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The Russian smartphone market, 1st half of 2016

September 2016

Analytical Report (full version)

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Analytical Report (full version)

The Russian smartphone market, 1st half of 2016
The Russian smartphone market,  1st half of 2016
September 2016

The Russian smartphone market, 1st half of 2016

September 2016

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The company J'son & Partners Consulting presents basic results of the research "The Russian market of smartphones, 1st half of 2016".

 

 

Summary of the study

 

According to J'son & Partners Consulting, in the 1st half of 2016 in Russia it was sold over 11 million smartphones. Compared with the results of the first half of 2015 the Russian market of smartphones has grown by 6%. The global market over the same period showed an increase of 4%.

 

Smartphones continue to be one of the main drivers of growth in the mobile market. While sales of many other devices decline, smartphones continue to grow. Note that sales of smartphones in Russia in the 1st half of 2016 surpassed pre-crisis figures of the same period of 2014.

 

 

The market structure of smartphones by operating systems in Russia is similar to the global market. Here and there Android system continues to dominate. The share of this operating system from Google by the first half of 2016 reached 88% in Russia and 85% in the global market, respectively, in natural terms of total sales of smartphones in the world.

 

The share of iOS in Russia is 10%, which is still lower than the world average. However, we see that compared to 2015 the share of Apple's operating system on the Russian market increased, and Apple's iPhone 5S, according to J'son & Partners Consulting, became the best selling smartphone in Russia in the first half of 2016.

 

The share of mobile operating system Windows continues to decline. By September 2016 only one Microsoft’s model, Lumia 650, appeared in the market. Smartphones with Windows gradually disappear from the Russian retail networks.

 

 

The main trends in the smartphone market

 

➢     The share of the price segment “more than 30 thousand rubles" was at the end of the first half of 2016 7% of sales of smartphones in natural terms. Note that in the pre-crisis 1st half of 2014, the comparable figure was only 1 %.

➢     Sales of smartphones supporting LTE in the first half of 2016 increased 2.5 times in comparison with the same period of 2015. The share of LTE smartphones accounted for 45% of the total smartphone sales in the first half of 2016.

➢     According to J'son & Partners Consulting, in fact, 4 out of 5 smartphones sold in the 1st half of 2016, had the support of two or more SIM cards. Among the leading manufacturers currently only smartphones from Apple do not support this technology. Most other vendors gradually make multiple SIM cards a "default" function. It should also be noted that some manufacturers use hybrid slots for SIM and micro-SD cards.

➢     The demand for smartphone sales on credit is growing.

 


 

Comments from the market participants

 

– What trends of the Russian market of smartphones in the 1st half of 2016 can you highlight?

From January to June this year, smartphone sales in the network "Beeline" has increased by 1.4 times compared to the same period last year. While sales of smartphones that support LTE increased by 3.8 times, and sales of smartphones without this function has fallen to 1.19 times.

The growing popularity of mobile devices with support for LTE among our clients is caused by interesting offers, continuing development of LTE networks and our own points of sales and expansion of the geography of our online store. It should be noted that we in “Beeline” see the highest growth in the segment of smartphones for 20-25 thousand (2.7%) rubles, mainly due to the popularity of iPhone 5S, the price of which has been significantly reduced. In general, the top five by the number of smartphones sold in the network "Beeline" in the first half of 2016 is (in descending order): Beeline, 4Good, Alcatel, Apple, ZTE.

 

– What was the influence of the economic crisis on the smartphone market? Does the sales on credit grow?

Of course, the economic crisis affects the purchasing power of customers. And in this situation our joint promotional campaigns with vendors allow our customers to buy mobile devices at the most affordable cost. So this becomes very important. For example, under the condition of using our communication services, our customers can purchase a smartphone Alcatel One Touch at a price 3990 rubles instead of 7490 rubles. First and foremost, due to such promotional campaigns, we see an increase of sales of smartphones in the price range of 0-5 thousand rubles by almost two times in the first half of 2016.

In addition, if our customers want to buy one of the most popular models, they can use our most favorable loan products, including interest-free installments for 10 months and two years with no down payment.

Overall, despite the economic situation, the Russian market of smartphones continues to grow: the number of sold smartphones grew by 4% compared to the same period last year, while revenue from their sales increased by 30%.

 

– Is there an increase of sales of accessories for smartphones? Are associated services (insurance, installation of applications, etc.) popular?

