The cell phone market is one of the strongest and most stabilized markets in the industry today. Nokia is a Finnish company that has been around for more than a century, and was once the largest vendor of mobile phones in the world. Unfortunately, their move into the smartphone industry was ill fated as they quickly became overshadowed by tough competitors in Apple and Samsung. Their mobile phone business has since been bought by Microsoft in a deal totaling $7.17 Billion, and has led to a creation of a new entity called HMD Global in 2016 (which still operates under the “Nokia” brand name). Though many see the smartphone business has being almost completely saturated by the sheer market dominance of Apple and Samsung, the Nokia 6 Android smartphone seems to be doing rather well currently. That statement’s foundation is built on the idea that America is not the only market for different smartphone players to thrive. In this case, Nokia has done quite well in China and has a brand appeal to the country’s consumers. Basically, does China offer another playground for products that would not normally thrive elsewhere? If so, does a specific business model drive it?
Formally announced on January 8 of 2017, the Nokia 6 has already gathered 1.4 million registrations before a second flash sale in China. The phone had garnered 2.5 million registrations just 24 hours after they opened on JD.com. What is more absurd, is that the first flash sale for the Nokia 6 saw the phone going out of stock within 60 seconds. Flash sales are the sales of goods at greatly reduced prices, lasting for only a short period of time. This business model seems to be very effective in China with its consumers, as Chinese companies such as JD.com and Vipshop thrive on this model. It seems as if the Nokia brand recognizes that they have appeal to the Chinese consumer, and have directly tailored this phone exclusive to China. But, the management levels of Nokia’s smartphone division see the crucial importance of working with established flash sales vendor such as JD.com. Nestor Xu, vice president of Greater China, HDM Global, announces his verdict on the Nokia 6:
“China is the largest and most competitive smartphone market in the world, it is no coincidence that we have chosen to bring our first Android device to China with a long-term partner. Jd.com is known for its upward mobile customer base and it has for many years believed in the Nokia brand and sold millions of our products to Chinese customers. Launching our first smartphone device, in such a strategically important market, with JD.com a trusted online retailer marks a signal of intent” (Investopedia).
Even though most Americans see the cell phone market as primarily dominated by either Apple or Samsung, this is not the case in China where multiple players exist. Hence, the main question asked is what does it take to succeed with the average Chinese consumer. Is the current success of Nokia 6 in China only possible through the company’s collaboration with flash sale vendors? Can it thrive without this business model in other countries? Data shows that mobile phone companies such as China’s Le-Eco are succeeding well in countries such as India. The flash sale model is again implemented, and the company launched their Le Eco’s smartphone in a series of three flash sales. The first sale resulted in sales of 70,000 units in 2 seconds. The second sale paved way for the sale of 95,000 units in about 20 seconds, and the third one sold about 55,000 in 9 seconds. Is the flash sale model that critical to success in China?
What makes the cell phone market in China more hospitable to Nokia than the market in the United States? Is there any data to suggest that brand name matters more in the United States (e.g, is having an iPhone more of a status symbol) as compared to China? Or is there a significant price difference between phones that creates the differential in sales?
How many cell phones are sold at stand-alone stores as opposed to via provider contracts (Verizon, Sprint, T-Mobile)? These may be relatively closed sales channels, where you have to negotiate a contract and get them to push your phone. In other words, they don’t need you.
It may be easier to break into a market if there are more sales channels.
I have never heard of flash sales before but it seems to me that Nokia has turned to this out of desperation. Why does it have to mark the price of its phone down so much in order to sell it? Since flash sales constitute the main source of Nokia’s sales, it must mean they have an inferior product if only the most price conscious consumers are buying their phones. I also find it mind-boggling how these flash sales are implemented. How can you sell thousands of phones or any product in just a few seconds?
Surely the “flash sale” price still leaves money in Nokia’s pockets, and as the final paragraph notes there are typically only a limited number offered for sale. We should look at this as a somewhat expensive [depending on numbers of phones offered] but extraordinarily effective advertising campaign.
After reading your blog post I’m very curious about IMD Global’s business strategy of using flash sales to sell their product in China. You stated in your article that the United States has two dominant competitors of Samsung and Apple in the cell phone industry. If a third competitor (Nokia) entered the market using flash sales, how well would they perform? Also, how much did Nokia have to mark down their product in order to sell it so quickly?
