The challenge OPPO has faced in the past three years has been the structural adjustment of the smartphone market and the forced adjustment of Huawei as a whole.
The “single hit product”, “channel is king” and “marketing bombing” that OPPO was good at in the past have been abandoned by the times.
Since 2018, OPPO has made a series of adjustments to find a way out of the situation. The Reno series, the Ace series that is independent from the Reno series, and the Find X2 series are just unsuccessful attempts.
The reason why the series of attempts led by OPPO leadership represented by Shen Yiren failed was not because of errors in their predictions and strategies, but because of inevitable changes in the market situation.
So, what are the core challenges OPPO encounters? To put it simply, it means that the profits of offline single stores have declined.
The smartphone market has transformed from an incremental market in the past to a stock market, and from "barbaric growth" to oligopoly competition. Such structural adjustments will inevitably lead to a decline in the frequency of smartphone purchases and intensified competition for single-product smartphones, and the result will be a decline in the profits of offline single stores.
This problem is almost unsolvable.
People used to buy 500 million mobile phones a year, now people buy 300 million mobile phones a year. Referring to the financial report of Xiaomi, the only listed company in Huami OV, in recent years, the average price of Xiaomi mobile phones has only increased by about 20%, and it will not exceed 40% in any case. Taking into account the continued expansion of online channels and the increase in offline rent and labor costs. The average profit of offline smartphone stores is undoubtedly declining.
The decline in single store profits means that the possibility of switching to competitors increases, which means that OPPO’s offline channels are in danger of collapse.
There are usually only two ways to solve this problem, which are to increase the profit of a single product and to increase the overall sales volume of a single store.
There are two ways to increase the profit of a single product: one is to increase the price of a single product, which OPPO has tried, but it is not very successful so far; the second is to reduce the cost of a single product and reduce the cost of a single product. There are two other ways. The first is to lower the overall cost by increasing overall sales and relying on lower marginal costs. This is the attempt of OPPO leadership represented by Shen Yiren; the second is to directly reduce the configuration of single products.
It is very simple to increase the overall sales volume of a single store. Increase the store conversion rate through more diversified products. In the past, stores might only sell mobile phones priced above 3,000 yuan, but now they also sell mobile phones priced below 3,000 yuan. This will definitely improve the conversion rate. It’s just that this conversion rate also has an impact on profits.
It is worth noting that the overall profit of OPPO Group and the profit of a single store are not always consistent. OPPO Group needs to seek the maximum combination of shipment volume and single product profit, while a single store needs to consider the maximum combination of sales volume and single product profit. The group does not always sell more, the better. There is a high probability that a single store sells more, the better. This is actually the main conflict between Xiaomi and channels. For Xiaomi, selling out of stock means lower inventory costs and higher turnover efficiency, while for a single store, selling out of stock means that it cannot obtain more profit.
Of course, in addition to the two usual methods, there is another "dimensionality reduction attack" method.
This method started with Xiaomi and was carried forward by Huawei. That is a single store sales model like a "grocery store". Smartphone sales have decreased, but IoT products still have a large market space and large profits. This kind of thinking has changed from the original effort to increase the profit of a single product to an effort to increase the profit of a single person in the store.
OPPO is actively promoting this approach. The previous OPPO watches and subsequent OPPO TVs are all part of the problem.
OPPO is currently experiencing an extremely rare strategic opportunity period. Huawei's setback in the smartphone business will release huge market space. The improvement of OPPO's full-year goals and goals for the second half of the year all depend on this.
From this perspective, the single-store profit problem that OPPO urgently needed to solve was not that urgent, because offline channels used to be able to switch to Huawei, but now the possibility of switching to Huawei has been greatly reduced.
OPPO may return to its past pace in the future, steadily promote IoT business and service business to gradually increase the declining single store profits, and return to the explosive product strategy to strive for group profits. The maximum value, rather than the maximum profit of a single product. The attempt to change the Ace series or even the entire Reno series becomes unnecessary.
Looking back, the attempts of OPPO leadership represented by Shen Yiren seem to be meaningless. However, who can really predict where competition will go in the future.