The Demise of the Others

I’d like to offer an interesting observation. As I look back over the past annual shipments of the PC, smartphone, and tablet categories, an interesting pattern appears. Take a look at this chart:


(Click to enlarge. I’ve highlighted the “other” category in the chart)

I like to keep track of how hardware brands sell within any particular category. Each category of PCs, smartphones, and tablets have their leading brands that absorb most of the volume. While we can list the estimates by quarter for every major brand, we tend only to break out individual brands that are the class leaders and group everyone else into a category called “Others”. This group can consist of a name brand that simply doesn’t sell in high volume but it also includes any number white label or upstart brands trying to capitalize on the potential S-curve of growth.

The observation I’d like to point out is, at the start of each new category, major name brands own the largest percentage of volume. These name brands are primarily responsible for creating the segment since they already have some established brand trust with consumers. Once the new segment begins to grow, non-name brands start to flood the market. The Chinese tech manufacturing scene is key to this phase of the market as they make it cost effective for nearly anyone to slap a brand on a piece of hardware and try to compete in new categories. These new brands attempt to ride the growth wave of the category but then, something interesting happens. At about the point in time when the market for the specific segment matures, the volume and percentage of total shipments for others begin to decline. The market slowly consolidates and often comes back to the brands who were there from the start or emerged out of the others category to be a recognizable brand.

In each of the three categories I charted, we see this pattern play out. Name brands dominate the majority share of products shipped. Once the category starts to accelerate, a flood of brand upstarts begins to enter the market. When we isolate the brands who ship under 10 million units per quarter and add them to the others section in each of the three categories mentioned, we see this group often make up 40-50% of all devices shipped at the peak of the cycle. Sometimes this is simply a gold rush but, in some cases, companies are making a valid attempt to become a name brand. As we enter the post-peak, more mature stage of the cycle, we seeing the decline of the “other” category as brands begin to reabsorb the bulk of quarterly shipments.

This observation further deepens my conviction that the single most important thing any technology company can do to help ensure a long life in the industry is to establish a strong brand. In an era where the perception of low-end disruption and good enough products has led to many false assumptions, I’d argue a strong brand is one of the most powerful defenses against that disruption.

The competitive dynamic in each new technology category becomes fascinating to watch as brands look to fend off upstarts who flood the market and offer lower pricing or a differentiated service to create a brand. In either case, the longer the company can compete and sustain in any given category, the more likely they are to be among the winners once the category consolidates back around brands when the category is mature and extends into post maturity. While the PC categories lifecycle allowed those in the other category more time to establish themselves, the smartphone and tablet category did not. Companies looking to emerge as a brand from the other category in both smartphones and tablets had roughly 3-4 years to accomplish it. Most failed.

The last thing to add is how this dynamic can be true of any brand, including those who don’t start off in hardware, but eventually get into hardware once the category consolidates to brands. Microsoft, for example, is starting to become a genuine threat to other PC makers even though they are relatively new to the category. They established their brand in software and services, not hardware, but then entered the hardware market at the time it was consolidating around brands. Google is similarly attempting this with the Pixel by entering the smartphone segment only after their brand was established in something other than hardware. Both Amazon and Snapchat are employing similar strategies by entering hardware categories only after building a strong brand and customer loyalty.

I believe this pattern will play out in every major category we observe. We are starting to see it in wearables, we will see it in AR/VR, and anything else that comes along in the future.

The moral of the story is a brand is critical. Whether a company starts in hardware, software, or services and then tries to enter a hardware category, the most important strategic thing they can do is establish a strong brand. If successful, the number of options open to them in the future is plentiful.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

14 thoughts on “The Demise of the Others”

  1. I agree with the general trend, and I ascribe it to the BCG-matrix (growth-share matrix).

    In the growth phase of a market, many companies, profitable or not, will invest heavily because they believe they can become Stars. However, as a market matures, smaller companies will realise that these Stars are turning out to be Dogs, upon which they will exit the market. Larger companies will remain and hopefully profitably milk the market as their product become cash cows.

    This does not explain Amazon, Microsoft or Google’s entry into hardware however. These companies are not necessarily interested in making hardware a profitable business so business frameworks that assume maximisation of profits as a motivation do not apply. At the same time, I think it’s a bit too early to say whether these strategies will work at all. Personally, I think these both Google and Microsoft are misguided, whereas Amazon might work but to a limited extent.

    1. There’s a lot of buzz about the Pixel in some circles not because of the device but because it’s Google’s. Maybe the goal is just to sap a bit of profits out of Apple, or to strategically have a first-party, well-updated device opposite the iPhone.

  2. I’m bothered by 2-3 aspects of your analysis:

    1- You say “others” are being squeezed out. That does appear to be the case long-term in the PC market; for phones and tablets it could just as well be a temporary blip, your story wouldn’t have worked last year; and, reciprocally, some of the “named” have taken a worse beating than the “others”. Look at tablet Q32012 vs today: Asus 9% -> 3%, Others 12% -> 33%. Can I be an Other, please ? :-p

    2- You say a brand is the way to resist the squeeze. Whatup with Sony, Compaq, HTC, Nokia.. then ? Those were, mostly still are, well-recognized brands. I’d say branding per se is not the issue, their value proposition is. A brand for brand’s sake (ie, brand recognition) is worthless if it stands for nothing. I’d make the case that if you know how to add value, your brand will build itself, not the other way around. Sure, at some point you want a strong brand as a shortcut to your value proposition, but the core is the value proposition. Apple’s is: easy + sexy. What is Sony’s ?

    3- I’m not sure MS’s and Google latest hardware forays can be extrapolated quite so much. MS created a new product category with a handful of devices, while Google simply re-spun Nexus into Pixel (granted they moved upmarket and increased their branding on it, but it’s still partner-built and co-designed and a decade-old program). Extrapolating into plans for world domination seems a bit drastic. It’s possible, anything is, but if releasing one product was a sign of impending full assault, Mattel would be king of cash registers by now.

    1. Apple’s value proposition is not easy + sexy. You’ll never understand why Apple succeeds if you continue to cling to this facile narrative you’ve created.

      1. They do look good… for me personally it doesn’t matter though, I don’t care how a tool looks, I use a case, and other features take precedence. Plus most phones and PCs also look good these days so looks aren’t a reason to pay Apple prices and get locked in.

    2. Regarding your first point that Others looks quite attractive for smartphones and tablets, I have to agree.

      This kind of analysis is difficult for many reasons.

      First, the criteria for including a brand into Other or separating it out is arbitrary. In the current study, it is “10 million units per quarter” and not market share. It is difficult to say which criteria is better unless you have an understanding of what actually may cause this trend. One effect of the current criteria is that you see many more vendors in the smartphone space, because to total shipment volume is so large. Hence you can have minuscule market share but still be outside of Others. This would not be the case with a market share based criteria.

      Second, this criteria may result in survivor bias.

      Third, the effect of simple brand consolidation via mergers has to be accounted for, especially in PCs.

  3. I think there is a typo in this sentence: “While the PC categories lifecycle allowed those in the other category more time to establish themselves, the PC and tablet category did not. ” Shouldn’t it be “smartphones and tablet category did not”?

      1. Apparently, the next iPads will be thicker. Can’t wait to be told how thick is the new thin, thinness really doesn’t matter that much, etc etc ^^

  4. What makes this story any different from the influx-then-shakeout pattern that occurs with almost any new industry you can think of? Didn’t automobiles go through the same evolution? Passenger airplanes? Petroleum? Typewriters? You name it.

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