Market Segmentation
Having looked through all sorts of cellphone data and from being a general techie, this is how I see the current cellphone industry.
Main Stream includes the Nokias, Samsungs, and the Motorolas everyone has. Typically, the more money you spend the more features and functionality you gain. The tip of this market segment is defined by the iPhone and the Nokia N95/96, highly functional cellphones in the $500-$900 range. The other end is marked by the Nokia 1100, cheap phones that luckily caught the developing world cellphone boom (over 200 million sold).
I consider the Fashion Brands segment to include the phones branded by non-electronics companies. The most famous in this segment might be the Prada Phone by LG (~$800). Others include the Lamborghini Phone by ASUS or Nokia, the Ferrari Phone by Motorola, Armani Phone by Samsung, or even the Playboy Phone by Alcatel. Some of these phones are re-badged main stream phones (like the Ferarri Phone) while others are entirely unique (like the Prada Phone). Most of these phones are priced higher than the Main Stream phones without any noticeable function or feature upgrade, but they are still within reach to most American consumers willing to make that extra sacrifice (or credit card hit).
The after-market Customization covers a wide range of taste and prices. You could simply get your iPhone colored for an extra $150 or have diamonds set by a world famous jeweler for $180,000. There's clearly a mass market (iPhone coloring), aspirational market (Swarovski Crystals), and luxury market (diamond setting) for after-market customization, but I decided to focus more on the super luxury brands. (By the way, it's interesting to compare the above three websites to see how each market is targeted)
The Super Luxury market is where I decided to investigate further and see if I could draw out any insights. This is the market beyond the reach for mere mortals, the Ferarris and the Bentleys of cellphones. Even within this market segment, there were clear aspirational brands and true premium brands.
Super Luxury Premium Brands
Vertu
Vertu is by far the most famous and well known luxury cell phone brand. Launched as an independent subsidiary of Nokia in Jan 2002, they are based in Britain and the phones are handmade in England. The phones also include a 24/7 concierge service that is free for the first year and fee based after that. All Vertu phones have a concierge button to access the service.
The website is in English, Russian, and Chinese (you'll see this as a reoccurring theme). They have offices in Paris, Frankfurt, Hong Kong, Dubai, Singapore, UK, and New York.
The phones are sold at their own branded stores, leading department stores, and authorized resellers. Apparently there is a watch store in Santa Row that sells the phones, and Niemann Marcus at the Stanford Shopping Center also carries them (going to go check them out tomorrow).
My friend has seen Vertu ads in some Chinese business magazines he owns, and he promised me to lend it to me once his apartment is fixed (he's currently exiled while they do reconstruction). I'm not sure when that is though. I also noticed Vertu show up as sponsored links on Google searches for other luxury phone brands.
The cheapest phone they sell, the (aptly named) Ascent, is $3850 while the most expensive phone, the Cobra (pictured above), is $310,000. Most of their phones were apparently introduced at fashion shows instead of tech shows, which are more common for cell phones.
According to an article published in 2006, there was a greater demand for Vertu phones than they could supply, and sales were in the "tens of thousands" but not "hundreds of thousands." Even if I conservatively estimate the average phone price to be $5000 and sales to be 10,000, that's a $50 million dollar business.
Goldvish
Launched in March 2006, Goldvish is an independent Swiss company based in Geneva. They justify their existence through a survey that showed 15% of cellphone users wanted a more luxurious phone (but they made sure 15% won't be able to buy it). They're goal is to grab 2% of the $136 billion cellphone industry. Just as a reference point, the seemingly omnipresent iPhone currently holds 1.8% market share for mobile phones in the US.
Their website is in English, Russian, and Chinese. They have offices in Moscow, Geneva, Amsterdam, and Dubai. There website also contains a promotional video that links Goldvish with celebrity life and high society. I presume the the clip comes from their launch party, at which Tara Reid was the spokeswoman for the brand. According to the website, the phones are available at exclusive department stores and jewelry stores, but specific details were not given.
The lowest end phones are around $29,000 while the most expensive phone, the 'Le Million' Piece Unique (pictured above) is a million Euros (about $1.56 million dollars right now). The tag line for the Piece Unique is "Most expensive, most exclusive." (Least they're honest)
While the Vertu, with its concierge service, had a CEO/business executive feel (the other phones are more conservatively designed), the Goldvish has more of an extravagant jewelry feel.
