1. 2014 Mobile Trends Report
JANUARY 2014
CES LAS VEGAS, NV
B R I G H T S TA R
I N T E L L I GE NC E
2. 2014 MOBILE TRENDS REPORT
Because things are
the way they are,
things will not stay
the way they are
Bertolt Brecht
2014 MOBILE TRENDS REPORT
JANUARY 2014
CES LAS VEGAS, NV
B R I G H T S TA R
INT E L L I GE NC E
3. 2014 MOBILE TRENDS REPORT
About the Trend Report
Nothing moves like the speed of mobile. And this year, we will see rapid-fire
changes as market dynamics collide with technology, creating a new world for
manufacturers, carriers and retailers to compete in.
From Brightstarās vantage point as a global leader in wireless products and services,
we see changes emerging that are poised to transform the way we all conduct
business. Our trends were identified and commented on by Brightstarās global
network of experts, validated by third party research and explored for the impact
they will make on OEMs, carriers, retailers and even consumers in the future.
In all, we see eight major trends that are critical to understand and be ready for
in 2014 and beyond. From product prices, to device lifecycles, to consumer
shopping behaviors and preferences, the impacts will be wide reaching.
Our industry doesnāt change slowly ā it leapfrogs. And weāre about to take the
next, major jump.
2014 MOBILE TRENDS REPORT
JANUARY 2014
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4. 2014 MOBILE TRENDS REPORT
8 DRIVING TRENDS FOR 2014
1 Device Lifecycle is Shrinking
2 No-Contract Will Dominate
3 Buy-Back and Trade-In is a Must
4 Device Financing Catches On
5 Attachments Become Critical to Profitability
6 Connected Devices Flood the Marketplace
7 Consumers Blur the Line
8 The End of Subsidization is Coming
2014 MOBILE TRENDS REPORT
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6. 1 DEVICE LIFECYCLE IS SHRINKING
Trend Overview
Smartphones have the shortest product lifecycle
of any product in consumer electronics:
Shelf life has
declined by
almost 50%
since 2005
Average
shelf-life for
some mobile
phones is
currently 8-10
months
Mobile phones
can last as
few as 4 short
months on a
retailersā shelf
2014 MOBILE TRENDS REPORT
Trend Driver
OEMs are developing and cycling devices
at a faster pace than ever with each
generation adopting the latest carrier
driven technologies, market-driven
software developments and consumer
driven features/enhancements. Additionally,
in an attempt to capture niche driven
market share, the development of multiple
models within the same price point is also
trending among OEMs. With the Apple
and Samsung iconic devices representing
the top 10 postpaid smartphone spots
which account for 60+% of total market
share, the ability for all others to move
any sizeable volume of product in the
market is finite and ultra-competitive.
All of these conditions result in a glut of
inventory in the market that creates a
race to the bottom for OEMs and retailers
to capture the attention of price sensitive
consumers and ultimately driving the
shrinking device lifecycle trend.
JANUARY 2014
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7. 1 DEVICE LIFECYCLE IS SHRINKING
Industry Perspective
While the mobile phone is in the mature stage of
the product lifecycle, its revenues and ASP continue
to increase. This can be attributed in part to two
main factors:
1
2
Q4 2012 ā Q3 2013
Prepaid/Postpaid
Smartphones Only
APPLE
GOOGLE 0.7%
MOTOROLA 5%
HTC
6%
12%
OTHER
LG
SAMSUNG
As smartphones
cannibalize other
product lines
(cameras, portable
gaming, navigation,
media players),
theyāre able to
command a greater
share of the
consumersā wallet.
44%
7%
Market power
of Apple and
Samsung allows
them to maintain
high ASPs in an
environment of
low competition.
26%
2014 MOBILE TRENDS REPORT
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8. 1 DEVICE LIFECYCLE IS SHRINKING
CARRIER
DRIVE CONSUMER BEHAVIOR
Tier 1 carriers are trying to break
consumers habit of upgrading to a new
phone every 18 months to 2 years.
CONSUMER
OEM
FEWER OPTIONS
MAINTAIN PROFITS
There is a major impact
for non-Apple and
Samsung manufacturers
who are struggling to
stay relevant. Without
consumer demand,
product pricing can
tumble quickly.
