1 Sept 2016
Chinese Smartphones Sales Surge on the Back of Russian Pragmatism
Less brand-conscious, more benefit-oriented, the changed priorities of Russian buyers are the key to sales success.
Sales of China brand smartphones are said to be surging across Russia. This has seen demand for handsets manufactured by ZTE – the Shenzhen-based telecoms giant – outstrip orders for both LG and Sony models over the last six months.
This shift in purchase patterns follows a bumper six months for Russia's cellular phones market. Since the start of the year, some 11.3 million smartphones have been purchased, a 10% year-on-year rise. Overall, this growth in demand has been attributed to a perceived stabilisation in the market following two years of uncertainty. This has been given a further boost by the end of dramatic fluctuations to the exchange rate.
With regard to the mobile phone market, the beneficiaries of this returning confidence were – in descending order of market share – Samsung, Apple, Lenovo, Alcatel, Fly, ZTE, LG and Sony. In terms of both quantity and value growth, ZTE was the biggest winner, overtaking both LG and Sony in less than a year and, effectively, hijacking their market share.
According to market analysts, ZTE's growth has been built on its success in poaching customers who had traditionally spent on the Russian "B-brands" in the sector – local brands such as Highscreen, TeXeT and Explay. These domestic players were seriously affected by the exchange rate fluctuations and found themselves unable to compete with the minimal – or even negative – margins the multinational resorted to in order to maintain market share.
The problem for the local brands was compounded when all of the China handset producers dramatically increased their marketing spend last year. This coincided with the launch of several new models, many of them offering features tailored to the market preferences of Russian consumers. These included dual-sim card functions, longer-lasting batteries and support for the LTE protocol.
At present, ZTE and Lenovo remain the best-known Chinese smartphone brands among Russian consumers, but they are not the only companies to have benefited from increased demand for mainland-sourced handsets. Indeed, Huawei has also proved a clear winner here.
In the first quarter of 2016, the Shenzhen-based networking and telecoms giant sold 124,000 units in Russia. In terms of quantity, year-on-year, this is an eightfold increase, while in value terms the growth is tenfold. In part this can explained by the fact that Huawei products are now sold through both dedicated cellular operators and through a number of the leading nationwide consumer electronics chains.
Until relatively recently, Chinese smartphones languished in the budget market segment, with models typically priced in the US$80-120 range. Now, however, the perception has shifted somewhat with the newer mainland models competing directly with the most popular global brands for market share. In some instances, the more practical benefits of the Chinese handsets are even giving them an edge over their global competitors.
In terms of Hong Kong companies, these shifts in Russia's smartphone sector open up opportunities on two different fronts. Firstly, many of these purchasers of Chinese handsets will now be in the market for suitable accessories, including covers, chargers and spare batteries.
The other opportunity is a little more abstract. The willingness of Russian consumers to prioritise practical benefits over branding indicates a new sense of pragmatism on the part of purchasers. This trend is not just apparent in the smartphone sector, but has also manifested itself with regard to a number of other products, including inexpensive electronic items, cars and furniture. Capitalising on this changed sentiment among buyers, then, should be a factor in the thinking of any company targetting the Russian market.
Leonid Orlov, Moscow Consultant