Gresso
While the mainstream media outlets covered the previous two brands, information for the Gresso phones are lacking and almost entirely provided by the blogosphere (harder to verify the facts). Gresso also sells the Symphonia mp3 player for $4000 and wooden USB memory through another brand, Adam & Eve.
The website is available in English and Russian, and while I can't confirm, I get the sense that the company is also Russian. According to the website, they currently sell the phones only in Russia, and they are not available online.
Their first phone, the Black Aura, was released on Dec 2006 and ranges from $6500-13,000. Gresso phones claim uniqueness by being built out of African Blackwood, and on their website they claim that the phones have existed for over 200 years.
Bellperre
The Bellperre phone was announced at CeBIT 2007 and is on schedule to be released June 2008. There are rumors that the phone will cost 11,000 Euros (~$16,500) from a seemingly uncredible source. The company is based in the Netherlands and the website is available in English, Dutch, and Russian. The company also sponsors (and let's people know) Guy Harrington, a racer in England.
Bellperre's claim to fame is that the phone contains no plastic part, and they are offering 200 variations of leather to fully customize your phone.
Super Luxury Aspiring Brands
Mobiado
Mobiado was founded in 2004 as a a division of Bonac Innovation Corp. based in Canada. While the Mobiado website is normal and existent, the Bonac website is extremely slow, and the links to their two other divisions are broken. (So it looks like Mobiado is their only venture)
The website is in English and Russian, and the they have distributors in "Indochina & Thailand" (which was actually a Vietnamese number), Malaysia, Russia, UAE, and the UK. The phones are explicitly not for sale in the US.
Their first phone, The Professional Collection, was announced on Dec. 2004 and sold for $1200. The shape and the specs are very similar to the Nokia 6230, which is what it's based on. The Stealth, pictured above was announced on Jan 2008 for 1450 GBP (~$2893) and is a limited edition release of 1200 (if they sell all of it, that's a revenue of $3.5 million).
Mobiado also sells a cellphone shaped perfume for men for $300.
Like the lesser known Super Luxury Premium Brands, there is very little mention of Mobiado in the main stream media. The hype comes almost entirely from the blogosphere.
Vx Phone
Information from the Vx Phone is sparse online even in the blogosphere. The website has some information but things like detailed company info is missing. It also tells visitors to call with questions (during certain hours in PST) but provide no phone number.
The phones on the website go from $1299-$1499 and all have English or Chinese language options (the website is only available in English however) along with a Sino-English Dictionary. According to PC Magazine, the VX Royal Hearts on Fire Phone goes for $1800 and $12,000 for the white gold version, but I can't find that phone on the website.
Premium versus Aspiring
There is no science to separating aspirational brands from premium brands, and what I discuss here is entirely driven by my instincts.
Price
The premium brand phones do not sell for less than $3000 while the entry phones for the aspirational brands can be bought for slightly above $1000. $1200 is well within reach for most consumers in the US (expensive, but not unreasonable) while $3800 is entirely unreasonable for for most people.
Presentation
There is a clear difference in how the phones are presented on the websites. For example, this is how Mobiado phones are presented on their website:
or the VX Phones:
This is similar to how main stream cellphone markets are presented on their websites. For example, this is one example from Samsung's website:
The phones, while presented graciously, are displayed along with a bullet point list of features. Even the iPhone is presented in such a manner.
The true premium brands on the other hand are presented much more simply with an elegant picture that highlights the lavishness of the phone. From Vertu:
From Goldvish:
The phones are presented less like cellphones and more like pieces of jewelry. For example, compare the above two presentation with Bulgari:
The true premium cellphones go beyond cellphones or accessories and become these items of fetishist desire.
I visited the Niemann Marcus today and while they didn't have any phones or catalogs (apparently you can order through them but they don't carry stock), I got to browse through the "Working with Vertu" guide for retailers (more on this on another post, hopefully). In it was the quote: "Our target audience remains the ASPIRER, as defined by the SIGMA segmentation." So I could be entirely wrong, or my definition is not in sync with the SIGMA segmentation (something I plan on reading up about next).
