Domestic mobile phones are quietly experiencing a price increase. Will consumers pay for them?

After smartphones entered the period of stock replacement, the growth of mobile phone sales began to slow down, but relatively speaking, prices have tended to rise.

Data from a third-party statistics agency show that the average price of domestic mobile phones (excluding iPhones) increased to 1,503 yuan in the first half of 2016, an increase of 114 yuan compared to the same period last year.

Entering 2016, mobile phone manufacturers seem to no longer pursue "cost-effectiveness" but instead pursue higher premiums than in the past, hoping to improve the image of their products by raising prices. Even Zhou Hongyi, who once advocated free hardware, began to reflect, saying that the hardware premium is reasonable and not evil.

However, excessive price increases will affect consumers' purchasing power and cause channel price chaos. Whether domestic users will pay for the price increase of mobile phone manufacturers is still a big question.

Are price increases becoming the norm?

No one can forget the bloody storm among domestic mobile phone manufacturers in 2015: price wars became the norm. Mobile phone manufacturers released new products every week and flagships every month, and every manufacturer claimed that their mobile phones had configurations of thousands of yuan and prices of hundreds of yuan. The price war in 2015 even caused a wave of bankruptcies among suppliers in the upstream of the mobile phone industry chain, and the survival space of small-brand mobile phone manufacturers was also severely compressed.

Meizu Vice President Li Nan mentioned "price-performance ratio is dangerous" at a media conference at the end of 2015. Vivo's Feng Lei also said in an interview with the media that the mobile phone market in 2016 was basically a stock market, with a penetration rate of 90%. Competition in the mobile phone industry has shifted from traditional hardware and price-performance ratio to the operating experience of the product itself.

Once upon a time, Apple, which had less than 20% of global shipments, accounted for 90% of profits. Huawei's Richard Yu envied Apple's ability to charge a premium, and admitted that Huawei was still far behind Apple, especially in the high-end field, where Huawei still had huge room for growth.

Since 2016, mobile phone manufacturers no longer talk about cost-effectiveness, but increasingly begin to emphasize quality and brand. This feature is clearly reflected in the price: the pursuit of premium.

At the China Telecom Terminal Trade Fair, Huawei and ZTE both released a new phone in cooperation with China Telecom: Huawei Maimang 5 and ZTE Xiaoxian 4. When the prices were announced, there was a sigh in the audience: the prices are so high. Maimang 5 starts at 2,399 yuan, while ZTE Xiaoxian 4 starts at 1,099 yuan. The two products have increased by 300 yuan and 100 yuan respectively compared with the previous generation. ZTE Xiaoxian 4 has increased by 391 yuan compared with the first generation in 2014; the MX6 recently released by Meizu has also increased by 200 yuan compared with the previous generation.

Data from GfK shows that the average price of domestic mobile phones (excluding iPhones) in the first half of 2016 was 1,503 yuan, compared with 1,389 yuan in the same period last year.

"Previously, mobile phone manufacturers set prices relatively low, but starting this year, price increases will become the norm," GfK analyst Wu Xiaofeng told NetEase Technology. In response, Li Rui, general manager of Sino Mobile's market mobile phone division, also said that mobile phone manufacturers are now in the brand promotion period, and seizing 2,000+ or ​​even 3,000+ is the only way.

Blind price increases may drag down shipments

In addition to pursuing brand enhancement, Counterpoint Research Director Yan Zhanmeng believes that the price increase by mobile phone manufacturers is also for the layout of offline market. As online channels have reached their ceiling and the cost of online channels has gradually converged with offline channels, mobile phone manufacturers have begun to return to offline channels. Moreover, offline channels are more conducive to brands impacting the high-end market. Yan Zhanmeng believes that mobile phone manufacturers raise prices in order to allow offline channel dealers to have sufficient profit margins.

However, Li Rui believes that "it is difficult to succeed to improve the brand image simply by raising product prices." At the same time, Li Rui added that currently only Huawei, OPPO and vivo can achieve simultaneous improvement in brand, product and price.

According to Huawei's 2015 financial report, Huawei's consumer business has shipped 108 million units worldwide, making it one of the top three smartphone brands in the world. Its brand awareness in China has also increased to 97%. The carrier version of Huawei Mate8 is priced at RMB 2,999, while the full network version is priced at over RMB 3,000.

The flagship phones of OPPO and vivo are priced at more than 2,000 yuan, and can even reach 3,000 yuan. Although the prices are relatively high, in terms of market performance, the three major brands occupy the top three positions in the Chinese smartphone market. Data from TrendFroce in the second quarter of this year showed that in the Chinese market, Huawei ranked first with a share of 20.8%, and OPPO and vivo ranked second and third respectively.

When it comes to product pricing, Feng Lei once revealed vivo's strategy, which is to consider the interests of four groups: employees, partners, shareholders and consumers. Only by handling these four stakeholders well can a company be healthy and long-lasting. This also allows vivo to avoid falling into a vicious cycle of price wars and has a certain premium space.

"If the brand and product are not synchronized with the price, excessively high prices will directly lead to a decline in sales and chaotic pricing in the channels," Li Rui told NetEase Technology.

It is easy to understand why sales have dropped. If the price is too high but the brand tone is not there, consumers who are no longer newbies will not buy it. Regarding the issue of chaotic prices in channels, Li Rui explained that high prices mean high profit margins. If channel management cannot keep up, market prices will be disordered between provinces and channels.

Therefore, when raising prices, domestic mobile phone manufacturers should also consider improving brand tone and controlling channels. However, in the final analysis, whether the price increase can be successful depends on whether consumers are willing to pay.

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.