TREND
IMPACT
RETAILER
If retailers and
operators continue
to lose money on
offering a larger
product selection,
they may reduce
choice for
consumers.
HIGH RISK
The big question for retailers and carriers is how do you pick the
next winner. While going with Apple and Samsung is the safe
bet today, consumers want to see more choices on the shelfā¦but
that can be a costly endeavor if costs are high and product
doesnāt turn quickly.
2014 MOBILE TRENDS REPORT
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9. 1 DEVICE LIFECYCLE IS SHRINKING
Brightstar Perspective
The shrinking life cycle creates a variety of pressures on overall profitability for
Tier 2 and Tier 3 OEMs due to supply chain inefficiencies, promotional inequities,
and brand awareness.
The ability to drive analysis and make decisions throughout the product lifecycle is
critical. Brightstar has developed tools that use key indicators to identify product
value at all points ā allowing operators and retailers to make decisions earlier to
move through declining product faster, ultimately reducing profit erosion.
Solutions like Virtual Inventory (VIP) or āendless aisleā combine technology with
product selection and have proven to be very successful at retail. Brightstarās VIP
solution enables national retailers to offer product without having to range or own
inventory in store.
2014 MOBILE TRENDS REPORT
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11. 2 NO-CONTRACT WILL DOMINATE
Trend Overview
No-contract is estimated to be 50% of market
by the end of 2015.
ā¢ No-contract plans have seen 19% growth
from 2011-2013.
ā¢ No-contract plans now have a 37% share.
NO-CONTRACT PLAN GROWTH
Trend Drivers
1) Better no-contract phone offerings
2013
2) Better no-contract plans
2012
3) Carrier interest in getting out of
the postpaid subsidization game
2011
60
70
80
90
IN MILLIONS
2014 MOBILE TRENDS REPORT
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12. 2 NO-CONTRACT WILL DOMINATE
Industry Perspective
No-contract is driving the unit volume growth in
mobile phones. With only a 37% category share
in mobile, no contract is driving the entire 7%
projected unit volume growth for mobile phones
in 2013.
UNIT VOLUME (YEAR OVER YEAR)
POSTPAID
PREPAID
27.3
30.7
33.4
36.6
72.7
69.3
66.6
63.4
2010
2011
2012
2013 (ESTIMATED)
In 2013, T-Mobile made a game-changing play
with their āUn-Carrierā strategy of replacing
service contracts with phone leasing contracts,
leading the industry toward a tipping point.
2014 MOBILE TRENDS REPORT
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13. 2 NO-CONTRACT WILL DOMINATE
CARRIER
COMPETITIVE PRICING
Carriers are plentiful in this category so there are
lots of plan options for consumers. Carriers need to offer
competitive plans that are focused on pricing, not just
services and they need to offer a range of phone options
that appeal to this changing consumer. Tier 1 operators
are now competing heavily with traditional no-contract
carriers which may reduce options in the future.
OEM
DEVICE VALUE
CONSUMER
DEVICE AFFORDABILITY
Product that used to be
contract only is now being
offered without one. While
traditionally no-contract or
prepaid product has been
devices later in the
lifecycle, now consumers
demand the latest and
greatest regardless of plan.
This could have a negative
impact on device value and
end up reducing the
number of devices offered
going forward.
TREND
IMPACT
RETAILER
This could change the game.
Having popular phone
models appear in prepaid
faster is a great benefit to the
consumer but that means
that the price for these still
popular phones will be high.
Many consumers want to
consider no-contract as an
option but they will need
financing to be able to afford
the phone along with the
more affordable plan.
CATEGORY MANAGEMENT
The category and the consumer are changing and retail needs to
adapt no-contract merchandising to these changes and maximize
the potential of this new opportunity. Also, while the price for
no-contract phones are increasing they are still not to the level of
postpaidās which could affect the categories dollar growth as
no-contract begins to overtake postpaidās share.
2014 MOBILE TRENDS REPORT
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15. 3 BUY-BACK & TRADE-IN IS A MUST
Trend Overview
Mobile Buy-Back & Trade-In solutions have grown to
the point where consumers are expecting it as part
of the activation/upgrade process.
ā¢ Most devices are graded as C stock (61%) at time
of trade-in, which typically nets a consumer $50.
ā¢ Trade-In is now a promotional strategy as well as
a profit driver.
