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Flagships are growing in value year by year. There are many reasons for this, but the trend itself remains unchanged, and we considered this issue in a separate article.

There are two trends on the market in 2020, and they can be safely called multidirectional, this is the time when the bulk of buyers did not come to any unanimous opinion about what is profitable and correct. On the one hand, the emergence of various credit programs, installments, subscriptions for smartphones makes it possible to purchase flagships even for those who, due to their limited budget, cannot buy them initially. On the other hand, the rise in the average price of the flagship is such that even taking into account financial instruments it becomes an expensive pleasure. Ten years ago, the cost of a flagship in Russia, and in the world, was fundamentally different, in relative terms, recalculated for the average income of a spherical resident of the country, such a smartphone rose in price 2.7 times. This does not mean that the price of the flagship has almost tripled, this parameter has doubled. But the purchasing power of the spherical dweller has also changed, it has decreased, smartphones have ceased to be the primary purchase, which also contributed. In order not to go into the jungle of reflections on this topic, let’s leave them aside, they are not so important in the context of our reasoning.

By 2020, two trends have taken shape on the market, which we will consider, they have gained approximately equal number of supporters. The first tendency can be called “we are not rich enough to buy cheap things”, supporters of this approach buy devices from a price segment that is formally expensive for them or not at all available. Installment plans and other financial instruments are used (the same trade-in that has become so popular), the choice of an expensive device is dictated by the fact that it is “better”, “will last longer.” And here the calculation of the cost of use comes to the fore, when the price of the device is recalculated for the expected life. It can be represented something like this: a flagship costs 70 thousand rubles, and a person plans to use it for 2-3 years. If it is 24 months, then the ownership price per month will be 2 rubles, for 916 months – 36 rubles. Both options seem to be acceptable to most, these are affordable payments and the opportunity to buy a flagship.

The incentive for choosing an expensive smartphone (this is not necessarily a flagship, we see the main growth in such sales in the middle price segment of 20-40 thousand rubles and the failure of smartphone sales to 10 thousand rubles) is its service life and almost always ignorance of this product. Buyers with this philosophy are almost always happy with their choice, as their previous smartphones were noticeably worse than those they are purchasing. They benefit from everything – camera, screen, battery life and interface speed. Transferring from an old and inexpensive device to a smartphone of a different level, people see a serious difference in the capabilities received.

It is important to make a reservation that very often, for some reason, they try to compare devices from the same year, as if the buyer has fully grasped Zen and exists only here and now, and until the moment X did not possess any devices. Buying a new smartphone is always a rejection of something of the past, of a device that was bought one, two, three years ago. Situations with stolen, broken devices are not as common as it seems from the outside, so they can be ignored. And here it is important to understand that even a model of the same price segment from the same manufacturer changes greatly over a couple of years, the set of these changes makes the perception of the new device a higher class. And this is what lays the satisfaction from the purchase for a person, he sees the difference.

It is quite another matter when the one who used the flagship suddenly chooses the model of the middle segment after two years. As a rule, he notices certain shortcomings, since these are devices of a different class. Can you put up with them? Definitely. But he will definitely not receive pleasure in the same volume as a person traveling from the bottom up (from ordinary models to more expensive ones).

I have repeatedly heard the opinion that people spoiled by the use of flagships can hardly refuse them, use models of the middle segment. This is partly true, but here the economic factor comes into play. How much are you willing to pay for the pleasure of using a top-end smartphone, what is the psychological cost limit? For me, as well as for many residents of Russia, the cut-off point is the price of 100 thousand rubles (for residents of the United States it is 1 dollars, in Europe – just under 000 euros). This is not a question of the presence or absence of money, but rather an attempt to rationally assess how much I need a device for such an amount that I will receive as a user something that models for less money or the previous generation cannot give. My experience in this aspect is not applicable to our reasoning, I definitely fit into the exceptions. But look around and see how many people in the past few years have chosen not the latest flagships, but the models of the previous season. The rhetoric that the new items have no advantages and the old model is just as good has been heard since the early days of smartphone development, but it has become louder in the last few years. The reason is that the additional features of smartphones are already redundant, many simply do not need them, and the line between the flagship of 900 and 2019 is gradually blurring. This is an extremely important point for understanding – the previous flagship is perceived today at the level of current models, since the difference in characteristics or capabilities is not fundamental for many buyers.

And this leads us to a very interesting observation: in 2019-2020, sales of the flagships of the previous season begin to grow in Russia. There are several reasons for this, let’s list the main ones:

• The tendency described above is when people are guided by expensive devices and choose them for a longer period. Often these are the flagships of the previous season, and not the current models – a sort of reasonable price / quality ratio;
• Initially rational buyers who have always done this (their number remains the same plus or minus), they convince others that this is the right approach;
• People who are not psychologically ready to buy the current flagship for its full price (and bought a few years ago, but then it was a different cost, a percentage of their income);
• People who previously bought flagships, but for economic reasons, now cannot afford it.

The response of Russian retail to this is the collapse of prices for the most popular Android smartphones, you can get a 15-25% discount, sometimes even more. This is an attempt to capture those rational, value-sensitive buyers and offer them a good deal. I have repeatedly said that this leads to exactly the opposite – people are accustomed to exorbitant discounts, they wait for them and do not buy goods for real value. The market is poisoned by constant discounts from MTS (and recently MVideo and Eldorado also began to indulge in this), regional players have long switched to purchasing smartphones in MTS retail, this is easier and cheaper than directly from the manufacturer. Fulfillment of sales plans at any cost has become the hallmark of MTS, and billions in losses from these actions are compensated by the operator at the expense of subscribers. The approach is at least surprising, and it cannot be explained by anything other than the tradition of giving money to customers that has already developed within the operator.

