updated 09:42 am EDT, Tue May 21, 2013
Android favored among those who can't afford post-paid, study finds
Sales of prepaid smartphones in the US consumer market have risen dramatically, doubling in the last year and "continuing a string of more than 12 quarters of triple-digit sales increases" according to a new report from market analysts NPD. Prepaid phones -- defined as either premium smartphones such as the iPhone bought outright to avoid a contract or low-end smartphones aimed at lower-income consumers -- increased 11 percent in year-over-year in the first quarter of 2013.
Smartphone sales of all types increased 42 percent year-over-year as more consumers make the switch from "feature" phones to smartphones, but studies continue to indicate that the lower end of the market continue to use smartphones much like they did feature phones. Such users engage only a bare minimum of features and primarily use the device for calling, texting and light Internet duty such as checking email and social services.
Pre-paid phones now make up approximately one-third of US smartphone sales, a 10-point sequential increase from the last quarter of 2012. Postpaid sales make up the remaining 68 percent of smartphone sales, but that is down from 79 percent a year ago.
NPD says that without brand-new flagship models from Apple or its rivals currently in the system -- the Galaxy S4 being seen as an incremental update of the S III rather than a redesigned new model -- consumers who are in the market for a new phone have "refocused their attention away from the postpaid wars and towards finding the best value for their dollar," according to Vice President of Industry Analysis at NPD Stephan Baker. He added the prepaid consumers happily settle for premium models from a year or two ago, noting that the Galaxy S2 and the iPhone 4S were among the top five choices for prepaid customers.
Though Apple is ranked fifth among prepaid phone sales in the US, the ranking represents a quadrupling of prepaid sales over the last year. LG, ranked second overall, has seen its share in prepaid double in the same time period. Lower-end Android phones tend to be the most popular choices for prepaid phones, with Samsung leading the pack (32 percent share of prepaid), followed by LG (22 percent), Huawei (11 percent), HTC and Apple (tied at eight percent). Together, the top five prepaid sellers made up 80 percent of all prepaid smartphone sales.
Since Q1 of 2012, the places where prepaid customers purchase their phones has also shifted. Most prepaid buyers (47 percent) now get their smartphone from national retailers such as Best Buy and Target rather than directly from wireless carriers (37 percent), a near-exact reversal of the situation from a year ago. "The easy purchase cycle and grab-and-go nature of the product plays into the strength of large-format stores," said Baker, noting that carriers are creating or positioning MVNO service resellers to focus on the pre-paid market, such as AT&T's new "Aio" project.