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Author/Wu Zi Producer/New Business Review

In the second half of 2024, realme also followed the example of car companies and started to "lower prices and increase configurations".

On July 15, 2024, the realme GT6 will be officially launched, with the 12GB+256GB version priced at 2,799 yuan. If you place an order now, you can also enjoy preferential policies such as trade-in subsidies, battery insurance, and interest-free installments, which are very cost-effective.

You know, after the Master Series was discontinued, the GT Series has become realme's highest-end product line. The realme GT5, which came out last year, started at 2,999 yuan. The price reduction and increased configuration of the realme GT6 to a large extent show that realme is unable to rise and can only continue to involute its internal anxiety.

Considering that OPPO has chosen to "let realme run wild" and the dividends of the smartphone industry are disappearing at an accelerated pace, realme may only be able to work hard on the road of high cost-performance in the future.

1. OPPO's shipments peaked, and realme became the "scalpel" of change

Similar to most sub-brands that carry the main brand's ambition to expand its market influence, realme was born because OPPO's shipments reached a bottleneck.

Image source: Sino Data

According to Canalys data, OPPO shipped 76.37 million mobile phones in 2018. Although it won the championship, it fell by 6% year-on-year, making it the brand with the largest decline among the top five smartphone brands.

OPPO has become the top seller, of course, because of its high product quality, but also because of its "provincial agent" sales model. It is reported that OPPO's first-level agents are called "provincial agents", who usually hold shares in OPPO's various branches. They can not only make a higher gross profit by selling OPPO phones, but also receive dividends.

This model is similar to Gree's sales channel partnership system, both of which strengthen the relationship with dealers through sales rebates, transfer of shares, etc. Relying on these hungry dealers, the main brand only needs to launch high-gross-profit products to expand its market influence at a low cost.

However, it should be noted that although the "provincial agent" model has strong combat effectiveness, due to the long sales chain, it ultimately relies on "low-spec, high-priced" products to make money. Around 2018, Xiaomi emerged as a dark horse through its online direct sales model, providing consumers with high-quality and low-priced products, becoming a force that cannot be underestimated in China's smartphone industry, greatly diverting OPPO's market influence.

In this context, due to the excessive voice of the "provincial agent", it is difficult for OPPO to directly deploy online and operator channels, so it incubates the realme brand. Official data shows that in July 2018, Li Bingzhong, the former vice president of OPPO in charge of overseas business, left OPPO and founded realme.

Since the founder was previously mainly responsible for overseas business, and OPPO did not want to trigger a boycott from domestic "provincial agents", realme mainly focused on overseas markets when it was first established.

With the support of OPPO and its focus on extreme cost-effectiveness, realme has grown rapidly. For example, in August 2018, realme 2 was officially launched in India, and 200,000 units were sold in the first 5 minutes on the Indian e-commerce platform Flipkart. In November, realme became the number one mobile phone brand in the Indian market, with more than 3 million mobile phone users.

Image source: realme

In May 2019, realme officially entered the Chinese market and launched the realme X series of products. During the 618 period, it became the sales champion of new mobile phones in the 1500-2000 yuan price range on JD.com.

Overall, by November 2023, realme's global mobile phone sales will exceed 200 million units, becoming the fastest smartphone brand to achieve this sales volume. It took realme three years to reach 100 million units, and two years to reach 200 million units.

2. OnePlus becomes its own son, while OPPO "let's let" Realme

In fact, realme is not the only direct-selling brand of OPPO that focuses on high cost-effectiveness. In 2013, at the beginning of the mobile Internet, former OPPO Vice President Liu Zuohu founded OnePlus Technology and joined the Internet mobile phone camp.

Previously, OnePlus and OPPO developed relatively independently, with the former focusing on online channels, focusing on high-quality flagships, and its product slogan being "no compromise"; the latter relying on dealers to implement the strategy of flooding the market with products. However, as mentioned above, after 2018, OPPO faced increasing downward pressure, and it not only launched Realme, but also made great efforts to adjust the positioning of OnePlus.

In June 2021, Liu Zuohu issued an internal email stating that in order to further leverage the advantages of collaborative operations and better integrate resources, the OPPO and OnePlus teams will be fully integrated, and OnePlus will become an independent brand under OPPO.

Image source: OnePlus

A year and a half later, Liu Zuohu announced that OnePlus would be positioned as a performance-focused pioneer brand under OPPO, and that OPPO's online business in the future would be OnePlus. At the same time, OPPO will invest 10 billion yuan in OnePlus over the next three years and provide support in terms of technology, channels, and services.

After that, OnePlus no longer insisted on "only boutique", but began to become Redmi-like, launching multiple product lines, all of which focus on the ultimate high cost performance. For example, in early 2024, OnePlus launched the OnePlus Ace 3, equipped with Snapdragon 8 Gen 2, 1.5K Oriental screen, built-in 5500mAh battery, support 100W fast charging, 12GB+256GB, priced at only 2599 yuan.