The share of flagships and their sales in Russia is kept at about the same level, although in theory it should decrease with increasing value. The explanation in the trend that we have considered above, for many buyers this seems to be a rational approach – to buy such a model and use it for a long time. For many, this is the first flagship in their life.

To finish talking about the first trend, I want to say that there is also an image aspect. Flagships have turned into status devices, a noticeable image component has grown in them, and the price directly influenced this process. Most of those who purchase flagships without regard to their capabilities are those who have money (as an option, go into debt) to demonstrate their status, that they have the ability to buy such devices. We see the repeated transformation of flagships into elite, not available for all accessories, which testify to the status. To some extent, it can be argued that the days of the Nokia 8800 are returning, but now in the smartphone market.

Dropped the flagship and chose the Galaxy A51 – the middle segment and the second trend

So we got to the second trend, which began to gain strength in 2019, and today it is fully manifested. People stopped seeing a big difference between mid-range models and flagships. For example, you can take in this capacity the most popular smartphone in Russia – Galaxy A51.

Five years ago, the difference between a smartphone similar in price to the A51 and a flagship was obvious to anyone, it was clear what you were paying for. Today many people cannot understand the differences, it turns out that the capabilities of the A51 are enough for them. A large AMOLED screen with AoD, fast charging, performance at the level and good, albeit not the best, photos on the few camera modules that it has. And at the same time, the price is 3-4 times lower than that of the flagship. Yes, different body materials, different perception, but the difference in cost is staggering.

The second trend emerged as a response to the slow evolution of flagships and the fact that many functions are secondary to people. Let’s conditionally assume that the Galaxy A51 costs 20 thousand rubles (it can be bought much cheaper, sales are held every week). And Galaxy S20 can be purchased for 60 thousand rubles. And here the person begins to think what he will get in the flagship:

• Better cameras, but how much cooler are they? For many, the difference is not fundamental;
• Wireless charging and reversible charging;
• Better body materials;
• The screen by eye is comparable (they differ greatly, but, again, the person does not care, he believes that they are the same!);
• A set of software features that distinguish the models (also does not look fundamental);
• Water resistant.

A person can add something to this list, but these items are almost always present. And suddenly it turns out that at a price higher by 40 thousand rubles, the choice of the flagship is not so obvious. Several times I came across how the supporters of this approach argue: “Wireless charging adds so much to the price, more memory – this is so much, but the difference of 40 thousand rubles does not come out in any way”. And there is a rational grain here, the models of the middle segment do not have an image component, but they are comfortable, modern and do not have any significant flaws. In terms of price / quality ratio, the same Galaxy A51 is almost perfect, as the sales prove.

There is a noticeable trend in the market in which those who have owned flagships for the last 5-6 years suddenly choose models below the level. There is a danger of attributing this solely to economic reasons, they say, there is less money, and therefore people choose such devices. It is possible that for some buyers this is true, but this is a small number of people. Such a choice is dictated by rationality, the fact that people do not perceive smartphones and other products in this life as carrying an image, status component. That is, they practically do not care what you think about their choice. Frankly speaking, this moment really pleases me, it is a demonstration that buyers in Russia have matured and become more rational.

In Russia, sales of Xiaomi took off, and this applies to virtually all price segments (there is growth above 50 thousand rubles, but it is hardly noticeable, here the company is still weak). Digging into the data of who and how switches to the company’s smartphones, I observe a clear trend – this brand absorbs many of those who used the flagships of other companies and realized that owning them does not give them any coolness in the eyes of others. Most of the transitions to Xiaomi from the iPhone of previous generations, the second place in terms of share are smartphones from Samsung. The rise of Xiaomi is largely associated with the first trend, but adjusted for those who do not care about the image. More precisely, external assessment from strangers is not important.

It turns out doubly interesting, now the fact of owning the very best smartphone does not play a role, many people are ready to choose models of the middle segment, and even choose other manufacturers. This does not mean that the influence of the brand and the perception of a particular brand are a thing of the past, they have weakened. The same Apple is perceived by the target audience in Russia, as in previous years, as a status and unparalleled entity, it is a kind of separate entity (you have an iPhone, which means plus a hundred to coolness, perception by others, and so on, but this approach is more and more moves to the periphery, in Moscow it stops working).

We examined two trends – choosing flagships for long-term use and abandoning flagships in favor of devices with a good price / quality ratio. The first trend is stronger than the second, and this is noticeable in sales. But the abandonment of flagships is just gaining momentum, and this is happening before our eyes. The higher the cost of new models, the greater the rollback towards the middle segment. This year will not be an exception, the iPhone line at the end of the year will be higher in value (directly or indirectly, it does not matter – prices will rise). Consequently, the second trend will receive additional fuel, and sales of models in the middle segment will continue to grow. This does not mean that the flagships will disappear, they will not be – the audience of such devices is more or less constant, and it will remain. But we are seeing the emergence of flagships as elite devices, accessories to demonstrate status. All models costing more than 100 thousand rubles can be safely attributed to those, and this segment was absent until recently. Its appearance and development will lead, in turn, to the fact that the choice of models of the middle segment will receive a larger number of supporters (I cannot buy the most-most – then I will choose what really suits me in terms of capabilities).

Tell us in the comments how you feel about the middle segment, the second trend. Or are you an adherent of buying for a long time and for a lot of money (remember, this is not necessarily a flagship)? Share your thoughts as smartphone buyers.

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