How Nokia Lost its Cool, and its Customers, in China

Nokia's flagship store in Shanghai, pictured before it opened in October 2007. It closed two years later, as did all Nokia's flagship stores by 2010.

Nokia has been hit especially hard in its Q2 2011 results by China, where sales plummeted 41 percent year-on-year. It comes at a time when China’s growing middle- and higher-income are buying smartphones and getting addicted to apps – but, it seems, they’re mostly becoming iPhone or Android customers, abandoning Nokia.

Where has it gone wrong for Nokia in China, from its heyday in the middle of the last decade when it was something of an aspirational brand? I’d say it comes down to three core points:

1. Most devastatingly, Nokia hasn’t grown with their Chinese customers. Its brand cachet has dropped so vertiginously in the past five or six years in China that most middle-income Chinese people would not want to be seen with a device that is now more commonly associated with a waiter or a bus driver. As asinine as gadget snobbery can be, it exists globally, and Nokia’s new CEO Stephen Elop must be having nightmares about the hundreds of millions of China’s new chattering classes turning up their noses at a Nokia reseller, and instead dropping 3,000 to 6,000 RMB cash into the hands of a Motorola, HTC, or Apple salesperson.
2. The apps buzz has passed by Nokia, so that thoughts of Angry Birds – even though, yes, it’s available in Nokia’s OVI store – turns people’s minds to Androids or iPhones. Plants vs Zombies – a viral hit in China this year – is not available on Nokia phones.
3. Nokia’s featurephones and low-end smartphones are very easily replicable by China’s vast array of hardware makers, either by genuine competition such as from cheap ZTE phones, or from shady shanzhai Nokia sound-alikes – such as NOKLA – which are finding it easier to steal Nokia’s lower end. And with Nokia’s average device selling point being €142 (1,300 RMB) in Q2 2011, the low-end is now pretty much the bulk of Nokia’s market. Also, cheaper Android phones are encroaching, too – a new HTC Android phone, such as a Wildfire, can be had for that average Nokia price-point.

WP7 in China for 2012…?

An interesting theoretical point on Nokia’s tanking in China is that it didn’t have so much to do with their upcoming and long-dragged-out-switch to Windows Phone 7 as its flagship mobile OS. Well, less so than it might have in Europe, where WP7 is fully rolled out and has a higher profile than in China. WP7 has not even been launched here by Microsoft.

Because in Europe, that premature – desperate? – early announcement of a WP7 tie-up seems to have triggered the so-called Osborne Effect, which states that timing a product announcement way too early can kill the current range, and leave the company in a year-long rut, with its annual product cycle in disarray.

We’re not ragging on Nokia here: we’ve recently reported that the Nokia 5230 is China’s mobile web-browsing king, and that Nokia’s OVI store is China’s favourite app store. Rather, we’re trying to identify how Nokia lost its mojo in China and how long it’ll take to get it back. Unless Microsoft rolls out WP7 here later this year, we can see China abandoning Nokia in even greater numbers in 2012.

[Stats source: AllAboutSymbian; Image source: Textually.org]