News Column

Economic slowdown takes toll on smartphone sales

July 16, 2014

Dana Halawi

BEIRUT: The drop in the purchasing power of the Lebanese in the past two years due to the economic slowdown has suppressed people's temptation to replace their smartphones with the latest models on the market.

"I am passionate about smartphones and I used to replace my mobile every year upon the release of a new model but I am not doing so anymore because my employer has cut our salaries in the past year to be able to survive," said Ahmad Merhi, an accountant in a trading company in Beirut.

Like many others, Merhi's shopping preferences have completely shifted to daily basic needs, especially with the increase in the cost of living in the past few years. "Smartphones have become a luxury for me rather than a necessity," he said.

Mobile phone shop owners interviewed by The Daily Star reported a drop of one-fifth in demand for smartphones this year as compared with 2013, due to the economic slowdown in the country.

"Sales have dropped by around 20 percent this year compared with 2013," said Roger Darjany, partner at Talaco, a distributor and retailer of mobile products.

He added that he was surprised to find sales were 50 percent lower this summer than they were in 2006, during the Israeli war on Lebanon. Darjany said that in 2006 Lebanese consumers did not minimize their demand on mobile products as it is the case this year.

"We had Lebanese customers back then but nowadays local and foreign demand has been reduced by half," he said.

He added that while Syrians bought a lot last year, he suspected they were focusing their spending on necessities rather than on luxury products. "I guess they are focusing more on basic needs because the crisis in Syria is not over yet and most of them are not sure about when they will be getting their jobs back."

Likewise, Samah Fakhreddine, a sales manager at Power Cell, a phone retailer, reported a drop of over 30 percent in smartphone sales in 2014 compared with last year.

"But if we are to compare June 2014 with the same month last year or the year before we realize [there has been] a gradual drop in sales," she said.

Fakhreddine said the economic situation has even prompted merchants to avoid displaying a wide range of products in their shops.

"Retailers nowadays prefer to display only one item of each kind, so as to avoid stocking products and losing their money when prices go down upon the release of new models."

Fakhreddine's remarks were echoed by a sales representative at Class mobile retailer in Downtown, who said that sales have dropped remarkably compared to last year.

"As you can see, we do not have clients. I cannot say that we are not working but we are definitely not doing as well as we should have been," he said.

As for the smartphones that have witnessed a decent level of demand compared with the two best-selling iPhone and Samsung handsets in the past year, shop owners noticed a strong entry into the market by HTC products.

"We have been witnessing lately a good demand on HTC products compared with other items because it combines the good features of Samsung [phones] and iPhones," Darjany said.

"We expect HTC to witness as much demand as Samsung and iPhone in the coming two years because of the brand's great features and its great price range that could be affordable to anyone," he said, adding that the price of HTC smartphones ranges from $200 to $800.

"HTC will take over the local market soon," said a salesperson at Hamdan Home Appliance in Jnah.

He said HTC has three to four product ranges that are compatible with all consumers.

"The $200 HTC entry model has competed successfully with the Samsung priced at $300, with the same or more advanced features of Samsung," he said.

"HTC does not have the same freezing problem that you can find in old Samsung smartphones."

Mobile expert Amer Tabsh said HTC was present even before iPhone and Samsung in the Lebanese market and most users who carried version 5 or 6 of the Windows Phone between 2005 and 2007 were HTC users, but when the first iPhone was released, users in Lebanon shifted dramatically from HTC to Apple.

Tabsh believes that HTC was and is still present, and that its phones have design and quality standards that are even better than Samsung, but that HTC falls behind its rival when it comes to marketing.

"The latest HTC devices have been sold in Lebanon before Dubai and Saudi Arabia, but price tags are a bit higher than Samsung and LG devices," he said. "Moreover, There is no official service or proper marketing strategy, which are the key factors delaying the possibility of HTC overtaking Samsung in our market."

Tabsh added that demand is still high for the iPhone even though it lacks most of the options available on other brands.

"The demand on iPhone is mainly due to its friendly operating system, applications and games," he said, adding that Samsung smartphones are the best-selling android devices because they cater to all tastes.

However, Tabsh strongly believes that big spenders would invest in HTC if they could because of its phones' advanced features.

For more stories covering the world of technology, please see HispanicBusiness' Tech Channel

Source: Daily Star, The (Lebanon)

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