A little-known smartphone company based in the manufacturing hub of Dongguan is shaping up to be China’s smartphone brand of the year, overtaking former stellar sellers such as
OPPO, which is virtually unknown outside of Asia, managed to grow its smartphone shipments by 153% to 18.5 million units in the first quarter, according to IDC data, which shows the company pushed into the ranks of the world’s largest five smartphone vendors for the first time. In May, it almost doubled its China market share to 11%, according to analysis firm Counterpoint Research. June will be a "close call" between OPPO and Huawei, and the company is likely to hold onto one of the top three spots in China this year, Counterpoint research director Neil Shah says.
The company’s rise comes as China’s smartphone market registered a 5% decline in the first quarter amid slower economic growth, according to data and consulting firm Strategy Analytics. OPPO is the country’s second-largest smartphone company by shipments in the first quarter, with a market share of 13.2% compared with 7.9% from a year ago. Huawei had the top spot with a 16.6% share. Xiaomi slipped to the third place while Apple dropped to the fifth with an 11.5% share, according to Strategy Analytics.
The strategy behind OPPO’s newfound success is simple: staying away from e-commerce, analysts say.
Unlike Xiaomi, which built itself upon the online flash sales of bargain Android smartphones, OPPO shunned online presence. The company instead focused on opening offline retail stores – oftentimes striking exclusive distribution deals with dealers – in lower-tier cities at a time when smartphone penetration was yet to grow.
The efforts led OPPO to have a network of 200,000 retail stores throughout the country today, Chinese media reports show. They sell smartphones designed for young, budget-conscious urban consumers, which are priced at an average of $270, according to Nicole Peng, a research director at market research firm Canalys.
Chinese smartphone company OPPO achieved stunning growth recently despite fierce competition in... [+]
A recent hit product, however, is targeted at wealthier consumers. R9, which sells for $239 to $539 in China, is a phone with flash battery charge functions and a 16 megapixel camera suited for taking selfies. OPPO said it sold more than 7 million units of the phone just 88 days after the product’s launch in March, and more than 90% of the company’s sales come from brick-and-mortar stores, Wu Qiang, a senior executive in charge of marketing, said during a June press event, according to Chinese media reports. OPPO didn’t respond to repeated requests for interviewing Wu or other senior executives.
“In 2013 many smartphone companies started to try e-commerce, but OPPO decided that the opportunity was still with offline retail,” says Jin Di, a research manager at IDC China. “A reason is that its core customers are in places where logistics aren’t that good. Retail stores allow them to try OPPO phones first-hand and can provide many after-sales services.”
Now OPPO faces a bitter rival in Vivo, a Chinese handset maker formerly known as Bubugao. Established in the early 2000s, OPPO was first intended as a Bubugao subsidiary focusing on overseas expansion. But a boardroom disagreement later led OPPO to strike out on its own.
Headed by Chen Mingyong, OPPO fights with Vivo in retail expansion and product design. In the first quarter, Vivo was China’s fourth-largest smartphone company, accounting for 11.9% of the market with a shipment of 12.5 million units, according to Strategy Analytics. Bubugao founder Duan Yongping still has a small stake in OPPO but is no longer involved in the company’s daily management, an OPPO spokesperson says. He lives in the U.S. today, the person says.
Another challenge for OPPO is winning over consumers in affluent cities such as Beijing and Shanghai, according to Canalys’s Peng. The company needs to build up its brand among wealthier consumers in order to achieve further growth, she says.
But that won’t be easy. China’s top cities are strongholds for premium brands such as Apple and Huawei. Cracking those markets will be harder than selling to budget-conscious consumers because people there are reluctant to try unfamiliar brands, Peng says.
“OPPO’s momentum will still be good for the rest of the year,” she says. “But the company really needs to spend more on marketing so it can have a chance to enter first- and second-tier cities when the market recovers in the second half of the year.”