Trend Drivers
Certain devices are retaining their
value much longer. Phones are not
disposable anymore and people in
secondary markets can own a popular
phone, like the iPhone, at a much
reduced price when it is used /
refurbished.
TRADE IN YOUR SMARTPHONE OR TABLET
GET UP TO A
$300
Buy-Back & Trade-In programs create
opportunities for consumers to
replace and recycle old devices while
helping to finance their next device.
IN STORE CREDIT
Another driver for the trend is
insurance replacements, which is
becoming a popular service for mobile
phones. Using recycled devices to
meet consumer claims is critical for
service profitability.
2014 MOBILE TRENDS REPORT
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16. 3 BUY-BACK & TRADE-IN IS A MUST
Industry Perspective
While Buy-Back & Trade-In is a critical service
offering, it has some concerning potential
downsides. Some industry experts believe the
influx of used and refurbished product could
significantly drive down prices and profits,
further shortening the product life-cycle, and
slow down product innovation.
D
10
S1
9
8
PRICE
7
6
S2
P5
4
SURPLUS
3
P2
1
0
10
20
30
40
50
60
70
80
90
As supply increases, a
surplus of the good is
created. In order to
combat this, prices must
drop to drive demand to
clear the surplus, driving
down profitability.
1 00
QUANTITY BOUGHT & SOLD
2014 MOBILE TRENDS REPORT
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17. 3 BUY-BACK & TRADE-IN IS A MUST
CARRIER
DRIVE LOYALTY
Carriers are using trade-in programs to help retain
customer loyalty, to drive promotional activities and to
demonstrate corporate social responsibility by
recycling or reusing devices.
OEM
INCREASE DEMAND
OEMs will experience
increased demand as the
consumer upgrade cycle
shortens however if the
market becomes saturated
with refurbished products
and prices/profit fall, new
production innovations
could decline as well.
CONSUMER
TREND
IMPACT
SELF-SUBSIDY
Consumers receive cash or
credit in exchange for their
used devices, which can
offset the cost of their new
phones.
RETAILER
MUST PLAY TO COMPETE
Retailers must offer a trade-in program to
compete with other retailers and the carriers.
2014 MOBILE TRENDS REPORT
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19. 4 DEVICE FINANCING CATCHES ON
Trend Overview
As more consumers move to a no-contract model,
they are realizing the true unsubsidized cost of their
phones. With average prices for top tier smartphones
at $550, they are looking for financing options.
ā¢ OEMs are offering financing programs:
HTC & Motorola launched programs in 2013.
ā¢ Retailers have programs: Amazon, Best Buy
and Walmart all introduced financing options
on select phones.
ā¢ Movement to No-Contract is impacting the
necessity of this model.
Industry Perspective
Financing is going to become a key
service offering with the other
changes in the market. Savvy consumers
will compare various financing offers
against each other to make decisions
about their carrier, phone, and store.
ā¢ There are opportunities to expand
financing solutions beyond
handsets to include supplemental
accessories and services resulting
in incremental growth in basket
and profit.
2014 MOBILE TRENDS REPORT
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20. 4 DEVICE FINANCING CATCHES ON
CARRIER
TRANSFORMATIONAL
Tier 1 carriers are following T-Mobile and offering
consumers a device finance plan. Some believe
that a focus on financing rather than providing
a subsidy would be ātransformativeā for the industry.
CONSUMER
OEM
PRODUCT DIFFERENTIATOR
OEMs can use financing as a
differentiator to try and gain
additional market share in an
hyper competitive space.
FINANCING A MUST
TREND
IMPACT
Financing will become an
integral part of the purchase
decision process. More
expensive devices, more
accessories to buy and less
subsidization means
consumers will need
financing in order to afford
the products they desire.
RETAILER
GRAB YOUR SHARE
All channels will need to offer this as an option
for consumers if they want to remain a viable
part of the mobile retail market. Retailers can set
themselves apart with unique product bundles
and complementary financing solutions.
2014 MOBILE TRENDS REPORT
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21. 4 DEVICE FINANCING CATCHES ON
Brightstar Perspective
A variety of financial services products are beginning to penetrate the category
offering attractive consumer solutions that focus on increased ASPs & basket lift to
supplement the profit squeezed device sale and drive incremental margin growth.
