Ceiling on US iPhone, Android Phone Sales Looming, Study Says
Smartphone owners have upped their loyalty level to Android and iOS operating systems, but a ceiling on iPhone sales in the U.S. could be looming, said a study on consumer behavior released by Consumer Intelligence Research Partners (CIRP). The researcher analyzed data from the September launch of the iPhone 6 and 6 Plus to determine whether Apple's most successful iPhone launch ever was a “one-time response to an outstanding new product, or a permanent change in how consumers buy iPhones.”
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CIRP Partner Josh Lowitz said Apple had relied to date on a “steady stream of first-time smartphone buyers” whose two-year purchase cycle has been facilitated by carrier contracts and purchase subsidies. “Some fear that the incredibly popular iPhone 6 and 6 Plus accelerated the normal upgrade schedule and will leave fewer U.S. buyers in coming quarters,” he said.
Future consumers who buy a new iPhone will either be repeat iOS customers or will be switching over from an Android phone, Lowitz said. Smartphone penetration in the U.S., calculated as a percentage of all phones sold, has approached 100 percent for the past several quarters, Lowitz said. From October through December, only 5 percent of iPhone 6 and 6 Plus customers upgraded from a feature phone, compared with 25 percent of customers who upgraded from a feature phone when the iPhone 5 launched two years earlier, he said.
In the most recent quarter, 86 percent of iOS users and 72 percent of Android users remained with their previous operating systems, said CIRP Partner Mike Levin, indicating more new iPhone buyers are existing iPhone owners. The loyalty bodes well for iPhone’s U.S. prospects, but “with the market divided between iOS and Android … there is potential for a ceiling on U.S. iPhone sales,” he said.
The CIRP analysis estimates a combined 24 million iPhone 6 and 6 Plus phones sold from September through December, compared with 11 million iPhone 5s phones sold during the comparable period in 2013. Some 72 percent of current iPhone owners have a phone that was released in the past 17 months, and owners of older models may not want to upgrade, Lowitz said. “The lifecycle of an iPhone model is long,” he said, and ongoing sales of legacy models at reduced prices “extend the selling period of some models by up to three years." Lowitz cited the 10 million iPhone 4s models currently in use in the U.S., even though the model was originally released in 2011. “While they are ripe for upgrade, many of these consumers have owned their iPhone 4s for only a fraction of its three and a half years on the market,” he said.
On the lifecycle of Android phones, Levin told us that an average buyer’s previous Android phone is “a bit newer” than those of iPhone owners, because Android owners don’t keep their phones as long as iPhone customers do. Financing plans for new Android phones “make it a little easier to relinquish a phone sooner than two years,” he said. Android phones face a similar ceiling issue as iPhones, Levin said. “Loyalty is high, and has actually increased for Android in the past few quarters,” he said. “Until we see some sort of huge technological breakthrough that prompts users to switch platforms, we see them in a sort of equilibrium for the time being.”
For the study, CIRP surveyed 500 subjects in early January who activated a mobile phone with a U.S. mobile phone carrier in Q4.