I find this especially interesting given Nokia’s reputation (in the US at least) as the type of phone that could be run over by a tank yet still be able to function perfectly. The idea of a flash sale seems perfect for a Chinese consumer market obsessed with obtaining the latest in hip technology.
I read an article a while ago that explained how Apple was struggling to crack the market in China simply due to the extortionate cost of the iPhone/other Apple products compared to a combination of the real wage in China and the low cost of Apple alternatives. Thus, the idea of Nokia instigating flash sales in order to gain market share seems like a fairly logical strategy. What will be interesting to observe in the future is if Nokia can maintain their market share, but with gradually higher quality/priced products that the Chinese population would be willing to purchase, without the need for flash sales.
Apple does well in China, but unlike the US competition in China is stronger as there are good (but less trendy) alternatives at much lower price points.
Don’t iPads now face that sort of competition in the US? I regret buying one, I could have gotten comparable functionality at a much lower price because iOS is so different that I can’t just swap with my computer.
The use of flash sales is understandable given that the world only continues to digitize. Despite the rapidly expanding online population, it must be noted that 60% of the world’s population still has no internet connection (internetlivestats.com). The reliance on flash sales cuts this percentage of the population mostly out of the market. For smart phones like the Nokia 6 internet connection on the part of the consumer is generally implied, though for any cheaper, more basic phone models being sold by other makers the lack of internet would not necessarily be an issue for phone use and the flash sale strategy would exclude part of the market.
There is a lot of innovation in China in business models and not just in products. Does anyone in the US use “flash” sales? I think that’s a real innovation, one that is present in much of the world (I don’t know about Europe).
Our visiting speaker next week will talk about the product side in China, and what is needed to sustain it. I will hand out a recent news story on Apple’s struggles in China: the open-source Android operating system allows anyone who has a design idea to enter, since there are now independent producers of the underlying chip sets for smart phones and independent engineering houses who can design custom add-on functions and job-shop assemblers who can do runs of a mere 50,000 phones.
Remember (well, I do!) that Apple lost a similar open- vs closed-source war in the PC market, and almost went out of business (Steve Jobs was fired for cause and only many years later rejoined Apple).
I would be curious to see if most of the buyers involved with these flash sales are returning Nokia customers. If so, they may have been able to make a lot of these sales without resorting to flash sales. However, if they’re attracting new customers to their brand with these, then this is an enormous innovation… for the cell phone market in China at least.
I find Nokia entering the Chinese market to be quite interesting since the only context I’ve heard Nokia mentioned in in the past couple years is their near-indestructible construction. These flash sales seem to have some intriguing merit as we do something similar (Black Friday/Cyber Monday) and it seems to be a relatively successful venture or I imagine companies would even partake. I wonder if flash sales will become more common at least in the U.S. if producers see high levels of success in the Chinese markets.
Yeah, I’m really intrigued about the idea of Nokia having flash sale here in the United States. It is obvious that Nokia would incur heavy costs having one of these sales here, but would people in the United States purchase these products? Or are we all doomed to think that Nokia sells an inferior product and continually feed Apple’s profit machine?
Note that in China flash sales may have only 40,000 or some small number of phones / products, which millions try to get. Think advertising, not systematic discounting, that gets [tens of] millions of potential customers not merely knowing your name, but actually looking at a particular product.
I’m really interested in how Nokia has been able to infiltrate the Chinese market for cellphones. You discuss the importance of flash sales and how the phone it tailored for the Chinese. However, I would like to know more about what makes the Chinese actually prefer and purchase this phone.
Nokia seems to be a bold company, that isn’t afraid of targeting big name producers. I remember when my uncle worked for them and headed a team in charge of producing an e-reader that could rival the Barnes and Noble Nook or Kindle Fire. It’s an interesting business strategy to target large brand names by lowballing the larger producers and brands of a certain product. Nokia, thus, must be content at offering alternatives to more expensive products, which allows them to capture market share in areas that cannot afford a top line price.
Apparently HMD Global is not following a flash sales model for the Nokia 6. Rather, it is having trouble keeping up with overwhelming demand. HMD stated,”Actually we have been updating the inventory on JD.com more than 3 times, but those were usually gone within minutes or hours, so that’s why you have the impression that we were doing flash sales. We will keep the supply to JD for sure and now the Chinese New Year holiday is mostly over and everybody’s back for work, you can expect more supplies in the coming days and weeks.”
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