Feature Article

April 27, 2016

What the $4 Smartphone Means for Mobile Commerce in Emerging Markets

By Special Guest
Kostas Kastanis, Head of Strategy, Upstream

In February, a company called Ringing Bells shocked many when it announced that it was releasing the Freedom 251, the world’s cheapest smartphone for only 251 Indian Rupees, the equivalent of $4. This extremely affordable smartphone is especially groundbreaking in India where smartphone adoption grew 44 percent between 2014 and 2015. IDC expects India to overtake the United States as the second largest smartphone market globally and a phone at this price point is bound to increase adopters. An affordable smartphone in this market has the potential to accelerate the mobile ecosystem, an impressive feat that also faces some challenges. Below we’ve taken a deeper look into the benefits that the $4 smartphone has to offer, together with certain of the challenges it faces, and how it may affect digital commerce in emerging markets.

The Benefits of the Freedom 251 Phone

It’s not surprising that the main appeal of the Freedom 251 it its price point. Aside from this new product, the least expensive smartphones on the Indian market are priced between Rs. 1,500 and Rs. 2,000 ($22 and $29). Compared to the iPhone 6 Plus, which was priced at Rs. 62,000 ($908) at launch, these options are still extremely affordable, but none as much so as the Freedom 251. As brands approach emerging markets, they need to consider that low price points are very important where smartphone adoption is concerned. In these developing regions, consumers typically have less spending money, and what they do have goes towards their basic needs. GDP per capita in India, for example, stands at $1,581.5 - 97 percent lower than that in the US, which stands at $54,629.50.

Moving past its price point, the Freedom 251 has various other benefits to offer Indian consumers. Though there are obviously major differences between such low-cost devices and the iPhone, the Freedom 251 offers features that make it a competitive option in emerging markets, like India, where many may be transitioning from a feature phone. According to GSMA, feature phones account for 75 percent of the mobile phone market, meaning a smartphone like the Freedom 251 would be a significant upgrade for millions of users. A vast majority of Indian consumers are not looking for the latest and greatest smartphone that will cost them a month’s wage, but a functioning connected mobile device.

Overall, the Freedom 251 is considered to be a value-for-money device aiming to undercut the domestic competition in India, whilst bolstering comparable specifications to advanced smartphones. It features 3G capabilities, a 1.3Ghz quadcore processor, 1GB RAM, 8GB of internal storage and a 1450 mAh battery.

The Challenges Facing the Freedom 251

One of the biggest concerns is the issue of bandwidth quality and technological infrastructure in emerging markets, such as India. Although a cheaper mobile phone helps provide consumers access to the device, to fully realize its capabilities and enjoy all it has to offer, consumers need to be able to afford data consumption charges as well as to have an internet connection of adequate quality so as to be able to receive and consume digital services without interruptions.

A majority of Indian mobile users cite high costs as the prime reason as to why they are not using mobile broadband internet. This is vital for companies to keep in mind as they gear products towards consumers in emerging markets. If consumers are looking to enjoy digital services that are media rich – such as video streaming – they will need to be able to afford the data costs that coincide. Internet users in emerging markets tend to access the web via mobile connections (mobile modem or 3G) rather than Wi-Fi. Specifically, in India, fixed Wifi accounted for 41% of total IP traffic in 2014, with predictions to drop to 36% by 2019. Knowing this, it’s clear that consumers would be better able to use digital services on inexpensive smartphones if they were offered, for example, a lite app version, or with reduced data charges.

Additionally, it’s important to note the Freedom 251 has a low internal memory and RAM capability – especially when comparing it to more advanced smartphones. Because of this, consumers may experience issues when attempting to use native apps that require more RAM or need to be stored locally on the device. With this in mind, brands need to realize that just because the device is labeled as a “smartphone”, does not mean that it has the same capabilities as brand name devices like the iPhone. To reach consumers in emerging markets, digital brands need to be conscious of accessibility issues, and the fact that perhaps accessing digital services via the web through HTML5 mobisites, as opposed to via apps, is more suitable.

The Freedom 251 phone presents an important lesson in what digital brands need to consider to ultimately be successful in high-growth markets. Within the next two years, the mobile industry is set to develop rapidly and smartphone companies need to carefully position themselves. Though incredibly low price points may draw attention, and enable Indian consumers to adopt digitally connected smartphones, the issues of affordability, with respect to cost of data, and accessibility, as it relates to mobile technology infrastructure, will determine the extent to which smartphone adoption will take off in high-growth markets.

About the Author

Kostas Kastanis is Head of Strategy at Upstream, a leading mobile commerce accelerator in high growth markets.

Edited by Peter Bernstein

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