Financing will not be limited to handsets, but also can be used to drive increased
accessory sales and services that will become critical to the profitability of the industry.
2014 MOBILE TRENDS REPORT
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23. 5 ATTACHMENTS BECOME CRITICAL TO PROFITABILITY
Trend Overview
The industry continues to be squeezed as a result
of micro and macro issues at work including a
demanding consumer population for price, function,
and availability. Aggressive OEMs and retailers are
learning how the puzzle pieces are coming together
to optimize revenues and profitability through
integrated strategic partnerships throughout the
value chain.
ā¢
400% basket lift can be achieved with the
right mix of accessories, attached services, and
financing solutions.
ā¢ Over 25% of consumers are adding handset
protection to their devices.
ā¢ Mobile wireless accessory shipments to approach
170 million by 2018.
ā¢ Accessories are hot - Sales on wireless
speakers jumped 175% in the US last year.
2014 MOBILE TRENDS REPORT
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24. 5 ATTACHMENTS BECOME CRITICAL TO PROFITABILITY
Industry Perspective
As these varying trends begin to merge
(no-contract, buy-back & trade-in, financing)
onto each other, consumers are learning that
smartphones are expensive investments that
need to be protected and optimized for maximum
benefit. As a result, industry players are seizing
the opportunity to infuse profit solutions through
comprehensive and integrated models that meet
and exceed the savvy consumer needs.
But there is risk in putting everything in this basket.
Lack of new phone releases, sudden discontinuance
of popular models as well as less consumers
upgrading their handsets, all lead to a drop in
the number of opportunity for attached sales.
2014 MOBILE TRENDS REPORT
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25. 5 ATTACHMENTS BECOME CRITICAL TO PROFITABILITY
CARRIER
CUSTOMER LOYALTY
A new 2013 mobile loyalty audit revealed that only 13% of
customers show the level of loyalty required to protect them
from competitive offers and service disruptions.
CONSUMER
OEM
DEVICE PROTECTION
VALUE IN ATTACHMENTS
Device OEMs need to
develop innovative branded
accessories to ensure their
share of the expanding
accessory market.
TREND
IMPACT
As the smartphone becomes
integral to many consumersā
lives, they are increasingly
willing to pay for services
and accessories that enhance
their overall experience and
satisfaction.
RETAILER
REVENUE GROWTH
Retailers must ensure they are offering the
right accessories for their device portfolio and
should consider offering a full range of
value-added services (i.e.; insurance, handset
protection, buy-back & trade-in).
2014 MOBILE TRENDS REPORT
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26. 5 ATTACHMENTS BECOME CRITICAL TO PROFITABILITY
Brightstar Perspective
Retailers, carriers and OEMs all have the opportunity to capitalize on the expanding
profit pools created by demand for new accessory and service attachments.
The overall basket must get larger because of shrinking profit margins. Accessories,
smart apps/accessories, insurance and subscription based services are a vital part
of basket and margin enhancements.
2014 MOBILE TRENDS REPORT
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28. 6 CONNECTED DEVICES FLOOD THE MARKETPLACE
Trend Overview
Most of the focus in connected devices for
smartphones has been wearables in the physical
health space. Consumers will increasingly see their
smartphones as tools for total lifestyle well-being.
From improving techniques for self-treatment,
developments in stress-detecting technologies and
near-total smartphone penetration in many markets,
consumers will lap up innovations that help track
and improve overall well-being and lifestyle.
ā¢ Consumer interest in wearable fitness quadrupled
in the last year.
ā¢ 75 Billion devices will be connected to the internet
of things by 2020.
ā¢ The wearable tech market will reach $4.5B
globally this coming year.
In addition, a vast number of up-and-coming
innovative solutions both from a horizontal and
vertically integrated perspective are making their
way onto the scene; most leveraging smartphone
technology via the iOS and Android platforms.
