year of 2019 is the kick-off year for 5G, and Chinese handset-makers are already leading the competition," he added.


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