Trendy smartphones making rapid inroads with average-income households

  • 2011-04-06
  • By Linas Jegelevicius

WAY OF LIFE: Compared to the early ’90s, when few could afford a mobile phone, today the Lithuanian market is glutted with phones, says Vytaras Singaras.

KLAIPEDA - Do you remember the first-ever cell phones? Just twenty ago, the then-cocky Lithuanian entrepreneurs were swaggering around with an unseen, yet brick-like, heavy electronic device that sounded so strange to many ears – the wireless cell phone. The first cell phones in Lithuania were provided by Nokia - the Nokia440 - the first cell phone model ever, which have now entered into Lithuanian mobile service history.

Needless to say, back then, in the mid-1990s, mobile phones were affordable only for the cream of those days’ entrepreneurs, those capable of paying a fixed monthly 50-70 litas’ (14-20 euros) subscriber fee and up to 3 litas per minute charge for mobile chat. These charges, bearing in mind the lowly three-digit salaries at that time, seemed mind-blowing. “In the early ‘90s, in my electric appliance store in Silale, a little provincial town of 20,000 inhabitants in the southwest, I had a safe-like locked glass cupboard where I displayed several cell phones. Most of my clients at that time were curious gawkers amazed at the wireless connection. Ninety percent of them were unable to afford it. In comparison, five or seven years ago, in my enlarged store, I was putting on sale already 30 different models of cell phones. The excess curiosity over them had been long gone, as wireless connection had become a way of daily life. Nowadays, I display over 100 different models in the store, which mostly specializes in laptop and cell phone sales, as these products are the most trendy,” Vytaras Singaras, owner of Singatel, the representative company of Omnitel, Lithuania’s major wireless service provider in three provincial towns, Plunge, Silale and Taurage, related to The Baltic Times. 

Technically, over twenty years, following worldwide trends, cell phones have gone a stunning path, advancing from button-operated phones to computer-like Apple’s iPhones or Blackberries, combining the most sophisticated Internet and mobile connection characteristics. “Today the Lithuanian mobile phone market is glutted with thousands, or probably millions, of phones - different in size, price, characteristic and origin of manufacturer,” Singaras concludes. Moreover, more bright news may be just around the corner. According to research by GfK Retail and Technology, a market research company, the IT market has lately been expanding the most rapidly in Lithuania, compared to the other two Baltic States, Latvia and Estonia.

Thus, last year, IT goods sales, including mobile phone sales, went up a staggering 27.6 percent in Lithuania, while the growth equaled 13.5 and 11.5 percent in Latvia and Estonia, respectively. “The most important change in the Baltic IT goods market is the redistribution of the market, which saw a substantial rise in audio and video device sales, but experienced a significant plummet in electric appliance sales,” Grybovas, a GfK Retail and Technology representative in Vilnius, said. In Latvia and Estonia, he relates the trend to the rapid digitalization processes, while in Lithuania it was more related to the former World Basketball Championship in Turkey which, with the great play of the Lithuanian national team, attracted hordes of onlookers. Grybovas foresees a further slump in sales of such appliances as tape recorders, music players and home theater systems in the Baltic countries, as the goods are being successfully replaced by the multifunctional smartphones.

“Obviously, mobile phones have become unquestionably the most sought-after gadgets. With the introduction of smartphones in the Baltic market, their abilities go beyond imagination, which results in their robust sales and mobile phone sales on the whole. Hence, mobile phone sales grew 27 percent, while smartphone sales skyrocketed by a staggering 455 percent in Lithuania last year. Thus, their sales made up 12 percent of the 2010 total mobile phone turnover, reaching the Western European sales average for the last months of 2010,” Grybovas pointed out. He thinks that smartphone sales will keep going up this year as well, and will make up roughly 30 percent of the overall mobile phone market. “In observing the trends in my stores, I can conclude that the rapid smartphone sales, in terms of quality and characteristics, mark an entirely new benchmark in the mobile market. With smartphone prices dropping, the devices become more affordable even to middle-income customers. Like twenty years ago, the youth rules the roost, willing to have everything – cell phone, recorder, radio, dictaphone and camera, however, it is just a matter of time when things will change,” Singaras said.

He sells different brands of cell phones in his three stores, as he has been observing what he calls “interesting things” in the business. “For many years, Nokia has been unanimously acknowledged as the single leader of the wireless market. However, in recent years, its leadership is robustly crumbling, as other emerging market leaders - Samsung, LG, HTC, Apple, Android-type gadget makers - are gnawing rapidly away at its lead. They are about to overtake Nokia mobiles in sales,” Singaras predicted.

