Vivo's "long-termism" is out of control: market share declines, high-end products are hard to find

Although it no longer appears frequently in people's vision, it has achieved another victory over depression.

According to the latest data from IDC, China's smartphone market shipments in 2022 were 286 million units. This is the first time in ten years that China's mobile phone shipments have fallen below 300 million again, a year-on-year decrease of 13.2%.

Among them, vivo shipped 53.161 million units throughout the year, ranking first with a market share of 18.6%. Despite being the first, vivo's market share fell by 25% year-on-year, which is shocking, almost twice the decline in overall shipments.

Unlike Luo Yonghao, who used to frequently save publicity costs for the Hammer mobile phone, and Lei Jun, who used his personal image to inject value into Xiaomi, vivo's founder Shen Wei is a low-key exception.

From the birth of the vivo brand to the present more than a decade ago, Shen Wei has appeared in public only a handful of times.

The most impressive one was in 2014. At a new product launch of vivo, Shen Wei was full of energy. He wore a casual suit and half-frame glasses and walked to the media for an interview. He claimed that he did not interact with his peers in the industry, fearing that it would interfere with his thinking. He would rather spend his time communicating with suppliers and channel partners. At that time, it could be felt that Shen Wei was proud of his solitude.

vivo is very similar to Shen Wei. It disdains to form a group with other manufacturers, but is not innovative enough. It claims to be a long-termist to the outside world, but secretly chases the trend.

There are very few reports on this topic after searching the entire internet, but looking at the years he has spent with vivo, one can paint a more complete picture of the head of vivo and the vivo under his leadership.

BBK vivo

In 1995, Duan Yongping left Subowang and founded BBK with six generals including Shen Wei. Four years later, BBK split its three major businesses, and Shen Wei was responsible for BBK's communications business.

In 2010, Vivo Mobile Communications Co., Ltd. was established in Dongguan, China, marking the true birth of the vivo brand.

When the brand was first established, Shen Wei conducted a survey and found that sound effects were a rigid demand among people between the ages of 18 and 25, but no one was making mobile phones with this feature, while other brands were busy competing in configuration and cost-effectiveness.

Therefore, in 2012, vivo's first dual-material smartphone with Hi-Fi and ultra-thinness as selling points came out. The price of nearly 2,500 yuan was not cheap, but it was able to achieve sales of millions. This made Shen Wei sure that this was a feasible differentiation path.

Music is a selling point that can be directly perceived and is not extremely dependent on performance and parameters. This indirectly controls hardware costs and maintains vivo's profits at a high level. Subsequently, vivo added thinness to the core concept of its products. In 2014, vivo ended up with Hi-Fi 2.0 and the slim X5Max. This phone was the thinnest phone in the world at the time, with a body thickness of only 4.75mm.

Avoiding the battle of configuration and cost-effectiveness, and emerging as a dark horse with differentiated strategies, this idea almost ran through vivo's rising period.

Judging from the data, vivo's existing market share continued to expand between the end of 2015 and the end of 2018, but its rapid growth soon cooled down.

The former moat, the current stumbling block

Judging from the research and development of operating systems, vivo started relatively late.

In 2013, vivo launched the much-disliked Funtouch OS, which has been criticized by users as "unstable and not power-efficient." In 2018, vivo became one of the first mobile phone brands to be equipped with the Android P developer preview version, but there were no subsequent public reports that vivo continued to develop the system, and the instability problem continued until last year.

In 2022, vivo launched the Origin OS 3.0 system. Some users believe that this update revealed the haste of rushing to release it from the very beginning. The 1.0 level, the 2.0 atomic suite and the 3.0 large folder were forcibly combined into one update.

Less than a month later, vivo had to respond to consumers' boiling complaints, promising to deal with the compatibility issues of old models and to have a major upgrade next year.

There are also many inconveniences in terms of user experience. A user complained on a digital blogger's Weibo that the vivo settings interface does not support clicks during the sliding process, and you have to stop and then click; the icon size is three levels; the buttons in the permission prompt box are parallel, which is not as convenient to click as the upper and lower design. The subtleties are not user-friendly, exposing vivo's shortcomings.

The "light and thin" concept, which has been a new trick since 2014, has not been abandoned by vivo. In 2021, the vivo S10 still has an ultra-thin body of 7.29mm. Judging from the media's evaluation reports at the time, the significance of the ultra-thin body lies in its good feel, portability, and more eye-catching appearance. This is far from enough to support people's love for a mobile phone.

