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Internet mobile phone or "ceiling"? Sales channels are interested in relying on physical stores
In the current mobile phone market, there is a growing saturation with overcapacity and a slowdown in growth. The industry faces intense competition due to high hardware homogenization and cost-cutting strategies. As a result, online-only smartphone brands are encountering a "ceiling" in their expansion. Recently, several internet-based phone manufacturers have shown interest in returning to traditional retail stores, aiming to create a better balance between online and offline sales.
Since last year, the smartphone sector has entered a "bottleneck period." Major players like Samsung have seen negative growth, while Apple and Xiaomi have experienced slower growth rates. In 2016, many manufacturers adjusted their expectations, and even Xiaomi used the phrase “Happy 2016,†indicating a shift away from aggressive sales targets.
Looking at sales channels, it's clear that internet brands are increasingly moving into physical retail. Nubia’s general manager, Ni Fei, revealed that in 2015, online and offline sales were split roughly 60/40, but by 2016, they aimed for a 50/50 ratio, opening over 1,000 stores and 3,000 sales points.
At the same time, Feng Xing, Senior Vice President of LeTV Holdings and President of LeTV Mobile, announced that last year, LeTV sold more than 5 million units of its super smartphones, with a 2016 target of 15 million units. He emphasized a "three-dimensional model" of distribution, including its own e-commerce platform, third-party online retailers like JD.com and Tmall, as well as offline partners. LeEco plans to expand its LePar experience stores to enhance multi-channel interaction.
Wang Yanhui, Secretary-General of the China Mobile Alliance, commented: "It's not accurate to say that internet phones have hit a ceiling, but their reliance on low-cost strategies is becoming less effective. Now is the time to integrate offline channels or explore overseas markets. Simply relying on e-commerce is no longer sustainable."
Zhang Yi, CEO of Ai Media Consulting, agrees, saying, "The internet-driven model has had its moment of success, but it's also been somewhat exaggerated." He also pointed out that low-end users are mainly concentrated in third- and fourth-tier cities and rural areas—what he calls a "bonus market" for smartphones.
As these trends continue, it's evident that the future of internet-based smartphones lies in the close integration of online and offline operations. Feng Xing of LeTV Mobile believes 2016 will be a turning point, with many manufacturers either shrinking or exiting the market entirely.