|Samsung Electronics' Galaxy S6 and Galaxy S6 Edge are put to the test in a demonstration at a company store in downtown Seoul, Sunday. Samsung organized the event ahead of an official launch on April 10. / Courtesy of Samsung Electronics|
Electronic giant plans to reduce sales budget in developed markets
By Kim Yoo-chul
Samsung Electronics plans to use limited marketing campaigns for its low-end smartphones to save costs and better compete with its Chinese rivals in emerging markets.
A local component supplier said last week that Samsung will actively use leading online commerce channels in India, Vietnam and China to sell its handsets directly to consumers.
"Vendor relations always matter to Samsung Electronics. If Samsung sells more of its smartphones via its online channels, then it can save a huge amount in costs. This is also good for consumers as Samsung may provide handsets with more of a discount," said a senior executive at the supplier.
The business strategy, however, may sap profits at mobile carriers in the countries. Usually, handset manufacturers supply products to mobile carriers at a discount, which telecom companies can use for various promotional campaigns.
An executive at another subcontractor said Samsung's top management is closely monitoring the sharp rise of Xiaomi both in market share and profit.
"One interesting point is that Xiaomi only sells its handsets via its official websites. Samsung management believes this strategy was one reason that helped the Chinese smartphone producer improve its bottom line in such a short time," said the executive.
But it's highly unlikely that Samsung will introduce the measure in its key developed markets such as the United States and Europe, as well as Korea.
"Samsung must be cautious about directly selling products via its online websites in developed markets because if it does, then carriers in these will be angered," said the executive, adding the solid partnership between Samsung and carriers in developed markets is crucial in maintaining its premium image.
However, the company is positioned well to try this in the Asia-Pacific region as having a clear Asia-Pacific strategy is becoming an increasingly important factor for almost all smartphone manufacturers.
Samsung already has a strong foothold in developed markets and is competing effectively with Apple.
But in Asia, where demand for cheap phones remains solid, the market gap with Apple has widened.
By the fourth quarter of last year, Samsung's share in Asia was 13 percent, while that of Apple was 16 percent, said data from CounterPoint Research.
"As Samsung is shifting its focus towards budget handsets in Asia, it intends to implement the direct online sales marketing strategy in selected countries. This strategy will be effective for Samsung to up its share at less cost," said the executive.
With Asia-Pacific accounting for 53 percent of global smartphone shipments in 2014, and with both global and local leaders crowding the market, market analysts have high hopes on Samsung building a meaningful foothold in this key geographical market.
A Samsung spokesman declined to comment.