You, me and everyone out there needs a smartphone. Yes, this is the 21st century and life without a smartphone isn’t imaginable. Smartphone companies, in order to keep pace with the expected demand, are introducing new and improved smartphones with curved displays, improved interface and cameras. However, an important question is why does prices are increasing when all these improvements are natural? Moreover, why there are unprecedented price hikes in the cellphone industry when the market is flooded with phones coming from Chinese manufacturers. And last but not the least, is customer actually on the losing end due to these inflationary trends?
Gfk, a research firm that collects customer’s checkout data, has asserted that price hike in the cellphone industry is around 7 percent in the 3rd quarter of 2017 as compared to the figures of 2016. There are numerous examples explaining why inflationary trends in the smartphone industry aren’t justified. The figures are further making it evident that consumers are buying more and more expensive smartphones every year.
We all acclaim the fact that innovations are natural. We all want a bigger, better, and beautifully designed smartphone. Moreover, we also know that innovation is the major factor, making the prices high. But the fact is that important features become cheaper with time. So the smartphone companies, to keep customers by the balls, are introducing gimmick innovations. You can get the situation with an example of phones with bezel less design. Yes, a bezel less phone looks enthralling, but I don’t think charging an arm and length for such gimmick innovations is justified.
Brand war is also an eminent factor leading to price hikes in the industry. This Android iOS conflict has intended the manufacturers to cross this $1000 price line. Moreover, big names, namely Apple and Samsung, don’t seem to stop on $1000, thanks to Apple’s iPhone X costing $1000+. Similarly, the upcoming Samsung’s Galaxy S9, although the name isn’t confirmed yet, would easily cost above $1000. And this brand war is doing nothing but making an average consumer worse off.
Customers, somehow, are also responsible for this unprecedented price hike. Prices are rising because people are willing to pay the high prices. You might know the simple economic theory claiming that price increases with an increase in the demand of a product. So, consumers are also responsible for this price hike. If we, the customers, educate ourselves to buy a product when the price is more competitive, the step would keep the manufacturers away from monopolizing the market.
Mid-range phone companies, offering similar features as that of the premium flagships, seldom surface in news and headlines. Past’s renowned brands, Motorola and Sony, are squeezed out of the market because they were unable to keep pace with modern flagships. Mid-range workhorses namely Huawei, OnePlus, and LG, etc. are doing their best to offer both quality and affordability. However, they also have this constant threat of being sidelined from the market due to the price wars with big brands.
On the one hand, unprecedented price hikes by the major smartphone companies are making the customers worse off as they’re setting the trend of charging high prices. On the other hand, they’re proving fatal for the mid-range companies, who, although are striving to offer both quality and affordability, but face the threat of getting squeezed out of the market due to price wars, the same happened with Sony and Motorola in the past.
So, smartphone companies must keep in mind that it isn’t gimmick innovations that will secure their position in the market, but the price normalizations that will ensure their security in the long run.