Diversification of Smartphone Purchase Channels

The habits of acquisition, use and use of smart mobile devices or smartphones have been transformed. Today they stand as democratizing elements of access to connectivity, information, communication, education, entertainment and other activities of daily life for Mexicans.

As of the third quarter of 2022 (3Q-2022), a total of 137.2 million mobile lines were registered in Mexico, a figure that represents a growth of 6.9% compared to the same quarter of the previous year. Of this total, 129.9 million correspond to a smartphone, that is, a ratio of 94.7%.

Approximately 30 million smartphones are replaced annually in the country, between additions and those that are purchased to update existing ones. Thus, its market value exceeds $125 billion pesos, an amount that makes this market an attractive one for manufacturers, operators and points of sale of these devices.

Operators as Purchase Channels. Certainly the sale of smart equipment is an important component in the generation of sales, even, due to seasonality, the fourth quarter of each year is usually the main source of income for mobile service providers.

Prior to the pandemic, during the third quarter of 2019 (3Q-2019), of the total revenue of the operators ($80,794 million pesos), 38.3%, corresponded to the sale of equipment. However, in 3Q-2022, this proportion has been reduced 12 percentage points (pp) to 26.3%, to account for $79,529 million pesos.

This decrease is due to three main reasons.

The pandemic caused a disruption in the production chain of smartphone components worldwide, which led to an increase in their price and, consequently, to a brake on their acquisition.

Second, the global macroeconomic crisis, as a consequence of the pandemic and Russia’s invasion of Ukraine, has led to a longer replacement period for smartphones, with the consequent decrease in sales revenue.

Third, users in Mexico have migrated to other sales channels in order to acquire new devices, so the accounting for these resources no longer corresponds to the operators.

Alternative Channels. At the beginning of 2022, 60.2% of users purchased their equipment directly from the operator. By 3Q-2022, that ratio dropped to 47.5%, 12.7 percentage points below its previous level.

The establishments that have gained the most ground are department stores and self-service stores, followed by other sales channels (online, for example) that have also captured the preference of consumers.

Users look for businesses that offer them credit, combined with experience tables to be able to interact with the devices. Another factor that also contributes to the redirection of preferences is the interest of customers in acquiring free or unlocked equipment.

Facing the end of the year, after the #BuenFin and Christmas season offers, a recovery of the smartphone market is forecast for mobile operators, although there is a growing struggle between these, manufacturers and establishments, to capture the preference of users .

Undoubtedly, those that manage to attract a greater number of users will be those that offer desired brands, customer service, payment facilities and knowledge of user habits when buying a smartphone, to maximize the income generated in this important time of the year.

@ernestopiedras