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Where did Samsung go wrong? What can they do about it?
There’s been a lot of talk recently about Samsung and its slumping sales, especially as brands like XIaomi continue to beat out the Korean giant in China and other emerging markets. Just yesterday Samsung revealed in an investor’s call that they hope to “fundamentally reform” their product portfolio in order to get back on track.
With that in mind, for this week’s Friday Debate we discuss how Samsung got into the position it is has found itself in. Is this a temporary slump, and what can they do to turn the ship around?
As always, check out the comments from AA team members and weigh in with your own thoughts in the comments below.
It’s easy to blame Touchwiz yet people seem to lose sight that it has a huge fan base. Believe it or not, a lot of Samsung users prefer it over stock Android. For me the main problem is Samsung’s inability to change with the times. The main reason why Chinese OEMs are getting one over on Samsung is by directly selling their phones through their own web shop. Essentially cutting the middle man out of the equation, thus being able to sell their devices at a lower cost.
Samsung is a global brand and moving their smartphone business to E-commerce would be a massive undertaking resulting in inequality of price or closing of markets.
Part of Samsung’s profitability issues certainly stem from an overabundance of products, as they take a lot of resources to develop. Not every device is pointless, LTE-A versions for Korea make sense. However, the ill-defined Galaxy A series is going to pass most consumers by.
The problem, as I’ve said a plenty of times this year, is saturation. If you’re a happy Galaxy Note 3 or S4 owner, is the Alpha, Note 4 or S5 worth a $600 price tag? As far as the general consumer is concerned, high-end purchases are being deferred as needs are met. There’s nothing that Samsung can really do about this as the smartphone sales boom has come to an end, at least in the West.
If Samsung had wanted to offset this inevitable decline it needed products to better suit growing markets like India and China. Samsung has its own mid-rangers, but they can’t compete with cutthroat flagships from HUAWEI or Xiaomi. Looking to India, sales direct from manufacturers or through cheap to run e-commerce partners help to keep costs down and improve manufacturer margins. Xiaomi has a different model altogether, collecting long-term revenue through its software services and subsidising handset costs to consumers. We’re seeing a global shift away from subsidised contract fees towards up-front purchases, where expensive phones don’t look so tempting.
For me, Samsung isn’t facing a product problem. Instead, the global market is moving on to better business models, leaving Samsung to suffer a hangover as traditional markets slow down.
Where Samsung went wrong may be harder to pinpoint than I originally thought it would be. A lot of the things that people describe as their “problem” is also one of the factors that made them so successful. For instance, a lot of people criticize Samsung’s “throw spaghetti at the wall and see what sticks” missions statement. However, that philosophy is also what gives them the longest list of features every year and what makes their phones look so much better than the competition.
Despite what the pundits say, their build quality was never really that bad, it just wasn’t overly desirable. In terms of hardware and software, Samsung never really screwed up really badly.
Really, I believe that the problem isn’t something Samsung did, it was something everyone else did. Does anyone remember why the Galaxy S2 and S3 were so successful? Because no one else was doing what they were doing. Having 4G-enabled devices available to literally everyone was a fresh perspective in a realm where HTCwas still making devices for specific carriers (the EVO series, the Incredible series) and Moto was still a one-trick pony (the Droid series). The best phones on T-Mobile were still the MyTouch brand.
How many people in Europe were angry that Sprint customers got the EVO 4G, 3D, and 4G LTE and they didn’t (they eventually did, much later)? The Moto Droid craze was only exciting if you were a Verizon customer. Then comes the Galaxy S series. A phone on every carrier (except Verizon on the S2…but they smartened up for the S3). Phones available worldwide. Good ones too, with up to date specs and decent cameras. It was less prevalent with the Galaxy S2 but the Galaxy S3 was something to truly behold. Then the Galaxy S4 was the same way.
Around the time the Galaxy S4 came out (and I believe that was also the Note 2 era…which was also available everywhere), other OEMs started getting wise to it. The new LG phones started showing up on every carrier. The HTCOne M7 was on every carrier.
This year? HTC, LG, Samsung, and Nexus are everywhere. The exact same phone on every carrier doing exactly what made only Samsung relevant and unique 2 years ago. The real reason Samsung has always done so well is because they’ve had the longest reach. Now everyone else can reach that far as well and the market is slowly but steadily becoming saturated once again. Sony and Moto are still behind the ball but I’m guessing that they’ll eventually catch up once they truly realize that “being available everywhere” is the world’s most powerful marketing slogan.
Now, there are plenty of amazing phones that are in the “phablet” size range and the Note isn’t the only one anymore. OEMs who are serious about producing devices are making them available worldwide and (often) at cheaper prices. It isn’t the same market that Samsung so easily dominated 2 years ago and they haven’t really adapted fast enough.
I think Samsung realized this some time ago and have been testing ways to get out of it. That’s how you see things like the Note Edge and the Galaxy Alpha. It’s Samsung testing the waters because they need to go somewhere they haven’t gone before and they’re not going to do that without seeing if there’s potential.
The era of Samsung will come to an end and thanks to ever improving radio technology (every phone can be used on virtually any network these days and it’s cheap), I don’t think we’ll have another OEM reign supreme.
All three of my colleagues make excellent points. It’s pretty clear that Samsung isn’t facing just “one problem” and instead it is the culmination of a variety of issues: a changing market, the slow down of technology, too many different products in too many categories and so much more. All these issues have led them to where they are now. But regardless of what brought them here, the important thing for Samsung is figuring out how to rise above it all.
Doing this is probably easier said than done, but I think that slimming down TouchWiz is certainly a start. That said, as Luka points out, not everyone dislikes TouchWiz, but removing extra bloat and speeding things up wouldn’t hurt. Narrowing down the number of products in their portfolio also would be a good idea, as it would limit customer confusion and require less investment and research on Samsung’s part. Do we really need dozens of phones that are only marginally different? Ideally, I would like to see a few high-end, a few mid-range and a few low-end smartphones — and that’s it. While we are at it, Samsung could probably use an even bigger refresh in design than just a metal frame, though that’s obviously just one man’s opinion.
In the long run, I think that Samsung is just suffering from a changing market that is more competitive than ever. Ultimately I don’t believe they are in any real danger, their time as the de facto king of Android may simply be over. Of course, changing things up could at least stem some of the bleeding.