When I was working in Tajikistan, a desperately poor country, my driver had an iPhone. He’d saved extensively to afford it, and prized it as a status symbol. And when things got tight, he didn’t save it for a cheaper, equivalent model — he traded it in for an older iPhone.
Apple has begun clawing back market share from Android, which has for years dominated the mobile phone market. For a long time, iPhone was the phone of the most wealthy consumers, and Android served everyone else. But Apple’s record-breaking iPhone sales suggest that lower-income people now feel that an iPhone is worth saving up for.
CEO Tim Cook talked on Apple’s last earnings call about new “Android switchers” joining Apple. Could it be that Android is now funelling new consumers to Apple? And could those consumers be status conscious people who are willing to spend money on the top brand, even if — from a strictly utilitarian point of view — they probably should not?
Things have never been better for Apple. The US company’s last quarter was more profitable than any other company ever, driven largely by the runaway success of the iPhone business.
Along the way it has dealt significant damage to high-end smartphone manufacturers like Samsung, who have seen their profits drop as a result.
For a long time, Samsung held its own against Apple as a genuine competitor in the high-end smartphone sector. Samsung’s Galaxy S and Note ranges consistently did well, and drove profits for the company. But the introduction of the iPhone 6 and 6 Plus changed the game.
Samsung’s profits are now cratering — a 60 per cent drop in Q3 of 2014. And in South Korea, Apple is seeing massive sales. It’s unprecedented for any foreign smartphone manufacturer to pass the 20% market share mark in the country. Apple is now at 33 per cent, and still rising fast.
It’s rapidly becoming clear that much of Samsung’s previous success was simply because it provided a product that Apple could not provide — a larger-screen smartphone. Now an Apple-branded phablet is on the market, there’s no reason for consumers stick around on the less attractive platform.
Here’s another detail demonstrating Apple’s success in the high-end market: Its products are now considered the top luxury gift item in China, ahead of designer goods maker Hermes, fashion house Gucci, Luis Vuitton and Chanel.
But Apple’s status as a luxury brand isn’t sufficient to explain its runaway success. And if Apple were content for the iPhone to be a desirable high-end product alone, that wouldn’t justify its significant discounting in retailers like Walmart.
So here’s one possible way to explain it.
Apple is fully penetrated among high-end consumers, and it’s now moving down the market. Consumers think of the iPhone in a unique fashion, because of its unparalleled desirability.
It’s not that no-one wants an Android. While the iPhone is undeniably a more attractive product, there are still loyal Android fans. There’s the die-hard Android community for one, and Chinese Apple rival Xiaomi also has an extremely passionate fanbase. The OnePlus handset, which runs a forked version of Android, also proved incredibly popular.
But by and large, Apple holds an allure with consumers that Android products find it almost impossible to emulate.
Apple’s move to discount iPhones on contract to affordable levels, and to market older iPhones at lower price points is reflective of this: Having cleaned up the top end of the market, the company is successfully moving down. If you want an iPhone but don’t have much money, there are plenty of wireless service providers willing to offer you a contract that will reduce the iPhone to a fraction of its total price tag.
There are not many hard stats to back this up, but plenty of anecdotal evidence. Everyone knows how desirable the iPhone is, and how nearly everyone either has one or wants one — even if they can’t really afford it.
As Sandip Roy writes for Huffington Post, “it goes without saying that the iPhone is a status symbol.” But, uniquely, it’s “a status symbol that actually does something instead of just sitting there, being a status symbol.”
The iPhone’s functionality compared to jewellery or designer options could explain why consumers are willing to save and shell out for what’s realistically above their price point — why they will buy a $US700 smartphone when a $US300 one would suit their needs.
Apple is succesful because it’s produced a great, high-end product. It’s record-breakingly successful because it’s produced a product that has such a desirable cachet that it’s not even considered in the same breath as other smartphones. As a consumer item, it’s totally unique.
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