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The Curious Case Of Plumetting Phone Prices

So you got a new phone. It has a Gigahertz + Processor. Maybe it even has two, four or five cores. It has as much RAM as some old PC’s. You paid a pretty penny for it, but were happy with your purchase. Until one fine day, not too long after purchase, you notice the company has slashed the price of your phone by quite a bit.
Sound familiar to you?

[quote_center] Does Your Phone Hold Its Value Over Time?[/quote_center]

 Take for instance, the Optimus 4x by LG. It was launched in July 2012. It is safe to say that the HTC One X, the Samsung Galaxy S III and the LG Optimus 4X are all the same generation devices. In fact, the Optimus 4X is the newest device out of the three. It launched in India at a price of around Rs. 37,000. Today, I saw it on an E-Commerce website for a paltry Rs. 21,000, while it sells for around Rs. 25,000 in local markets. In comparison, the SIII and the One X still sell for upward of Rs. 30,000. By anyone’s standards, the 4X is pretty much a latest generation device with cutting edge hardware. Why then are manufacturers forced to sell it at such ridiculously low prices?

Either Sales of the device were so abysmally poor that they just want to get rid of old stock. The other reason could be that the consumer has no confidence in the product. In this case, the Optimus 4X was soon superseded by the Optimus G. The device launched with Ice Cream Sandwich, as did the One X and S III. But while the other two got the Jelly Bean update since ages, there is no word on Jelly Bean on the 4X yet. LG did announce plans to roll out Jelly Bean in 2013, but for the Optimus G. Seeing all this, it isn’t too surprising to see the value falling 43% within just half a year of launch.

Another instance of a phone’s value falling astronomically is the Lumia 800. The first Lumia and Windows Phone device by Nokia, it was priced at over Rs. 30,000 at launch. Recently, in a festive offer, it was selling for a paltry Rs. 20,000, along with another Rs. 15,000 worth of accessories to sweeten the deal. That is a price drop of 33%, not including the accessories.

However, all phones don’t see such price falls. Take for instance, Apple’s iPhones. In India, Apple sells the lowly 8GB version of the iPhone 4 for Rs. 26,000. Keep in mind the iPhone 4 launched in June 2010 and we are currently in 2013. Apple wouldn’t be able to price such old devices so high if people weren’t buying them. Even the iPhone 3GS, which now has specs lower than most Rs. 5,000 Android devices, sells for Rs. 13,500 in India. Why does one company’s device retain value over such long periods of time, while the other has to slash prices by almost half in just six months?

From our perspective, it has two do with two factors: a focused lineup and software support.In both these fields, Apple excels. By launching a device every year or so, they avoid having overlapping devices that compete with each other. Also, they support their old devices. The 3GS getting iOS6 is a prime example of this.

However, in the Android world, a new device every year and a half may be too slow. One thing is for sure: one device of a company cannibalizing the other needs to go away. HTC did that with the One X, LG did that with the Optimus G and Nokia, to a certain extent, did that with the Lumia 900. Further, if someone is paying good money for a device, the least you can do is ensure it gets timely updates for the first one year.

Until manufacturers stop trying to flood the market with slight variations of the same devices, the trend of phone prices falling to rock bottom within months of launch will continue, harming them.

What do you think? Is there any other way out of this conundrum? Do let us know in the comments below.

  • DjB

    Apple targets only a section of people that are cut above the rest in India. Iphone sales in india account for meagre percentage in Global sales. Rather than burdening itself with large quantum of sales and support it aims at rendering 100% Service to the limited numbers in India. In broader terms apple sells lifestyle by its varied range of macbooks, tvs, tabs, pods and players. The avg indian can afford a 3gs but not the devices that he can integrate his device with, that limits the scope for apple in revenue terms per customer. So it moderates its demand by keeping the prices high and not letting it drop too soon.

    For others Nokia and LG particularly Indian subcontinent holds a greater share in their overall sales. This makes them to set high targets failure to meet compels slashing prices. The quality of hardware in devices at the end of their market tenure may also be a reason.

    As innovation strides rapidly it stomps out the technologies(redundant ones)…..Slashing prices is a last resort to survive a little longer in the natural order of Birth i.e innovation and Death i.e redundancy.

  • sumitskj

    Nokia has been doing this forever. Remeber Nokia 3310, 1100, 6600, the N series…They have been lauching phones at a premium and then lowering the price. The only difference between Nokia of then and Nokia of now is software support. Nokia would support all its products for atleast 2 yrs, but, no longer :(

  • thatsme

    What about samsung galaxy S3 – Released @ 40-45 k and now its 29k – 31 k for the 16 gb…the same can be said for htc one x also…Some years ago you could get a decent resale value for 2-3 year old phone ..thats cost technology advancing @ a rapid pace…

    • aatifsumar

      Very true. Happens to most devices. We just picked the most stark examples.

  • http://www.facebook.com/gxsaurav Saurav Srivastava

    I purchased my Nokia N8 in 2010 for around 23k. That was an all time high price for the phone. Even though that phone deserved it, 23k was high. But at that time situation were different. I could spend that much on my own personal stuff on gadgets.

    Today, Lumia 920 sells for 35k on eBay. That is a huge amount and even though 920 is flagship phone, 35k is just too much IMO.

    I still believe that ~25k is the best price for a phone. Anything beyond that is plain absurd. The worst thing is that today the value of money has reduced so much that we youngsters don’t mind paying it at all. Its a fraction of salary of most people in the age of 25~30. And then the feeling “if not now then when? After marriage this all will stop anyway.” :P

  • anuraj

    lol i bght 5800 for 20k,n8 for 25k,n900 for 25k ,s2 for27k..funny how smart fones prices drops……in this regard my s2 price drop is nt tht much compared to other phones i owned…..