Apple just released its famous iPhone 5C, the “affordable” version of the iPhone 5S, for just 100 USD cheaper than the most expensive phone in the world. Since, most articles related to the release mention a lost battle for Apple in Africa, as such prices can’t compete with the 100 USD Chinese Android based phones available in developing countries.
But is the equation as simple as that? Is Apple really losing a battle, or consolidating a strategy it has been building since years over its best selling product? Only Apple knows the final answer to this, but this is my personal analysis.
What is a smartphone? What difference with a phone?
According to the Oxford online dictionary, a smartphone is “a mobile phone that is able to perform many of the functions of a computer, typically having a relatively large screen and an operating system capable of running general-purpose applications.”
I find this definition restrictive. In today’s world, people expect much more from a smartphone than from a computer. They want a camera, they want to be able to look down to their pocket and not up to the sky to know the weather, they want to make vocal free calls without putting earphones on, they want a GPS, and many other things.
That’s to me the main difference between a smartphone and a random phone: the ability to make it practically what you want – other than a tuna sandwich-. And this ability depends on the one to download and install new applications on the phone.
Most of these apps are available on specialized online shops, such as Apps Store store for Apple, or Play Store for Android. Some applications are downloadable for free, provided the user has a good internet connection and an account. They usually come with commercials, but those are in most case not disturbing, discretely placed at the bottom of the screen.
But when coming out of the “fun” to the more “serious” or “technical” league, most applications become paying. Even in the “fun” section, most of the best apps are equally paying. Once you get bored of Angry Birds, you’ll have to pay a few dollars and download a few hundred megabytes to find your satisfaction. And this is where things start hurting for developing countries, and Africa in particular.
The situation in many African countries, and probably elsewhere in the developing world.
Developing economies are usually characterized by several common factors, such as an unevenly distributed but rapid growth, a small middle class, a very large and very poor lower class, and a tiny but extremely wealthy upper class.
By definition, this demographic setup makes developing countries a restricted market for big smartphone players. Few in percentage are the people who can afford to pay even 100 or 200 USD for a phone, even in capital towns. The vast majority of people will therefore continue to buy cheap Nokia phones or Chinese ones costing less than 50, or 100 USD at most and in best cases. They are not a 5C market.
In most developing countries, the wealthy minority is very worried about marking its social difference with the poor majority. People will pay much more attention to the way they are dressed than in Europe or the US. Don’t expect a Congolese, Kenyan or Rwandan millionaire to dress like Steve Jobs!
It’s also reflected in the cars they drive, the watches they wear and, mostly, the phones they use. These can be taken and displayed everywhere, particularly in meeting rooms or restaurants where they can be strategically placed on the table in a manner faking as much carelessness as possible. These people therefore usually go for the latest Blackberry, iPhone or Samsung, rather than for the cheap or even average smartphone. They are not a 5C market.
Last comes the middle class. Practically inexistent in country sides, more and more people in main towns manage to find a job paying anywhere between 300 and 1000 USD per month. They are the pragmatic lot. If they need a car, they will buy a used Toyota for its cheap price and reliability, rather than an expensive and always in need or repair Range Rover, even if they could afford a used one. They buy flat screens, but not necessarily 80-inch plasma ones. A 32-inch LCD is more than enough. This is the market most concerned by middle priced high-end smartphones such as the 5C. To them, a difference of 100 USD out of 600, meaning somewhere around 18% of the total price, does make a huge difference, and could very well be a decision changer. While most can’t afford a 5S or a Samsung S4, they can afford a used clean S3, and now many will also be able to afford an iPhone 5C. Yet, their number is not large enough to represent a strategic market for big companies like Samsung and Apple, which sell thousands of their devices even in the smallest North American or European towns.
Is the price of phones the only thing blocking smartphones from really emerging in developing and most African countries?
I’d say definitely not, and this takes us to the previous point on online app stores. As mentioned, most really good, or technical apps enabling one to extend the daily use of its phone, are paying. And the way to pay for them is by credit card.
This is a killer for the expansion of a real smartphone market in developing economies. Most people in these places don’t own a credit card. Even the middle class mentioned above often only has debit cards. Most in the lower class don’t even own a bank account.
The logic question that follows would therefore be: why would people need high-end smartphones, if they can’t download applications that make full use of their technical potentials? Despite being cheaper than the 5S, the iPhone 5C has high-end specifications, partly explaining its high price. Wouldn’t a much lower-end and lower priced phone be sufficient for any user who doesn’t have access to paying apps?
The equation is even harder for Android, as the possibility to access their paying apps doesn’t only depend on the ownership of a credit card. Contrary to Apple, which sells apps “indiscriminately”, Google limits the access to its paying apps geographically. If you live in DRCongo or in Guadeloupe in example, you won’t have access to any paying app of the Play Store, even if you own a platinum card. I wrote to Google in order to better understand these restrictions, but they were not able to provide any explanation. It therefore is easy to think and speak of geographic, and even racial discrimination, until Google gives a more realistic explanation.
To conclude this point, smartphones will never be really adapted to emerging markets as long as they rely exclusively on credit card payments for the download of additional apps. A company showing real interest for Kenya in example should enable apps purchases using the SMS “Mpesa” payment system. Only then will we be able to speak about a “race to gain emerging markets”. This is why I am assuming that today phone constructors don’t really care about emerging markets and continue to concentrate on the so-called “developed” world. They reach rich Africans that same way, as most buy their phones directly from Europe, the US or Dubai, and not from their country of origin.
So, what’s this whole debate about the iPhone 5C and Africa?
To me, this debate is non-existent and misplaced. From its creation, Apple has been and still is an elitist brand. First, they targeted the wealthy “artistic” elite, in the days where Macs meant music and photo edition, and PCs meant Office. Now that most Microsoft programmes such as Word, Excel or Outlook are available on Mac also, it targets the wealthy elite around the world.
Apple never had the intention of targeting developing and emerging markets with its 5C. As I see it, Apple’s aim was rather to reach the European middle class that usually looks for phones with a 500 USD price tag max. Or to reach iParents that want their children to become iChildren, but still want to have a different phone from their teenage son or daughter. To them, the 5C is God’s blessing.
Does this mean, like many wrote, that Apple “left” emerging markets to Android? In my opinion, no. At least not until Android stops locking the access to its paying apps in some countries, and not until it decides to make payments by mPesa and other systems adapted to developing countries available.
Until then, everyone, from Apple to Samsung through Nokia and BB, everyone plays in the same league, the one too easily called “developed world”, and continue to consider sells in developing countries as residual side effects.