Inflationary Trends In The Smartphone Industry: Is The Customer Really On The Losing End?
You, me and we all need a smartphone. Yes, this is the 21st century and life without a smartphone is unimaginable. Smartphone companies, to keep up with expected demand, are introducing new and improved smartphones with curved screens, improved interface and cameras. However, an important question is why do prices increase when all these improvements are natural? Also, why are there unprecedented price rises in the mobile phone industry when the market is flooded with phones from Chinese manufacturers? And last but not least, is the customer really on the losing end due to these inflationary trends?
Gfk, a research company that collects customer payment data, has claimed that the price increase in the cell phone industry is around 7 percent in the third quarter of 2017 compared to 2016 figures. There are numerous examples that explain why inflationary trends in the smartphone industry are not justified. The figures also make it clear that consumers are buying increasingly expensive smartphones every year.
We all applaud the fact that innovations are natural. We all want a bigger, better, and beautifully designed smartphone. Furthermore, we also know that innovation is the main factor that makes prices high. But the fact is, important features get cheaper over time. So smartphone companies, to keep customers in check, are introducing cheat innovations. You can get the situation with an example of phones with a bezel-less design. Yes, a bezel-less phone looks fascinating, but I don’t think charging an arm and a length for such cheat innovations is justified.
The brand war is also an eminent factor leading to price increases in the industry. This Android iOS conflict has been intended for manufacturers to cross this $ 1000 price line. Also, the big names, like Apple and Samsung, don’t seem to stop at $ 1000, thanks to Apple’s iPhone X costing $ 1000+. Similarly, the next Samsung Galaxy S9, although the name is not confirmed yet, would easily cost more than $ 1000. And this brand war only makes the situation worse for the average consumer.
Customers, in some way, are also responsible for this unprecedented price hike. Prices are rising because people are willing to pay high prices. You may be familiar with simple economic theory that states that price increases with an increase in demand for a product. Therefore, consumers are also responsible for this price increase. If we, the customers, educate ourselves to buy a product when the price is more competitive, the move would move manufacturers away from monopolizing the market.
Mid-range phone companies, offering similar features to premium flagships, rarely make the news and headlines. The big name brands of the past, Motorola and Sony, are pushed out of the market because they couldn’t keep up with modern flagships. The mid-range workhorses, namely Huawei, OnePlus and LG, etc. they are doing their best to offer quality and affordability. However, they also have the constant threat of being marginalized from the market due to price wars with the big brands.
On the one hand, unprecedented price increases from major smartphone companies are making the situation worse for customers, as they are setting the trend to charge high prices. On the other hand, they are proving fatal to mid-range companies, which, while striving to offer quality and affordability, but facing the threat of being pushed out of the market due to price wars, the same happened with Sony. and Motorola in the past.
Therefore, smartphone companies should keep in mind that it is not artistic innovations that will secure their market position, but price normalizations that will ensure their long-term safety.