2014 MOBILE TRENDS REPORT
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29. 6 CONNECTED DEVICES FLOOD THE MARKETPLACE
Industry Perspective
āThere's no reason to doubt that connected devices
will soon be flooding the mass market. Technology
with compact, connected sensors and actuators
make their way onto everyday consumer electronics,
household appliances, and on general infrastructure.ā
Tony Darova (Morgan Stanley, Business Insider)
2014 MOBILE TRENDS REPORT
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30. 6 CONNECTED DEVICES FLOOD THE MARKETPLACE
CARRIER
COMPETITIVE ADVANTAGE
OEM
DEMONSTRATE
LEADERSHIP
Need to determine what is a fad
for early adopters and what has
mainstream staying power. They
need to set the stage for how to
market these products as well as
if and how they can reach and
educate the consumer. This may
also lead to new OEMs being able
to enter this space and become a
factor in mobile that may begin to
challenge Apple and Samsung
with possible exclusive/strategic
partnerships.
Carriers are currently providing the best spaces for
displaying and educating consumers on these new devices
with their interactive store formats. Big data operators
have a lot to gain in this space, with any and all things
connected to the Internet, that opens up more real-time
data inventory to sell.
CONSUMER
REQUIRE EXPERT ADVICE
TREND
IMPACT
Based on all of the emerging
devices and connected
devices, consumers will need a
retail environment where they
can ask questions and
āplay/interactā with devices
before they purchase them.
They will need to find a way to
feel comfortable with the new
technology and understand it
before they adopt.
RETAILER
SMART PRODUCT RANGE
While ideas are limitless, consumer interest is finite. Obviously they
can't all be a hit. The big challenge for this industry is trying to gauge
consumer interest and understand how the consumer will learn about
and shop the product. A big question is how can retailers effectively
play in this space without losing their shirt on inventory. What will be
considered valuable and what will supply chain and retail distribution
look like for this new category?
2014 MOBILE TRENDS REPORT
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31. 6 CONNECTED DEVICES FLOOD THE MARKETPLACE
Brightstar Perspective
Initially, operators will be better positioned to support connected devices. They
have already started marketing connected and mhealth devices horizontally as
add-ons to existing vertical services.
With platform-based APP development (iOS, Android) being the gateway to the
development of so many devices, OEMs should look at driving innovation with
start-up device manufactures to help them bring the next big thing to market.
2014 MOBILE TRENDS REPORT
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33. 7 CONSUMERS BLUR THE LINE
Trend Overview
70% of consumers said that they have a better
customer experience when they can choose how
they purchase.
72% of respondents expect to be able to research,
shop and receive goods and customer services
through whichever channel they choose. This figure
rises to 83% amongst omni-enthusiasts.
15% of customers feel extremely satisfied that
retailers provide a consistent experience across
different channels.
In 2016 e-retail will account for 9% of total retail
sales, up from 7% in 2011 & 2012.
Nearly half of shoppers (44%) said that they
expect to purchase through more than one channel
within five yearsā time.
3/4 of participants surveyed claimed that being
able to use different channels cohesively (in store,
online, mobile) is important.
2014 MOBILE TRENDS REPORT
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34. 7 CONSUMERS BLUR THE LINE
Industry Perspective
Retailers are moving towards creating a seamless
shopping experience whether in-store, online, or
through mobile devices. Site-to-store delivery,
online price match, and an interactive experience
at retail are all driving omni-channel evolution.
Ensuring that customers can cost-effectively shop
across multiple channels and still enjoy a consistent
and cohesive experience must be a top consideration
for retailers today.
2014 MOBILE TRENDS REPORT
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35. 7 CONSUMERS BLUR THE LINE
CARRIER
DIFFERENTIATION
Carriers will need to evaluate the devices they
choose to adopt into their networks as well as
cultivate new service solutions to create
differentiators that appeal to next gen shoppers.
OEM
CONSUMER
INCREASED PRODUCT
PORTFOLIO
OEMS will benefit if retailers
and carriers begin to offer a
wider device portfolio as
virtual inventory and extended
aisle options become available.
EXPECTATION IS NOW
As consumers experience
consistent and memorable
engagements across platforms,
they will begin to seek out and
reward those companies that
deliver on these unique
solutions and eventually
come to demand it.
TREND
IMPACT
RETAILER
SEAMLESS EXPERIENCE
While ideas are limitless, consumer interest is finite.
Retailers can no longer operate their brick and mortar
and .com businesses in silos, even in mobility. Retailers
must move faster to offer a seamless experience.
2014 MOBILE TRENDS REPORT
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36. 7 CONSUMERS BLUR THE LINE
Brightstar Perspective
Full integration of online shopping solutions were inevitable and adopted
successfully by many. The mobile experience continues to challenge many
however large screen devices and better software solutions are starting to
turn the tide with consumers as evidenced by 2013 mobile shopping.