The businessman, having started with a single store in Silale, has successfully expanded his business to another two neighboring regions, Taurage and Plunge. Being Omnitel’s full-rights representative in the regions, he prides himself on the achievement. He says his business, a few years ago before the crisis yet, endured a “certain setback,” following Omnitel’s hardships due to a large loss of customers in the aftermath of the disputable Omnitel mobile service plan, which aimed to attach its customers more strongly to the provider. However, Singaras rejoices that Omnitel has been able to bottom out and emerge as a leader in Lithuania’s smart phone market. “No one, not even Omnitel’s rivals, doubts that Omnitel is the 3G network leader in Lithuania. Many people who tended to use feature mobile phones, after discovery of Omnitel’s 3G services, providing impeccable wireless phone service, fast mobile Internet, Skype and other computer-characteristic features, do switch to the latter, despite a comparably higher price for the devices, like smartphones,” the Singatel owner asserted.

He admits having experienced the severest blow of the crisis in 2009. “Mobile phone sales went down by 60 percent in 2009 compared to the previous year. Though the turnover rose a rapid 40 percent in 2010, it still has not reached the pre-crisis sale levels,” the entrepreneur said. For many years, in the little town of Silale, he was dealing with competition from only stores representing the largest mobile connection providers, like Tele-2 and Bite. However, he notices that in recent years other mobile device stores have started popping up. “I am not intimidated by the competition, as it makes me work better. Besides, I have established myself as a seasoned businessman, having made inroads in many households in town. Therefore, I count on that, as the dwellers tend to entrust me with their burdens regarding their mobile services,” Singaras said.

“The market trends are rather simple – we see a considerable growth in smartphone sales, as more customers choose mobile phones from the middle and above-the-middle price range. In addition, Lithuanian customers started being interested not only in Nokia phones, but also in other mobile phone producers’ goods, like HTC and BlackBerry. Though Nokia edges up a bit ahead of its key rivals, Samsung mobile phone sales have nearly overtaken Nokia. It is just a matter of days and weeks when Samsung, followed by HTC, will catch up with Nokia.

We are witnessing a rather substantial switch in the market. Speaking of the price range, most Lithuanians stick with 350-600 litas mobile phones. However, lately we have been seeing an accelerating increase in 1,000-plus-something litas mobile phone sales. With the purchasing power increasing in the country, more and more customers prefer buying a more expensive phone, usually a smartphone that nowadays is available in quite a large price spectrum. The mobile phone prices are largely determined by their importers, as there is not room for large mark-ups due to the high competition in the market. Generally, Lithuanian mobile phone prices are similar to those of the devices abroad,” a representative of GSM turgus, a mobile phone retailer in Kaunas, said, answering The Baltic Times’ query.

Chris Robbins, customer chief officer of Bite group, one of the three largest mobile connection providers in Lithuania, also observes an increasing popularity of smartphones and increased use of the phone for more than just talking. “Smartphone sales already comprise almost 35 percent in Bite’s overall market in Lithuania, leading smartphone penetration to about 12 percent. Our customers are hungry to try novelties and we give all opportunities to do so, making no compromise between price and quality in our services,” Robbins said to The Baltic Times.

He says Nokia is still the market leader overall in the Baltics, however, in the smartphone category, the obvious players, like HTC, Samsung, Blackberry and Apple, are dominant in terms of sales volume. “Smartphone users increasingly use their phones for surfing the Web, and to keep in touch with friends using mobile versions of social networks. These additional ways of communicating in some cases even are a substitute for voice and SMS use. Non-smartphone  users tend to choose their phones for ease of use, familiarity, price and battery life. Smartphone users tend to choose based on the operating system, applications, and a huge ‘cool’ factor,” Robbins emphasized.

Speaking of prices, he asserts that in Lithuania these are amongst the lowest in the world. “With no real ‘non-operator’ retail distribution of phones – like a ‘carphone warehouse’ – the vast majority of phones are sold way below their cost by operators linked to a service and/ or a contract. This model does not make sense, as it limits customer choice and flexibility, locks them into contracts, and the cost of the phones is buried in the service pricing. In some countries, where subsidies have been stopped or reduced, there is much better transparency for customers, and they can choose the phone they want, buy it, and then choose any operator. That type of transparent pricing ultimately drives better handset prices for customers and better service as customers can more easily change operators,” the Bite customer chief officer remarked.

Bite has over 80 points of distribution across all parts of Lithuania. Across Europe, the average target is about 1 store for every 30,000 to 50,000 people, so for a country the size of Lithuania, the right level is about 60 – 100 stores. “Any more, and the operator is wasting money. Their customers’ money, actually. Our distribution investment now focuses on training, communication, and in-store and call center execution,” Robbins maintained.