I know the exchange rate is good, their Prime Minister is
pretty good, Sauv Blanc has taken over the world, and lamb exports are up. But
IDC’s latest smartphone research just proves
Kiwis have more money than sense.
Why do Kiwis have more money than sense?
Apparently, in 2018,
40% of Kiwis bought a smartphone costing over $900. This is against a global trend where flagships account for about
10% of the market.
Scott Manion, IDC New Zealand Associate Market Analyst for
client devices, says consumers are willing to invest more in their devices because they’re becoming increasingly
reliant upon them in their daily lives.
“Increased reliance upon our phones is leading to greater willingness to invest in a higher-end device. These devices bring better performance and are likely to age better. While vendors benefit from greater revenue in the short-term, these higher-end devices lead to longer life cycles”.
Consumers are holding onto their devices for longer
Manion says they are willing to spend more when it’s time to
renew. In 2018 shipments were down 1.6% annually, however increasing ASP’s led
to a 21.6% increase in revenue.
According to IDC’s Consumerscape 360 study, the average ownership lifecycle is 3.7 years. This, in combination with a saturated smartphone market, are the main contributors to decreased unit shipments.
And the purchase on a plan market is strong – pre-paid is a long way off.
Rising ASP’s in the Ultra High-End space is causing concern
New Zealanders have a record as a price sensitive nation.
Only a few weeks ago Spark announced they were having difficulty moving
inventory of high-end phones, which begs the question does New Zealand’s
smartphone market have a price ceiling?
“All recent evidence points to yes. The current flagship market doesn’t offer enough marginal benefit to justify the increased price between models for many Kiwis. Consumers are increasingly opting for older models rather than the new flagship. Often these fulfil the use case without breaking the bank”.
While consumers are increasing their willingness to spend on
devices, this spend does have a limit. If mobile manufacturers continue to
raise device prices, New Zealand market demand for flagship devices is likely
GadgetGuy’s take: Statistics are not relevant to Australia
First NZ is unlikely to get wide-spread 5G until 2023
according to Telco 2degrees spokesman Mat
Bolland. The other main Telco Spark is a bit more bullish hoping to have ‘limited’
5G in time for America’s Cup competition in
What is happening in
Australia is that potential 5G consumers are holding off on replacing flagship
phones until they see the reality – cost, use and availability. Apple says it
is holding off too – and it’s smart to do
so. We think telcos will push Australia
to 5G faster than most but expect it may be 2023 before it has the same
coverage and acceptance as 4G.
US research (also not entirely relevant to Australia) shows that fewer than 3% are buying a handset over US$1000.
Interestingly the sweet spot is <$300 and pre-paid is picking up a massive following. This reflects Sam Skontos (Alcatel) and Motorola MD Danny Adamopoulos’s call that the action is all below $500 here. In NZ 50% of sales reflect that too.
What is uncertain is
that no man’s land between $500-900 where
9% of Kiwis are shopping. GadgetGuy understands this segment is much stronger here
with a sweet spot of under $799 where you can get some amazing handsets including superseded flagships.
All that leads us to recommend
Don’t buy a 5G handset until 2021 or later, e.g.
Hang on to your existing phone if you can (battery
replacement may be a good option)
Consider the outright
purchase of a <$779 model and moving to pre-paid for the best deals by far
Don’t be a brand snob – the best value/performance
may occur elsewhere.