What it's like to buy a smartphone in South Africa
I was watching the latest episode of "Top Shelf" on The Verge, and David and Nillay were basically going into paroxysms of despair over the fact that, even though the tech press (including, notably, The Verge itself) keeps telling people to buy the HTC One rather the Galaxy S4, the buying public stubbornly refuses to listen. There seemed to be genuine confusion: why do people keep buying Samsung's crappy plastic smartphones?
Well, I thought I would offer the following anecdote, to possibly share some light on the matter.
This weekend, my girlfriend was buying a new smartphone. At the local storefront for Cell C (a South African cellular carrier), it turned out that there were only two options for a high-end Android phone:
1. The Sony Xperia Z, for ZAR450 per month, which came bundled 100mb(!) of data 2.The Galaxy S4, for R400 per month, bundled with 1gb of data
A couple of points:
First, you will note the complete absence of the HTC One. I asked the sales guy, and he said that the One would probably be arriving next month. This is somewhat ironic, since the One was announced a month before the S4, and yet, in our market at least, it will only arrive in stores at least a month later. In terms of our purchase, Samsung was able to completely checkmate HTC by having a superior global supply chain. They were available in the store, while HTC was not.
Second, note the crazy disparity between the S4 and the Xperia Z. Even though the S4 has a more powerful SoC, a better camera and better brand recognition, it is nevertheless sold on a cheaper monthly contract, and comes with ten times more data. Personally, I actually prefer the Xperia Z simply because I find Sony's skin to be more coherent and attractive than TouchWiz, but one would really have to hate Samsung to an irrational degree in order to choose Option #1 over Option #2.
There were cheaper phones available too, of course, but the same general pattern applied. Lots of Samsungs available, no HTCs whatsoever, a few other random brands like LG thrown into the mix, but with Samsung phones offering the best overall packages.
She bought the S4.
This is only one anecdote, of course, but I imagine that the same story repeats itself every day, all over the world. Analysts trying to explain Samsung's global dominance usually end up reaching for explanations like "marketing". This captures part of the truth, but not all of it. Every day, hundreds of thousands people walk into a cellphone shop and find that, for some reason or another, buying a Samsung product is the most rational course of action. It's not that Samsung's marketing department has turned the entire world's population into brainwashed Samsung zombies. Rather, it's that Samsung can use its unprecedented scale and supply chain to be on every carrier, get to market first, undercut competitors in the wholesale market, and incentivise carriers to offer better deals. And yes, part of this story is Samsung's marketing reach, which not only makes its products more desirable to consumers, but also makes them more desirable to carriers. But I expect that much of Samsung's success stems from a) offering a better deal than equivalently-specced competitors, and b) simply showing up.
Phrased in these terms, perhaps this also helps shed light on a different mystery in the global smartphone market, which is: why is the US such an anomaly? Throughout most of the rest of the world, Android and specifically Samsung are dominant, but in the US, Apple is dominant. Why?
I expect that this mystery can largely be explained by the unique carrier subsidy model that exists in the US. Apple fans like to propagate the idea that there in adversarial relationship between the carriers and Apple in the US. (For a recent example of this meme, see this Gruber post from yesterday.) But in fact the US carriers, by forcing everyone to compete at the same price point, help to insulate Apple from the withering forces of market competition, and specifically from competition with Samsung. Obviously, Apple is in a much stronger position to compete with Samsung in terms of supply chain and logistics than just about any Android OEM. Still, even though I obviously can't prove it, I suspect that if US carriers structured their business more like carriers in the rest of the world, then the US smartphone market would look a lot like the global one: with Samsung trending towards dominance.