Chinese telecom manufacturer turned mobile device maker Huawei’s low-cost Honor-branded smartphone has skyrocketed to sales of 20 million units from one million in the last year, a spike the company has attributed to a strategic shift to an online-only business model.
Huawei Honor brand president Jeff Liu said the vendor moved to an online sales strategy, mirroring a blueprint upstart Chinese rival Xiaomi has followed to its meteoric rise. The strategic adjustment owes to cutthroat pricing among low-cost competitors, Liu said, according to a Reuters report. Selling exclusively online eliminated 30 percent of the vendor’s costs allocated for distribution expenses, he said.
"E-commerce is massively changing the traditional channels for the smartphone industry, and we needed to go in that direction too," Liu told Reuters.
In mid-December, Huawei unwrapped the Honor 6 Plus, launched with the marketing slogan,”Not Just Bigger,” in an obvious reference to positioning the device as a competitor to Apple’s iPhone 6 Plus phablet. A year ago, Huawei began branding the Honor handsets separately from its own smartphones, selling the units in smaller markets in Europe and emerging areas in Latin America through online marketplaces.
Honor "doesn't make money but doesn't lose money," said Liu. Reuters reported that Huawei consumer division boss Richard Yu said the vendor must attract high-end customers as well as entry-level consumers.
"If Huawei wants to survive, we have to win in developed markets like Europe, a high-end market," said Yu. "Next year is very important for us to target the high segment."
According to researcher IDC’s Q3 2014 figures, the worldwide smartphone market rose some 25.2 percent with Samsung leading with a 28.3 percent share, followed by Apple (AAPL), with a 12 percent stake. Xiaomi, Lenovo and LG Electronics each own about 5 percent of the market, IDC said.
Researcher Kantar Worldpanel Comtech’s figures show Xiaomi taking over as the leading smartphone maker in China with a 30.3 percent share of the market, followed by Samsung with an 18.4 percent stake. Xiaomi said it shipped 18 million smartphone units in Q3 2014 and a total of 44 million units for the first nine months of this year.
Samsung, in particular, has lost share to Xiaomi and Huawei in the form of cheaper, more feature-laden smartphones flooding the market.