As the US smartphone market decelerates, Apple and Best Buy have been experiencing slower sales growth, and we forecast that the number of smartphone users will grow just 3.0% in 2019.
Apple sales have stagnated in all major markets that it reports. In Q1 2019, sales in the Americas grew just 3%, and iPhone sales dropped 18.4%. We forecast that Apple’s ecommerce sales will slow to 13.4% in 2019, down from 16.3% in 2018. Growth will be driven by sales on the App Store, wearables and home and accessories products.
Best Buy reported retail ecommerce sales growth of approximately 10% in its Q4 2018, which ended February 3, down from 17.9% growth the year prior. Some of the deceleration could be attributable to the difference in their accounting schedule: Their fiscal Q4 had one less week in 2019 than 2018. It could also be attributed to the slowdown in mobile phone sales. Notably, computing and mobile phone sales decelerated to 1.2% growth, according to the company’s Q4 report. We forecast that Best Buy’s ecommerce sales growth rate will remain stable at 10.4% in 2019.
As smartphone prices increase, with seemingly minor feature changes, customers are holding on to their phones for longer before replacing them. The iPhone XR/XS line costs anywhere from $749 to $1,349, and the Samsung Galaxy S10 line ranges from $749.99 to $1,299.99.
“Each iteration of a new phone, the changes are smaller than they used to be, so people don’t feel pressured to buy a new phone as quickly as they once were,” said eMarketer principal analyst Yoram Wurmser.
“The change, for example, between an iPhone 3G to an iPhone 4 was a big jump," he said. "The jump now between the iPhone X and the iPhone XS is pretty minor. People just don’t feel compelled to buy those phones every year-and-a-half; they’re waiting three years."
On top of increasing phone prices, there are competing devices that people are interested in spending money on: smart speakers, smartwatches and other personal and home accessories. Smart speakers, for example, are quickly being adopted by consumers after being widely available to the public. Research from IDC and Morgan Stanley estimates that US smart speaker penetration will reach 40% at the end of 2019.
Ultimately, the implication for a stagnant smartphone market is minimal for marketers. People aren’t giving up their smartphones, and in fact, most are increasing the amount of time they spend on their phones—they’re just not buying the newest handsets right away. This might change with the rollout of 5G technology, but until then, advertisers whose core marketing strategies are around mobile should stay the course.
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