ā¢ In 2013, over 23% of Black Friday and 17% of Cyber Monday online shoppers
placed their orders from mobile phones (up 43% and 55% respectively
from 2012), reinforcing the growing importance of mobile phones as a
valid shopping platform.
The importance of executing a seamless omni-channel merchandising
strategy within the retail market is of paramount importance.
Retailers will need to ensure that customer online, in-store and mobile
experiences are consistent across platforms.
2014 MOBILE TRENDS REPORT
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38. 8 THE END OF SUBSIDIZATION IS COMING
Trend Overview
Subsidies were used to kick-start and grow the
market for mobile devices. Now that weāre nearing
100% mobile penetration in the US, subsidies donāt
make sense for the carriers any more.
ā¢ Subsidies are common in the US. 63% of all sold
devices are via a subsidized carrier contract.
Globally however, unsubsidized phone plans are
the global standard. Several carriers such as
Telefonica and Vodaphone have stopping offering
subsidies to new customers or have stopped
offering subsidies altogether.
Mobile phone
penetration in
the US is
nearing 100%
Operatorsā
subsidized
subscriber base
is predicted to
decline by 16% in
the next 2 years
ā¢ While subsidies have helped carriers to lure in
customers and lock them into long-term deals,
they are also bottom-line killers that carriers have
long said they would like to do away with.
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39. 8 THE END OF SUBSIDIZATION IS COMING
Industry Perspective
"Is the subsidy-model definitely going away?"
asked Pierre Alain Sur, leader of Price Waterhouse
Coopers' global communications business.
It's hard to say at this point,
but the trend is pointing in that
direction.
Smartphones are becoming more durable, and
innovation is slowing. Apple is still selling large
amounts of the iPhone 4, a device that was
launched two years ago.
All that's left is to change customers' mindset.
Interestingly, consumers have no issue paying full
price for tablets, which are essentially large
smartphones with all of the same features outside
of the functionality to place calls, but carriers have
been using the subsidy model for phones since
the beginning.
2014 MOBILE TRENDS REPORT
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40. 8 THE END OF SUBSIDIZATION IS COMING
CARRIER
LOYALTY GROWTH
Carriers can stand alone on the quality of their
networks and the services they provide. Expect
financing solutions to become more comprehensive
and more complex as carriers look to further secure
their subscriber bases. Carriers will focus on program
specific enhancements to network services in order to
build customer loyalty in new and innovative ways.
CONSUMER
OEM
BRAND AWARENESS
AND LOYALTY
Tier 2/3 OEMs are generally
less expensive and have a
price advantage with no
subsidy, assuming they can
compete technically.
ABUNDANCE OF CHOICES
TREND
IMPACT
As contracts come up for
renewal and new programs
hit the market, consumers
will have an abundance of
choices to develop a plan that
works best for them. Look for
consumers to express their
wants and needs via social
networks. All parties should
be monitoring this closely to
stay on top of consumer
demand.
RETAILER
DIFFERENTIATION
Expect retail to come to the table with accessory and
device upgrade/financing programs. Retailers will
look to create unique programs that differentiate
themselves both in the category and in the market.
2014 MOBILE TRENDS REPORT
JANUARY 2014
CES LAS VEGAS, NV
B R I G H T S TA R
I N T E L L I GE NC E
41. 8 THE END OF SUBSIDIZATION IS COMING
Brightstar Perspective
The removal of subsidies could be a game changer. It removes a significant differentiator
and forces each carrier to stand on its own merits.
OEMs will need to spend even more money to merchandise their products in store, in
advertising and at POS as carriers will no longer participate in reducing the consumers
purchase price.
Customers may look to financing solutions as phone costs continue to rise. They may
also hold their phones for longer periods of time, potentially impacting the buy-back &
trade-in market.
2014 MOBILE TRENDS REPORT
JANUARY 2014
CES LAS VEGAS, NV
B R I G H T S TA R
INT E L L I GE NC E
42. 2014 MOBILE TRENDS REPORT
About Brightstar
Retail Doors
2014 MOBILE TRENDS REPORT
JANUARY 2014
CES LAS VEGAS, NV
B R I G H T S TA R
I N T E L L I GE NC E
