With over 1.3 billion people in China, the populous Far Eastern country is the largest smartphone market on the planet. Interestingly enough, while most phone manufacturers are running production operations in China, it wasn't until recently that smaller Chinese smartphone makers started capturing larger market share volumes on their home turf. Two years ago, Samsung and Apple accounted for almost a third of the Chinese phone market. These days, Apple is struggling to catch a double-digits percentage, while Samsung is nowhere to be seen. On the one hand, it's understandable how the rise of local phone makers made a huge dent in Samsung's economic foothold in China. After all, the Seoul-based conglomerate is the largest smartphone maker on the planet, which means that among other things, its portfolio consists of a broad range of low-end and mid-range devices; devices which are easy to compete with when you're running a local phone manufacturing business in China.
However, even though Apple's decline was less severe regarding market share, the Cupertino-based tech giant lost a lot more money than Samsung ever could. Let's not forget that these two companies are the only phone makers in the world generating any reliable earnings, with Apple accounting for almost all profits in the smartphone industry. More specifically, while Samsung's phone division can only dream of achieving $4 billion in operating income in China, that's how big Apple's decline was last year. Both companies recently experienced diminishing phone business results in China due to local competition upping its game. The likes of Oppo and Vivo may have only been entering the phone industry half a decade ago, but these days, they're holding over a third of the Chinese smartphone market, more than Samsung and Apple ever did. In fact, the rise of local phone makers in China at the expense of established names like Samsung and Apple has been one of the few consistent Chinese industry trends in recent years.
Interestingly enough, the likes of Oppo, Vivo, and Huawei are now generating more profits in the smartphone industry than Samsung is. Of course, that fact has probably been influenced by the issues with the Galaxy Note 7 which reportedly cost the company over $3 billion. However, it's still an incredible turn of events given how these Chinese OEMs were nowhere near making money from consumer smartphones half a decade ago. In addition to delivering low-end and mid-range Android devices which offer fantastic value for money, these phone manufacturers managed to take customers from larger brands like Samsung and even Xiaomi by doing something nobody else was – rural marketing.
According to a recent investigation conducted by Bloomberg, not only have smaller Chinese brands started undercutting their better-funded competition, but they've also realized they can accomplish great things by appealing to rural communities. These regions have traditionally been one of Samsung and Apple's weakest points given how people living there are more easily turned away by high prices, not to mention the fact that they aren't accustomed to online shopping. These days, devices made by Oppo and Vivo are available in hundreds of thousands of consumer electronics stores throughout China while one would struggle to find a few Xiaomi or Apple stores outside of large urban areas in the country. In other words, major phone makers in China misunderstood the rural community. Sure, they were aware of the fact that people outside of large cities are statistically poorer, but they've neglected to account for their buying habits. More specifically, they seemingly haven't realized how much different consumer habits in rural regions of China are in comparison to those in urban areas. Given how the former host approximately a billion people, that's a lot of potential market share to attack with offline marketing, which is what Oppo and Vivo realized and acted upon.
Not only are local Chinese phone makers now investing in rural marketing, but they're also offering additional financial incentives to small vendors for selling their devices. Additionally, this strategy facilitates customer support given how consumers can physically visit their retailers if there's a problem with their phone. In comparison to these hundreds of thousands of locations throughout the country, there are currently only 36 Apple stores and several hundreds of Xiaomi stores in China. Rural customers apparently still care a great deal about local support, and the likes of Oppo and Vivo adapted their business strategy to that fact with great success. So, until major phone makers realize and act upon the fact that not everyone is ready and willing to conduct all their shopping online, this trend is likely to continue even if no other smartphone manufacturers in China start implementing similar strategies.