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Only way for smartphone vendors to compete with Apple, Samsung: Stop selling smartphones

Published Aug 29th, 2013 11:25AM EDT
Apple Samsung Competition

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As Apple and Samsung continue to divvy up all of the profits in the smartphone industry, rival vendors have yet to really find a way to loosen their stranglehold on the market. Innovation and execution used to be vendors’ top priority during the early growth period that began in 2007 with the launch of Apple’s iPhone, and vendors like HTC were hugely successful thanks to sleek hardware and smart software. But then it all came crashing down. According to leading market research firm GfK, the only way for vendors to compete with the global duopoly Samsung and Apple have established is to completely upend their strategies and, in a sense, stop selling smartphones.

To be successful in the modern smartphone market, GfK’s research director of business & technology Ryan Garner believes companies need to stop selling products and start selling lifestyles.

“With so much choice and smartphone adoption moving into the late majority in many countries, the emphasis needs to shift from selling products to operating like a lifestyle brand,” Garner wrote in a recent research note. “OEMs should move away from promoting product features as their headline story and look to other product categories for how to differentiate in an increasingly saturated and commoditised market. For example, Nike doesn’t just sell trainers, it sells a fit and active lifestyle. Similarly, in technology markets, Bose does not sell speakers, it believes life is better with better sound.”

Garner notes that the “recipe for success has changed” in the smartphone market and a great experience is now a basic expectation among consumers. As such, focusing on specific features such as a smartphone’s camera or location-based services has become difficult since users already expect top-notch experiences in those and other ares.

“[A smartphone], and everything it enables, is transformative and empowering so there should be many options as to what its lifestyle message could be,” Garner said. “When Apple first entered the category it showed how the App Store could meet all your needs and empower you to do more on the move. The market has moved on from this now but if OEMs can pinpoint a more refined type of empowerment they can focus their product innovation in a more effective way. Innovation is what they do best but there are so many attributes to a smartphone that these innovations can get lost in product marketing, potentially having little impact in driving sales. If innovation is focused on supporting their higher purpose OEMs can choose where to focus their innovation and fit it into their brand story.”

The analyst continued, noting that the current race to the bottom scenario that seems to be playing out in some markets is bad news for the industry. “Without making this shift OEMs will struggle to differentiate and thus be less able to command a premium for their products,” Garner concluded. “The only other way to compete in this fierce product category is on price. Once price becomes the primary lever, the game is truly over.”

Zach Epstein
Zach Epstein Executive Editor

Zach Epstein has been the Executive Editor at BGR for more than 10 years. He manages BGR’s editorial team and ensures that best practices are adhered to. He also oversees the Ecommerce team and directs the daily flow of all content. Zach first joined BGR in 2007 as a Staff Writer covering business, technology, and entertainment.

His work has been quoted by countless top news organizations, and he was recently named one of the world's top 10 “power mobile influencers” by Forbes. Prior to BGR, Zach worked as an executive in marketing and business development with two private telcos.