The Shenzhen Market Mini-Guide
I work in Technology, focusing on Emerging Markets at Google. All views expressed here are strictly my own — formed through travel, work, observation, and many ongoing conversations with experts on the ground. All feedback is welcome.
A quick jaunt to the main electronics marketplace in Shenzhen, in China’s southern Guangdong Province provides a glimpse into the massive scale of the Chinadroid phenomenon. This is the biggest single global marketplace for smartphones — in 2013 alone, an estimated 400 million Chinadroid devices were shipped out from China to the rest of the world, with the vast majority produced and sold from Shenzhen. Some of my observations are below.
Chinadroids: These are phones that use the Android Operating System but have not gone through official channels for compatibility (CTS) or do not have a Google Mobile Services (GMS) license.
Hua Qiang Bei Market is a 2 mile strip with several major plazas (huge, brightly lit, stuffed full of people and shiny objects) in Shenzhen’s central business area. There are scores of miniature stalls packed into about twenty massive electronics markets. SEG Plaza, Long Seng Market, Yuan Wang, Qong Xiang are some of these— each selling almost identical products.
At least hundreds of completely unique phone models are stacked in large and small shops. Standalone ‘brand name’ stores like Samsung, Huawei and HTC are scattered in between. Most customers are from China, but there is a peppering of foreign languages and dress. Outside of domestic Chinese sales, countries sold to span the globe— one tiny shop had currency from Indonesia, Oman, Ethiopia, China, India, USA, Malaysia, and Pakistan.
Smartphone Scale and Volume — in 2013, Smartphone sales exceeded feature phones for the first time
Worldwide sales of smartphones totaled 968 million devices in 2013, an increase of 42.3 percent over a 12 month period, according to Gartner. Perhaps most significantly, sales of smartphones made up almost 54 percent of overall mobile phone sales in 2013, and outnumbered annual sales of feature phones for the first time.
Overall, there are well over 300 million Android devices sold within China — most are manufactured in the country, which is easily the world’s single biggest market right now. The vast majority of these devices are churned out by factories in the Shenzhen area. Korea and Taiwan have similar factories, but do not pose much competition scale-wise.
As for the rest of the world: 100 million white label devices (mostly smartphones and tablets wrapped up in packaging appropriated from existing, branded models) were shipped from China to other regions in 2013. And a conservative estimate for other (GMS licensed) devices from China to other regions stands at a staggering 200 million.
Pricing, Features and Quality—getting better for users
The popularity of the Chinandroids has clearly led to a shift in strategy for for official device manufacturers. Prices are coming down and there is a rush to fill in the gaps for users who have specific needs and are price sensitive.
This is a highly commoditized market, and device features eclipse branding. New model turnaround times are < 3 months from launch to sale. And buyers have options — for every ‘Real’ device, there are ~10 phones at varying price points which run on the stock Android Platform, but in a plastic shell that looks awfully similar to the original Samsung Galaxy or LG G3 device. The ‘better’ copies come from Taiwan, with ‘only’ difference to the original in some cases being the newer induction feature (waving a hand over the screen to unlock it, for example).
Most Chinadroid phones are within the US$40 — US$100 range, and these will undoubtedly come down with Mozilla’s Firefox Smartphone ($33 at retail) and the launch of the Emerging Markets-targeted ~$100 priced Android One device in India this month. Regions broadly determine pricing: cheaper phones are sold to buyers from Africa.
Most devices over US$65 seem to have GPS, WiFi, Dual SIM card functionality, a 2-sided camera, and full Voice/Video capabilities. CDMA is more expensive than GSM. The phones in the US$40 — $65 range do not necessarily have GPS or 3G capability.
For the more obviously low-end phones, icons are too big, fonts do not fit, the UX experience is slightly slower and error-prone, and GPS is not prevalent. Upon charging and exploring, some of the devices do not have promised features, and performance on some of the cheaper devices is noticeably terrible (i.e. You currently get what you pay for).
Customization of devices — not all users are the same
Importantly for handset manufacturers focused on Emerging Markets, design modifications and phone customization specific to these markets are prevalent — these include language, features like dual-SIM cards, and a willingness to drop features like GPS for markets where that connectivity functionality is low.
Dual-SIM Cards are highly sought after by consumers — as most developing countries still have roaming data pricing even within-country. Another reason is that some people use one for work and one for personal. Almost every local device has this design feature — which is clearly adding value across the board and for every market.
Most phones could be built ‘to order’ — both in terms of labels/stickers/packaging, as well as hardware and software features. Even an order as small as 500 phones could be fully customized.
Software and App Stores
Google Play was not preloaded on every device, but it is largely prevalent on the higher end models (RM 400 or US$65 and above). There does not seem to be one consistently popular alternative App Marketplace. Baidu was the major Search App, generic email apps, WeChat and AliBaba/AliPay are preloaded onto many devices (Facebook was surprisingly not on most).
Distribution and Sales
Bargaining is expected — and a 15–25% discount seemed to be easily attainable. No one blinked an eye at anyone’s trying to place orders of ‘1–2 thousand mid-priced Samsung/HTC/LG devices bound for a South American country’.
Legal issues do not seem to be a major consideration here. No one minds pictures, and it appears that buyers can walk out with suitcases full of phones, breeze through customs, and hop right onto the MTR back to Hong Kong. Somewhat ironically, there are law enforcement officials standing around thousands of locally manufactured, often incorrectly branded white label devices in all of the plazas, watching for thieves.
And of course, very importantly — distribution is global and efficient — very little red-tape seems to exist in placing and shipping out orders to some of the world’s fastest growing markets on every continent.
Next piece: Getting In on the Emerging Markets Smartphone Boom; And what it means for Entrepreneurs here