The number of sold accessories for mobile devices in the first half of the year increased almost two times year-on-year due to a significant expansion of the assortment. In addition, our clients have access to various insurance products, including voluntary medical insurance programmes. In June 2016 we launched a new product of insurance technology – "Complex Protection", which involves an additional guarantee for the whole range of risks of standard purchase protection. Sales of all insurance products in the second quarter increased by 1.5 times compared to the first quarter.

 

– What trends of the Russian market of smartphones in the 1st half of 2016 can you highlight? What influence does the economic crisis continues to have on the smartphone market? Does the sales on credit grow?

Most of the trends we noted last year continue to dominate in the Russian market of smartphones in the 1st half of 2016. These trends are determined by the current economic situation in the country.

Real incomes are not growing and that is why rational approach to the selection of the device continues to dominate. It is reflected in the fact that the buyers pay less attention to the brand and acquire a gadget with optimal correlation of price and functionality. In this situation manufacturers who offer a wide range of smartphones in various price segments win. These devices often are not worse than those from more well-known manufacturers, and sometimes even exceed them in performance being cheaper. In particular, Chinese brands are rising.

For example, sales of smartphones ZTE, ASUS in the 1st half of the year significantly increased (more than twice both in pieces and rubles). Smartphones from Lenovo are still among the most popular in the country, entering the top three in market share.

The only smartphone brand, which, in fact, stays independent from the trend of rationalization of the consumer behavior, is iPhone. Its sales increased significantly compared to the 1st half of 2015. IPhone continues to bring the largest revenue to Russian retailers from sales of smartphones and it is still among the most popular brands of smart phones in general.

Also we can note that there is an increase in the share of devices purchased with on credit. For example, in "Svyaznoy" the share of smartphones purchased on credit increased by about a quarter during the year. Popularity of insurance products is not reducing. Buyers seek to protect themselves from expensive gadget repairs and acquire such products as "Additional service", "Purchase protection", which suggest enhanced service even after the warranty period.

Among the changes which are not caused by the current economic situation, we note continuing growth of popularity of smartphones with screens bigger than 5 inches (phablets), as well as increasing popularity of gadgets with LTE.

 

– Is there an increase of sales of accessories for smartphones? Are associated services (insurance, installation of applications, etc.) popular?

The smartphone market grows, and buyers still continue to buy insurance products and various settings.

Often buyers insure their smartphones and tablets of medium and high price segments (over 15 thousand rubles). For example, in the category of 15-20 thousand rubles every second smartphone or tablet is insured.

Setting is also an important service for buyers. The cost of such service is low, however, it allows many customers to save time, nerves, and sometimes them both. “Svyaznoy” sells a variety of settings in addition to every third smartphone sold in its network.

As for accessories, the dynamics of their implementation repeat the growth/decline in the market of devices for which they are produced. This is because a significant part of accessories are sold together with gadgets. A customer purchases a smartphone, and in addition he/she buys, for example, a protective glass/film, a case, a memory card, a mount or a charger for the car. Later a person can buy, for example, a charger for the smartphone to use it at work, a portable battery, headphones. At the end of the 1st half we can not record a drop in sales of accessories in the market or in "Svyaznoy".

 

Speaking about the trends, we understand that LTE is definitely interesting to consumers and it will continue its development. Currently this technology is popular only among a narrow part of the population. For the masses this acronym means not much yet, so the choice in favor of LTE devices is done unconsciously most of the times, and often under the influence of advertising. Nevertheless, users of 4G do not want to return to the lower standards. Accordingly, they unwittingly become hostages of LTE. To date, the policy of the operators is to attract subscribers to LTE networks by explaining the mass consumer the benefits of this data transfer standard. In addition, today all new brands while presenting their new models, starting from the middle price segment, declare by default their support for 4G. This factor has also been the driver of growth of new brands. Prospects for the development of these devices in the market are really wide.

 

The trend to expand the range of mobile devices supporting NFC function will continue. Today, almost all smartphones have this feature, as manufacturers understand that this service is the future of cashless payments. In confirmation of this we see the increase in the number and transaction volume of contactless payments, which have recently been launched by "Euroset" and their card “Kukuruza” (Russian for “corn").

 

The economic crisis still continues to affect consumer behavior: we see that customers prefer to purchase equipment on credit. Sales on credit for the 1st half of 2016 increased by 20%.

 

The average cost of devices has increased by 20%. Sales of accessories in value terms increased by 16%, but reduced by 2% in natural terms for the 1st half of 2016 compared to the 1st half of 2015.