But in order to achieve ultra-thinness, more efforts need to be made in the cooling system and battery life to catch up with the average performance of other mobile phones.

From now on, it seems that thinness has not allowed vivo to maintain its previous differentiated image. On the contrary, for other mobile phone brands, factors such as cost-effectiveness, ecology, and user experience are becoming increasingly important.

It’s not that vivo isn’t working hard, it’s just not being ahead of the times.

From a technical perspective, vivo did not increase its investment in chips until 2021. However, Huawei HiSilicon started developing chips in 2004, and Xiaomi started in March 2017. Vivo started almost the latest.

For many years, vivo has relied on superficial changes and in-depth marketing, which originated from inviting popular stars at high prices and sponsoring variety shows. These costs have all flowed into the hidden costs of mobile phones.

According to incomplete statistics, in 2018, vivo sponsored 12 variety shows and promoted four models, with the prices of the promoted products ranging from 2,500 to 3,600 yuan.

Source: GF Securities Development Research Center

This is related to vivo's audience. According to the "2019 Smart Mobile Terminal Industry Insights", vivo mobile phone users are mostly 2-4 tier female people who pursue beauty and quality of life. The most frequently used apps on their phones are also closely related to life and entertainment. The top five most valuable apps include Taobao News, Mini World, Kuaishou, Movies and TV, and Soul. Vivo users are a group of people who pay more attention to entertainment and lifestyle.

Only by comparison can we see the difference. Xiaomi showed a different tone. The top five most valuable applications are Zhihu, LinkedIn, Bilibili, Himalaya FM and NetEase News.

On the other hand, there is vivo's offline network. A few years ago, the conspicuous blue-green colors of vivo and OPPO often appeared in every corner of the streets and alleys of 2-4 tier cities, because these stores are needed in the sinking market. According to the data in 2019, the share and TGI index of the vivo brand in third-tier and lower-tier cities are both high.

Source: 2019 Smart Mobile Terminal Industry Insights, talking date

Whether pre-sales or after-sales, offline stores meet the brand's reliance and trust in low-tier cities. Vivo has put a lot of effort into offline channel construction. From salesmen to dealers, everyone can receive excessive incentives for completing sales targets, becoming a powerful promoter of Vivo's offline sales channels.

In 2016, the explosion in offline sales of vivo mobile phones brought a substantial increase in overall sales, but this was only temporary. Such an incentive model could not escape the drawbacks of increasing prices at each level. In today's information-rich world, the information gap between people's trust in offline stores will sooner or later be eliminated by abundant channels.

Decline ensued. In 2018, a reporter from Southern Metropolis Daily discovered during a visit to Huaqiangbei that the mobile phone industry was experiencing a wave of offline store closures. Yan Tao, then head of OPPO’s sales in China, also told the Southern Metropolis Daily reporter that the reduction of mobile phone stores was an inevitable trend. “In the early years, OPPO’s offline layout focused more on how to make it convenient for users to obtain or purchase products. Now offline stores need to better meet users’ requirements for shopping environment, experience, and a series of other services.”

With the popularization of the Internet, people's understanding of mobile phones is no longer overly dependent on offline stores, and they have put forward higher requirements beyond shopping, but vivo has not caught up.

The reluctance to be ahead may be due to Shen Wei's anxiety in the early days of vivo's factory construction. It was the first half of 2012, and feature phones were switching to smartphones. Because vivo failed to anticipate the sharp turn in the market, some of its feature phones were piled up in the warehouse.

Shen Wei recalled: "At that time, vivo was not big, but it lost 100 million yuan a month."

This to some extent dampened his enthusiasm for achieving "hard-core innovation".

The data looks good, but the road ahead is unclear

The data that is most easily mentioned by the outside world about vivo is its market share. According to IDC data, vivo's market share has been ranked first for two consecutive years.

But behind this glamorous data, the support is a little thin.

Taking 2021 as an example, vivo sold 71 million mobile phones in China and Apple sold 50.3 million mobile phones, but their revenue and profit margins were 143.3 billion yuan and 329 billion yuan; 7.4% and 67.8% respectively.

Perhaps in order to cut costs, vivo only sponsored three variety shows in 2022, which once again reduced vivo's influence in lower-tier cities.

