October 25, 2018
In Q3 2018, within MTS Retail, handset sales demonstrated an explosive growth. This was mainly as a result of replacing various loyalty discounts and bonuses by the cashback program. The cashback encouraged consumers to update their smartphones. Another trend of Q3 2018 was that Russian consumers spent less on travel this summer and preferred to make expensive purchases, including devices.
According to VCIOM (Russia Public Opinion Research Center), 78% of respondents took summer leave, but only 31% of them travelled to another city or country, while the rest went to the countryside or stayed home. Instead, Russian consumers prefer spending their saved money on new smartphones in order to enjoy digital entertainment such as Youtube, online gaming, social networks and messengers which often replace offline entertainment. Due to changes in consumer behavior, there was no traditional decline in sales this summer. On the contrary, sales within the MTS Retail showed record numbers in the reporting period.
Cashback became the most efficient tool to attract customers and replace traditional discounts and bonuses. In Q3 2018, 52% of smartphones within MTS Retail were bought via the cashback program. The share of such smartphones almost doubled compared to Q2 2018. These numbers show that customers prefer immediate cashback to discount option and bonuses that often related to certain retail chain. At MTS Retail, sales grew significantly faster than the overall market: in Q3 2018, smartphone sales increased by 13.9% y- o-y in unit terms and by 52.4% y- o-y in monetary terms. At the same time, the Russian smartphone market grew by 1.6% y- o-y in unit terms and less than 21% y- o-y in monetary terms.
Yury Labis, Commercial Director, MTS Retail, commented: “According to MTS Retail analysts, before buying a smartphone, the average Russian user reviews promos and offers of five stores. With a similar price and quality of service, users make a choice in favor of the most advantageous offer. With the cashback program, we created a simple and transparent loyalty reward scheme, which allows the customer to receive a discount in cash immediately. Favorable purchase conditions attracted more customer traffic to MTS sales offices and increased sales in our retail. At the same time, credit turnover remained at the level of last year. This suggests that our cashback program stimulated customers to purchase new devices without using additional financial instruments, such as loans or installment plans.”
Three manufacturers — Samsung, Apple and Honor / Huawei — became the best-selling brands in MTS Retail. In monetary terms, their share was 94.1% of all smartphones sold in Q3 2018. Sales of Apple smartphones within MTS Retail increased 60% times in monetary terms and more than 118% in unit terms.
At MTS, demand continues to grow in all segments with the exception of low cost devices. Sales of affordable smartphones, predominantly Chinese brands, priced at up to RUB 5,000 fell 1.5 times both in unit and monetary terms for the year. The largest increase was seen in the price category of RUB 40,000 - by 120% in unit terms and by 136% in monetary terms. As a result, the average price of smartphones increased by 33.7% y- o-y to RUB 15,816. This growth was mainly driven by high-end models such as iPhone X, Samsung Galaxy S9 and Huawei P20 Pro.
The Russian smartphone market in Q3 2018
The smartphone market in Q3 2018 amounted to 8.3 million units and RUB 124 billion. Compared to the same period last year, it grew by 1.6% y- o-y in unit terms and 21% in monetary terms. The average price for mobile devices in Russia was RUB 14,976, an increase of 19.6% compared to last year.
In the Russian market, Huawei tripled its market share to 28.3% for the year and became the leader in the number of smartphone units sold in Q3 2018, releasing a line of devices in the low and mid-budget segment. Samsung was in the second place with a 24.8% market share, while Apple was in the third place with a market share of 11.7%.
In monetary terms, the market leader is Apple with a 32% market share, followed by Samsung with a 26.4% market share, and Huawei with a 25.4% market share.