 

 

Detailed results of the study are presented in the full report:

«The Russian smartphone market, 1st half of 2016»

 

Contents

 

1. The Russian market of mobile phones and smartphones, key performance indicators

1.1. The market volume of mobile phones and smartphones in natural and monetary terms

1.1.1. The market volume of mobile terminals in natural terms, 2014 – 1H 2016 (quarterly dynamics)

1.1.2. The market volume of mobile terminals in monetary terms, 2014 – 1H 2016 (quarterly dynamics)

1.1.3. Sales structure of mobile terminals: smartphones and mobile phones in natural terms, 2014 – 1H 2016 (quarterly dynamics)

1.1.4. Sales structure of mobile terminals: smartphones and mobile phones in monetary terms, 2014 – 1H 2016 (quarterly dynamics)

1.2. Average retail prices of mobile terminals, the market structure by price segments

1.2.1. Quarterly dynamics of average retail prices of mobile terminals, 2014 – 1H 2016

1.2.2. Quarterly dynamics of average retail prices of smartphones, 2014 – 1H 2016

1.2.3. The market structure of mobile terminals by price segments, percentage of sales in natural terms, 2014 – 1H 2016 (quarterly dynamics)

1.2.4. The market structure of smartphones by price segments, percentage of sales in natural terms, 2014 – 1H 2016 (quarterly dynamics)

1.2.5. The market structure of mobile phones by price segments, percentage of sales in natural terms, 2014 – 1H 2016 (quarterly dynamics)

 

2. Main manufacturers of mobile terminals

2.1. Dynamics of the market structure of mobile terminals by manufacturers, percentage of sales in natural terms, 2014 – 1H 2016 (quarterly dynamics)

2.2. Dynamics of the market structure of mobile terminals by manufacturers, percentage of sales in monetary terms, of 2014 1H 2016 (quarterly dynamics)

2.3. Dynamics of the market structure of smartphones by manufacturers, percentage of sales in natural terms, 2014 – 1H 2016 (quarterly dynamics)

2.4. Dynamics of the market structure of smartphones by manufacturers, percentage of sales in monetary terms, of 2014 1H 2016 (quarterly dynamics)

2.5. Short profiles of manufacturers

 

 

2.6. The market structure of smartphones by operational systems, % of sales in natural terms, in 2014 – 1H 2016 (quarterly dynamics)

2.7. The market structure of smartphones by operational systems, % of sales in monetary terms, 2014 – 1H 2016 (quarterly dynamics)

 

 

3. Average functionality of a smartphone sold in Russia 2014–1H 2016

3.1. Two or more SIM cards

3.1.1. The market structure of smartphones with support of two SIM-cards /

without support of two SIM cards in natural and monetary terms

3.1.2. The market structure of smartphones with support of two SIM-cards by manufactures in natural terms

3.1.3. Average retail prices of smartphones supporting two SIM-cards. The market structure of smartphones supporting two SIM-cards by price segments

3.2. LTE

3.2.1. The market structure of smartphones with LTE / without LTE in natural and monetary terms

3.2.2. The market structure of smartphones with LTE by manufactures in natural terms

3.2.3. Average retail prices of LTE smartphones. The market structure of LTE-smartphones by price segments

3.3. NFC

3.3.1. The market structure of smartphones with NFC / without NFC in natural and monetary terms

3.3.2. The market structure of smartphones with NFC by manufactures in natural terms

3.3.3. Average retail prices of NFC-smartphones. The market structure of NFC-enabled smartphones by price segments

 

4. Forecasts and trends, 2016-2020

4.1. Forecast of the mobile terminal market in natural terms, 2016-2020

4.2. Forecast of the mobile terminal market in monetary terms, 2016-2020

4.3. Forecast of the share of smartphones sales in natural and monetary terms, 2016-2020

4.4. Forecast of the share of sales of smartphones with different technologies, 2016-2020

4.4.1. LTE smartphones

4.4.2. Smartphones with two or more SIM cards

4.4.3. NFC-module

 

5. Key insights

 

The newsletter prepared by the J'son & Partners Consulting. We work hard to provide factual and prognostic data that fully reflect the situation and which are available at the time of the release. J'son & Partners Consulting reserves the right to revise the data after publication of new official information from particular players.

 

The company J'son & Partners Consulting presents basic results of the research "The Russian market of smartphones, 1st half of 2016".