According to incomplete statistics, in the first half of 2022, domestic mobile phone brands led by Huami, OPPO and Vivo released a total of 51 new products, of which many flagship models were priced over 4,000 yuan.

However, while Vivo is impacting the high-end market, it still adopts the "sea of ​​​​machines strategy". In 2021, Vivo and its sub-brand IQOO released 49 mobile phones. However, the sales share of Vivi5G mobile phones has fallen to 5.0% by 2022.

In the competition of high-end mobile phones, vivo's participation is obviously not high, and the update of core technology is not obvious.

Shen Wei once set a goal for vivo to make mobile phones its main business. From a business perspective, vivo is indeed not aggressive enough in other areas.

In 2019, vivo announced a high-profile upgrade of its ecosystem, such as equipping smart car scenes, using a mobile phone to upgrade smart scenes, and using the mobile phone as a car key.

But this did not distance vivo from other brands. In 2018, the Internet of Vehicles Alliance announced the launch of the first digital key specification for cars. Subsequently, several manufacturers such as Audi and Hyundai Motor have provided digital key services to customers. Huawei and Xiaomi also realized the "mobile phone car key" technology in the same year.

In terms of the layout of the ecological chain, vivo is clearly lagging behind.

For example, Apple, Huawei, Samsung, Xiaomi, OPPO and other manufacturers released smart watches in 2014. In the same year, Xiaomi had already laid out an ecosystem around mobile phones. However, vivo only released its first smart watch in September 2020, which did not make any splash.

Vivo's Possibilities

If the previous poor performance is not considered a crisis, vivo's real dilemma is that its development direction is contrary to its survival possibilities.

According to a survey by Zhongguancun Online ZDC Data Research Center, the most popular price range for vivo is 3,000-5,000 yuan.

At higher and lower price points, there is Apple at the top and Redmi at the bottom. The attention paid to the functions of mobile phones can directly reflect the degree of user demand for the brand, and in a certain sense, it can also guide the survival direction of the brand.

However, according to IDC analysis, vivo's achievement of No. 1 in domestic market share in 2022 is closely related to the sales of vivo's X series high-end models. Most of the X series are priced above 5,000 yuan, and the gross profit is higher than that of low-end models. From a long-term perspective, it is inevitable to take the high-end route.

In the past two years, vivo has been expressing its intention to enter the high-end market. Last year, it launched a foldable screen mobile phone. The cheapest configuration of the first foldable screen mobile phone costs 8999 yuan. In 2022, vivo took 7.7% of the foldable screen market share. It needs to rely on external forces such as Qualcomm chips, Google systems, and Samsung screens to complete research and development. In the high-end market where there is no first-mover advantage, the share of 7.7% is not easy.

The current survival issue is equally difficult. Focusing on high-end phones means that users may lose attention to mid-priced models. How to strike a balance has become the most important issue for vivo in the coming year.

If we analyze Shen Wei's external statements, he would definitely be more willing to let go of "the immediate gains".

At the vivo 2022 online annual meeting and innovation awards ceremony a month ago, Shen Wei mentioned cause and effect again. He delivered a speech titled "Focus on Planting Causes, Long-lasting Foundation", saying that 2022 is vivo's "year of high-end breakthroughs". Only by adhering to long-termism and focusing on "planting causes" can the foundation be long-lasting.

He likes to define his and vivo's philosophy of life as causality and long-termism, but in fact, vivo is not as pure and unselfish as Shen Wei claims to the outside world.

Vivo also had a low-key involvement in the village bank incident that went bankrupt in 2022. After the incident became a big deal, the mutual finance platforms where funds flowed into village banks, including vivo wallets, surfaced.

The Internet finance platforms help banks to attract deposits, and the banks allow the Internet finance platforms to obtain income such as handling fees. Shen Wei, who once said that he would never get involved in real estate, actually changed the way to allow vivo to conduct capital operations.

Vivo under Shen Wei's leadership has obviously gone in the opposite direction. Either the monk who ruled by inaction is misreading the sutra, or Vivo under Shen Wei's leadership has difficulty in integrating knowledge and action.

When talking about vivo, what can you think of at this stage? Long-termism? Or sowing seeds and waiting for results? These may just be excuses for weak growth. Vivo, which is holding on to its No. 1 position, may not fall into crisis immediately, but whether it can find new business models and growth points this year is in fact the key to whether vivo and Shen Wei can be "long-termists".

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.