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iPhone retention slips as Apple loses its innovation edge

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 19 Jul 2019

iPhone customer retention is the lowest it has been since 2011, with 15% of US phone owners trading in their Apple mobile devices for Android brands.

This is according to a survey conducted by US-based trade-in site BankMyCell, using a dataset of 38 043 consumers. The report provides insight into consumers’ upgrade cycle patterns and Apple’s brand loyalty during the online trade-in process from October 2018 to June 2019.

Lack of innovation, high prices and stiff competition are some of the reasons cited for Apple’s consumer churn rate.

According to the report, the iPhone retention rate was down 15%, as more than a quarter of iPhone X owners moved to Android, but only 7.7% of Galaxy S9 users switched to iOS.

A report conducted by Consumer Intelligence Research Partners in March 2018 found Apple sales declined 17% in the first quarter of 2018, which ties in with BankMyCell’s new findings.

BankMyCell cautions that while its report is not a reflection of the iPhone’s overall retention rates, its data shows more iPhone owners are churning and opting for competitors such as Samsung, Huawei, LG and Motorola.

It further found that 18.1% of iPhone owners traded in their phones for Samsung devices in June, the highest level it's been.

“Smartphones like the iPhone need thrilling new features to justify most consumers’ upgrade decisions as the prices have got so high,” says a BankMyCell spokesperson. “As the prices of handsets like the iPhone increase, it most certainly has an impact on consumers’ upgrade decisions.”

BankMyCell further reveals that on average, 71% of iOS users remained with Apple during an iPhone trade-in from Q4 2018 to Q2 2019. Only 66% of iOS users trading in their phones opted to stay with Apple during Q4 2018, following the release of the new iPhone XR/XS range. The iPhone XS was in the bottom four devices for same brand upgrades, with only 65% of users, who currently used an iPhone, choosing it.

When comparing local prices, Samsung Galaxy S10 goes for R14 499, while Huawei's P30 Pro costs R13 999. Apple's iPhone XS 64GB is priced the highest, between R21 000 and R24 699.

Apple takes a beating

Apple’s second quarter financial results show the tech giant posted quarterly revenue of $58 billion, down 5% from the same quarter a year ago.

iPhone revenue came in at $31.05 billion, still down year-over-year, but the company says it made up over 53% of Apple’s overall revenue.

World Wide Worx MD and ICT expert Arthur Goldstuck says while there is a decline in Apple’s global market share, it’s not as bad as BankMyCell makes it out to be, as the research does not represent the market as a whole, because it looks at the second-hand ownership market in the US, where a high proportion of the market get their phones on contract.

“Apple is definitely taking a beating from Samsung and Huawei, as these manufacturers are offering consumers better technology at significantly lower costs,” Goldstuck points out.

“In SA, iPhone is a very small market share, with Samsung and Huawei having a far bigger market share. This is primarily due to costs and the fact that iPhone only has high-end models, which only appeal to the top end of the market, where Samsung and Huawei appeal to consumers across the board.”

When comparing the Huawei P30, for instance, its camera is superior to its iPhone competitor; however, it is priced much lower. In the same way, voice recognition on any high-end Android phone is much better than on Siri, with Google Assistant bringing in many more benefits, according to Goldstuck.

Samsung is ahead in the local smartphone market, followed by Huawei, Vodafone, Mobi Cell and Apple, he notes.

According to research firm GfK South Africa, smartphone unit sales in SA declined by about 7% year-on-year in the first quarter of 2019, while the value of the smartphone market climbed nearly 3%, to around R8.6 billion.

Arnold Ponela, research analyst at IDC, says while the entire global smartphone market saw a 6% year-on-year decline in shipments for the first quarter of 2019, the data shows Apple shipping 30% fewer iPhones than last year.

Notably, continues Ponela, Chinese brands went against the trend, with Huawei, Xiaomi and Oppo all boosting phone sales, thanks to their broad appeal in emerging markets like China and India.

“Apple is increasingly transforming itself into a luxury brand and consumers are increasingly turning to the array of Android devices.

“Apple has always played in the more affluent end of the market and its iPhones have always carried a premium price over competing smartphones with similar performance. Apple moved to revamp its device line-up by doubling its offering on thousand-dollar phones, and simultaneously dropping its least expensive models, which has made it clear the vendor is no longer concerned with appealing to customers of more limited means.”

According to Statista, global search interest in iPhones has been falling since 2012, after peaking with the iPhone 5.

While Apple’s iPhone announcements are still preceded by months of rumours, alleged leaks and endless speculation, Google Trends data shows the events themselves no longer create as much buzz as they used to.

“Looking at global search interest for the term ‘iPhone’ shows 2017’s announcement of the iPhone X, for example, sparked 30% fewer Google searches than the iPhone 5 did in 2012,” according to Statista.

An analyst from research firm Citi points out customers are getting less excited with each new generation of iPhone: “We suspect this is because of a slowdown in innovation and the saturation of iPhone in the addressable market.”

According to Reuters, more Chinese consumers are switching from iPhone to local brands, due to their better value proposition. In spite of the US-China trade war, the report notes Chinese brands led by Huawei have made big strides in wooing consumers with top-notch innovative mobile features.

“Of those people who are upgrading, there are many switching from Apple to Chinese brands but very few switching from Chinese brands to Apple,” Jiang Ning, who manages a Xiaomi store in the northern province of Shandong, told Reuters.