Yesterday, I was watching one of those typically bollywood movies – Phata Poster Nikla Hero. Why – well, funny as it may sound, I like the senseless dance, plot, storyline etc once in a while. However, while doing so, I noticed a very curious thing – everyone in that theater had a smartphone and all of them looked absolutely similar. This happened with me in the local train compartment, at the bookstore, at the Ganpati festival line everywhere. That made me wonder – are Smartphones getting commoditized – so much so that Smartphones are now classified as FMEG ( Fast Moving Electronic Goods!) ?
With Android getting increasingly dominant in the ecosystem, and so many players jumping on to the Android bandwagon there is a definite possibility that smartphones will become the de facto standard of the mobile world. Just counting the number of companies with at least one Android 4.2+ model launched successfully in India gives you a staggering number – 15! – Samsung, LG, Micromax, BenQ, Karbonn, Sony, HTC, Intex, Xolo, Spice, iBerry, Videocon, Huawei, Gionee, Lava and many more if you dig deeper! Also note that all of these companies have multiple models at various price points. On a related note – The lion’s share of the profits on Android phones globally have been made by one company though – Samsung. However, smartphone commoditization presents a different set of challenges. I try to name a few here –
1. Early adopter disenchantment – From the day when Steve Jobs introduced the iPhone in June 2007, there has been a cult of early adopters – to smartphones, to tablets, to app stores and to ecosystems. Commoditization leads to disenchantment among early adopters. These early adopters will now find some other pasture to buy their technological marvels.
2. Eroding margins – If everyone is selling basically the same product, the only way to compete becomes price. Unless there is massive cartelization, prices are bound to come down, even if Moore’s law is applied to smartphones. While this is good for consumers, I doubt if the mobile industry can take such a situation. The raw material cost etc is high and increasingly, quality cannot be compromised in front of a consumer who is getting more technology savvy by the day.
3. Power of alliances and marketing grows – In such a situation, the carriers will become increasingly powerful and career bundling may again come into the picture for India. With the smartphones increasingly getting commoditized, alliances on the carrier side, retailer side, marketing side, mass media side and distribution side will become vital to stay afloat for these firms.
4. Consolidation – While some of these firms have enjoyed tremendous profits and have deep pockets – unless they diversify, there is a definite possibility of consolidation happening in the Device manufacturer industry. Similar consolidation has already been happening in the app manufacturer industry, gaming industry, e-commerce industry and I don’t see why this industry won’t see consolidation in the near future.
What is your opinion – Is Smartphone commoditization really going to happen? Let us know in the comments section! ( Image – 1)