(Yicai Global) Feb. 13 -- The belief online marketing of smartphones as a sales panacea has waned after that particular e-commerce dividend began drying up early last year. Internet-based smartphone brands are being pinched both by their sales channels and suppliers.
Some Chinese smartphone makers are increasingly aware of the importance of gaining control over the entire supply chain, said Yan Zhanmeng, director of technology research firm Counterpoint Technology Market Research. They dismiss price and marketing wars as short-termism, he added.
"As competition intensifies, companies can no longer entice consumers based on a price war alone," Yan said.
Online marketing was a phenomenal success during its early days because it offered a more cost-effective alternative to traditional marketing channels. More than 100 brands jumped on the bandwagon. Analysts say the marketing-driven 'internet smartphone 1.0' era will be completely replaced by a new generation of products. 'Internet smartphone 2.0' will see the focus shift to user experience.
"User experience has actually deteriorated," said China Handset Industry Alliance General Secretary Wang Yanhui. "Hence the bottleneck encountered by online mobile marketers when they try to further increase market share. Consumers have gone back to offline channels."
"The problem facing internet-based smartphone marketing is excessive reliance on marketing as the only growth driver," said Zhao Ming, president of the Huawei Honor sub-brand of mobile devices. Slow product evolution is the main culprit for the steep growth curves in most internet phone marketing campaigns.
"But the same approach is no longer sustainable if it remains unchanged," a senior channel manager told Yicai Global. Most internet smartphone brands are talking about 'internet thinking,' but Oppo and Vivo took a different direction. They managed to penetrate first- to sixth-tier city markets leveraging their extensive distributor networks, sales outlets and service and experience centers. That, together with their all-pervasive advertising bombardments, led to a dramatic impact on consumers.
"It's difficult for internet smartphone brands to reach the rural markets with a total population of 350 million," said the channel manager. The recent disappointing performance of internet-based smartphone marketing is actually a manifestation of the victory of Oppo and Vivo's 'in-depth marketing' focus on low-end markets over 'direct online marketing.'
Moreover, supply chain management has become the biggest challenge for internet smartphone brands, and even Xiaomi -- the pioneer -- suffered a four-month supply shortage last year.
Higher prices also weighed on the market's development. According to Wang Yanhui, some internet smartphones are priced above CNY3,000, smashing people's traditional perception of internet phones. Similarly, a shift in branding strategies toward innovation and product quality marks a significant departure from the cost-centric marketing approaches of the past.