- The Essential phone got a $US200 price drop, just two months after its launch.
- It’s a sign that sales are very weak as competition for the high-end smartphone market tightens. Samsung and Apple released their new phones around the same time.
The Essential phone had challenges from the beginning, and always seemed doom to sell poorly.
Android creator Andy Rubin’s latest project seems to be a flop.
On Saturday, the company announced that it was slashing the price of its first product, a $US699 smartphone called the Essential Phone, by $US200.
Such a dramatic price cut just a couple months after the product’s launch is never a good sign, and it’s validation to those early reports that sales are pretty dismal. One ugly estimate from research firm BayStreet said Essential only sold 5,000 phones by the end of September.
Essential’s announcement Saturday skirted around the low-sales figures, framing the price cut as a way to ” make it even easier” to get the phone instead of spending on a “a massive TV campaign to capture your attention.” That’s one way to put it. The other is that no one bought the phone and now it’s time to cut prices in an attempt to generate sales.
The Essential phone’s price cut and poor performance may have been a surprise to Rubin, but not to anyone else who knew what he was getting himself into. Let’s recap.
A product delay that caused it to lose the spotlight
The Essential phone launched at a horrible time. Rubin originally promised it’d go on sale by the end of June, but he missed his own deadline. It eventually went on sale in mid-August. By then, Samsung was gearing up for the Galaxy Note 8, and we were less than a month away from the iPhone 8 and iPhone X announcements. Before the Essential phone ever stepped on stage, Apple and Samsung had already stolen the spotlight.
Timing and the delay was only part of it. The Essential phone had negligible retail distribution. In the US, you could buy it online from Essential’s site. The only other option was a Sprint store. Without a significant retail partnership from all four major carriers, no phone has a hope, with the exception of perhaps the iPhone. Carrier stores still get a lot of foot traffic, and it’s the way many people buy their devices. How many people do you know who buy their phones by visiting the website of a startup they have never heard of?
One upstart company that managed to win a loyal following is OnePlus, which makes a phone loaded with high-end specs that appeals to techies. But OnePlus gave its product a super low price tag to help it stand out from the pack, a tactic that Essential was not willing to make.
Nice materials don’t cut it
The high-end smartphone market has been dominated by Apple and Samsung for years, and despite numerous attempts, virtually no one has managed to break out. Even Google’s well-reviewed Pixel phone from last year only sold about 1 million units, according to one estimate. Apple sells 1 million iPhones every few days. A company would have to offer something radically different to stand out and manufacture it at scale. A pricey phone made out of ceramic and titanium doesn’t cut it.
So the odds were against Essential from the beginning. A few thousand phones isn’t just a drop in the bucket. It’s not even enough to form a drop.
Essential has raised an estimated $US330 million, so it has plenty of runway to get over this initial hump. It also has grander plans beyond the smartphone with a smart home operating system called AmbientOS and an Amazon Echo-like hub to control everything.
But the smartphone is still the center of gravity in the tech hardware world, and if you’re going to build a new tech brand, you need to nail it with something that appeals beyond a geeky niche. Essential tried to defy the smartphone industry’s rules of the game and do things its own way — in the end, it didn’t deliver enough of a change to convince consumers to follow it.
This column does not necessarily reflect the opinion of Business Insider.