Nearly 60% of American adults own a smartphone and it’s estimated that 220 million people will be embracing the technology within the next four years. And while there are many manufacturers to choose from when purchasing a smartphone, Americans have made it clear which brand they prefer: Apple.
When comScore presented their U.S. smartphone subscriber market share report earlier this year, they showed that 41.6% of smartphone users over the age of 13 owned an iPhone; making it the most popular smartphone in the country. This statistic is perplexing because it shows that despite Android’s 51.7% U.S. market share dominance, Americans are willing to shell out the average price of $650 for an iPhone.
So why are Americans willing to spend more money when they can spend less? The answer is simple: The Apple Store.
With 254 prime real estate locations across the United States, the Apple Store is literally everywhere American consumers are. No other brick-and-mortar store in the country makes as much money per square foot than Apple, and it’s the only sales floor in the nation that manages to make computers look hip instead of boring. Millions of Americans are flocking to the Apple Store because it’s the only place where they can actually use an iPhone before they purchase one, and it’s something they can’t do anywhere else.
Recently, Google has tried to combat iPhone sales by offering smartphones with better specs at reasonable prices. The Nexus 5 beats the iPhone 5S in nearly every category and the Moto X offers more customization options than any other smartphone on the market, yet their sales pale in comparison to the iPhone despite actually being better. Analysts theorize that while Americans have embraced online shopping, these smartphones aren’t as successful because they are primarily sold online – and Americans like using their smartphones before they buy them. However, this is not the case in China.
In just four years, a privately-owned Chinese electronics company called Xiaomi rose from obscurity to become the most popular smartphone manufacturer in China. The company has reported a whopping 240% improvement over the same period last year and has prompted technology experts to christen its founder as “the Steve Jobs of China.”
“We sell all our products online and our gross profit rate is very low. Our price is one third of Apple’s. We make our profits through content and services.”
–Lei Jun, Founder and CEO of Xiaomi
Xiaomi exclusively sells their smartphones online and has an aggressive pricing model that doesn’t even try to make a profit. Instead, the average price for one of their smartphones is $130 (what it costs to make) and all their profits come from the purchase of add-ons and apps. The company also sells models for up to 18 months instead of the usual 6 months like Apple.
To keep their costs low, Xiaomi chooses to not own any physical stores and spends no money on traditional advertising methods. The company relies solely on social media channels and word-of-mouth promotion from their customers to increase sales. These methods may seem odd to American companies — like Apple — who operate in the exact opposite manner, but these methods have helped Xiaomi earn $5.3 billion so far this year.
Now that Xiaomi has taken over China, one would expect they want to spread their dominance to other countries. The company is currently looking to expand into Indonesia, Mexico, Russia, Thailand and Turkey; but is staying clear of America – and with good reason.
Find more statistics at Statista
Americans have a different mentality than the rest of the world and it’s called “consumerism”. Because Americans have more disposable income than any other country, many of them aren’t worried about saving money when it comes to buying a mobile device they will use every day. But that isn’t to say that Xiaomi won’t eventually break into the American marketplace. Don’t think it’s possible for a foreign company to convince Americans that more money isn’t necessarily better? One look at their corporate motto may change your mind: “Always believe that something wonderful is about to happen.”
Do you think budget smartphones like Xiaomi can penetrate the American marketplace? Or will American consumers stick with their iPhones?