Due to OnePlus's high brand awareness and OPPO's deep empowerment at the supply chain level, OnePlus phones have continued to sell well after its transformation into a performance-focused pioneer brand. At the beginning of 2024, Li Jie, president of OnePlus China, revealed that OnePlus was one of the fastest growing brands in the Chinese mobile phone market in 2023, with a year-on-year increase of 285%, and ranked second in the online market for Android phones above 2,500 yuan.

Image source: TechInsights

The strong growth in OnePlus mobile phone sales has greatly stabilized OPPO's market ranking. According to TechInsights data, in Q1 2024, OPPO (including OnePlus) shipped 10.7 million mobile phones, with a market share of 16.9%, ranking first.

It is true that realme is also growing rapidly, but for OPPO, the profit margin of a high-cost-effective brand focusing on online channels is very limited, and the positioning of OnePlus and realme is highly overlapping, which is very likely to lead to a fight between the left and the right. Therefore, as OnePlus opens up the market, OPPO began to "free-range" realme.

In June 2022, OPPO was no longer responsible for the after-sales service of realme products. The following month, OPPO's official store no longer sold realme products. Since then, realme has rarely launched mobile phones that simply "stuck" OPPO or OnePlus products.

All these factors indirectly indicate that OPPO does not want to invest more resources in realme and hopes that the latter can grow on its own.

3. Impacting the mid-to-high-end market, realme faces the identity dilemma

Referring to Xiaomi’s experience, if we are still on the eve of the explosion of Internet mobile phones, realme, which has successfully opened up the market, can continue to grow rapidly even on its own.

Image source: IDC

Unfortunately, the smartphone industry has already begun to "PCize", and the market dividend is gradually declining, making it difficult for Realme to provide more room for growth. According to IDC data, in 2023, the shipment volume of China's smartphone market will be about 271 million units, a year-on-year decrease of 5.0%, setting a record low in shipments in the past decade.

Image source: IDC

Against this backdrop, it is difficult for most smartphone brands to steadily increase their shipments. According to IDC statistics, the shipments of the top five smartphone brands in China will all show negative year-on-year growth in 2023.

Generally speaking, with the market dividend narrowing, it is difficult for companies to generate revenue from massive incremental demand. They need to focus on high-end products and rely on higher premiums to balance downward pressure. Currently, brands such as Xiaomi and Honor, which previously focused on high cost-effectiveness, are committed to impacting the high-end market.

For example, in Q1 2024, Xiaomi's market share in the 5,000-6,000 yuan price segment of China's smartphone market reached 10.1%, an increase of 5.8 percentage points year-on-year. Thanks to this, Xiaomi's smartphone business revenue in the same period was 46.5 billion yuan, a year-on-year increase of 32.9%.

In fact, realme has also seen the above trend and released a future-oriented "leapfrog climbing plan" in August 2023, aiming to deepen its presence in the 2,000-4,000 yuan price segment, break through its competitiveness in the price segment above 4,000 yuan, and break through the mid-to-high-end market.

At the product level, realme has launched the higher-end GT series and Master Exploration series. For example, the top-end version of the realme GT2 Master Exploration Edition, which was released in July 2022, is priced at 3,999 yuan. The top-end version of the realme GT5 Pro, which was released at the end of 2023, is priced at 4,299 yuan.

Image source: Counterpoint Research

Unfortunately, realme's high-end products have been slow to gain market share. According to data released by Counterpoint Research, realme is unknown in the ranking of high-end smartphones (wholesale price ≥ US$600) in 2023, sharing 4% of the market with a number of small and micro brands.

Combined with specific models, we can intuitively feel that realme's high-end product market performance is mediocre. JD platform data shows that the number of reviews for realme GT5 Pro is only over 100,000. In comparison, the number of reviews for Xiaomi Mi 14 on JD.com, which was released at the same time as realme GT5 Pro and has the same positioning, is as high as 500,000.

Due to poor sales, realme has even abandoned some of its mid-to-high-end product lines. In April 2023, Xu Qi, vice president of realme, president of global marketing, and president of China, announced that the realme product line will be reorganized and there will no longer be a "Master Exploration Edition" mobile phone.

Realme has been slow to enter the high-end market, perhaps because of its limited brand style. As we all know, consumers choose high-end products not only to pursue a better experience, but also to hope that high-end brands can give them more confidence in social occasions. At present, well-known high-end brands in the mobile phone industry, such as Apple, Samsung, and Huawei, all have excellent premium capabilities and brand awareness, which can bring strong emotional value to consumers.

In contrast, Realme is still pursuing brand positioning such as "dare to leapfrog" and "king of quality-price ratio" with very limited premium ability, and its product configurations are highly homogenized. It lacks the high-end positioning moat similar to iOS to Apple and Kirin to Huawei, so it is naturally difficult to open up the high-end market.

Precisely because of the limited brand style and years of striving for high prices, realme's GT product line is not only difficult to reach the 5,000 yuan price range that truly symbolizes high-end, but the latest GT6 product has even proactively reduced the price by 200 yuan and continues to stick to the 2,000 yuan price range.

Considering that competition in the smartphone market will become increasingly fierce in the future, sales of mid- and low-end products will be difficult to continue to rise. Realme, which has been slow to open up the high-end market, may face huge downward pressure and usher in its "darkest moment."