Russian (and one Swiss) One Phone Wonders
Identifying and discussing the numerous extremely expensive Russian phones that were announced (but not all released).
Ancort Diamond Crypto Smartphone
Ancort is a company in Russia that specializes in cryptography equipment (cellphones and more). Announced in mid 2006, this phone was designed and built by Austrian Jeweler Peter Aloisson, who designs custom cellphones, for the Ancort company. Coming in at $1.3 million, it typically competes with the Goldvish Piece Unique for the top stop in many "most expensive" cellphone lists. The description on their website for the project is hilarious; something clearly lost in translation. Excerpt:
We remember the oracular words from the first chapter of Gospel from Ioann: “First there was the Word and God had the Word”. What does it mean? God existed, God exists and God will exist. God does not change. So also our words shouldn’t be changed. A word is a materialized thought and idea, and no one can change a person’s words without his consent.Tancher MAGO Smartphone
Designed by Maslov Design Studio for Tancher, a Russian handset company, this smartphone costs $3600. However, there is no evidence that this phone actually made it to market, and the website only states that the prototype was delivered in Aug. 2005. The project began in Dec. 2004.
VIPN Black Diamond
VIPN is a Swiss telecom or handset company (the website is not in English, and I'm getting conflicting information on this) that commissioned the design of this phone to Jaren Goh. Announced in mid 2006, this phone was supposed to cost $300,000, but again, I can't see any information on if it was actually delivered. The White Pearl, the white version without the diamond was also planned for $1500.
Timing
Vertu: Brand conceived in 1997, launched and first phone released 2002.
Goldvish: Launched March 2006.
Gresso: First phone released Dec. 2006.
Bellperre: Announced 2007, phone scheduled release June 2008.
Mobiado: Founded 2004.
Vx Phone: ???
Ancort Diamond Crypto Smartphone: Announced mid 2006.
Tancher MAGO Smartphone: Project started in Dec. 2004.
VIPN Black Diamond: Announced mid 2006.
As you can see, except Vertu, almost all these luxury phone brands were conceived in the last five years. It feels like in the cellphone industry, as the cheapest cellphone prices kept dropping, the most expensive phones were going up. Do we see this in any other industry? I bet it happened in the car industry (like 90 years ago?), laptop industry (there are designer laptops around now, and think MacBook Air), and even the bottled water industry (ridiculous Bling H2O).
Market Size
According to IDC, in 2007, 1.14 billion cellphones were shipped, and 82.3% of that was covered by the top 5 brands (Nokia, Samsung, Motorolla, Sony Ericsson, and LG) . The remaining 17.7% constitutes 202.9 million phones, which is still much larger than the luxury market if the top luxury brand, Vertu, is selling in the "tens of thousands." I was hoping to get more luxury cellphone market data but nothing came up online.
In 2007, according to Informa, the world cellphone users surpassed 3.3 billion, signifying that more than half the world now owns a cellphone. Interesting coincidence that this happened as was the world was passing the 50% urban mark too.
Conclusion
- There is something going on in Russia and China. All these websites (except vx phone) are available in Russian (GDP/capita $8612) and most are available in Chinese (GDP/Capita $2460). Vertu Concierge service has extended hours for English, Russian, and Chinese too. From what my Chinese and Russian friends tell me, status symbols are very prominent in those two countries.
- Japan is completely missing from this list, which makes sense since Japan does not have GSM which most (possibly all) these phones use. South Korea also does not have GSM, and may have grown their own flavor of luxury phones.
- The luxury phone market is just starting. Many companies are following Vertu's footsteps, and from what it seems, the market is well and profitable.
- All luxury phones are candy bar. I think it's the easiest to customize and re-engineer.
Next steps
- Post pictures and insights from my trip to Niemann Marcus and post pictures from the retailer guide. It may provide insights on how luxury brands operate.
- Research the Japanese market to what kind of luxury phones are being sold there. Start online and hopefully find a magazine (gave it a cursory try at Kinokuniya in SF but couldn't find anything).
- Get the Chinese business magazine that Vertu was advertised in. See what else is there.
- One of the phones were released at the millionaire's fair. See what this is about and what other things are being sold/announced.
- Find out what the SIGMA marketing segmentation is and why Vertu fits under aspirer.
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