U.S. Consumers Losing Interest in Smartphones as Demand Falls

Smartphone demand in the U.S. has dropped by 8 percent since June 2014 and shows weakness, according to new research from Argus Insights.

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U.S. smartphone buyers are experiencing "upgrade fatigue" and are seeing fewer must-have features in the latest smartphones, which is causing lower demand that is largely impacting phone makers such as Samsung over rivals like Apple.

That's the key finding of a new study, "U.S. Smartphone Demand Q2 2015," released July 16 by research firm Argus Insights. Smartphone demand has dropped 8 percent in the United States since January 2014, according to the study. The drop has been most apparent for Samsung, which despite the April release of its flagship Galaxy S6 and S6 Edge handsets (pictured), has not been able to sustain the higher sales gains it saw initially, John Feland, the CEO and founder of Argus, told eWEEK.

The research, which is based on some 622,000 device reviews posted by consumers online on various phone carrier, vendor and shopping Websites from January 2014 to June 2015, shows that even though Apple and Samsung released new devices since last September, consumers aren't continuing to spend like they had in the past, said Feland.

"It's upgrade fatigue," he said. "We saw the same patterns in tablets previously. We're in that same sort of saturation point, where more technology doesn't exactly translate into more for consumers."

Samsung and Apple maintained the top two market positions in U.S. smartphone sales in the period, but after initial consumer interest peaked following the Apple and Samsung releases, things began slowing down, said Feland.

"While the new Samsung Galaxy S6 and S6 Edge created an initial influx in demand, those gains quickly fell off, and Samsung saw less happy, less interested flagship users," the report states. "During the same time, Apple saw increasingly positive attention for the iPhone 6 (launched in September 2014) and even the iPhone 5S which is more than a year old. As reflected in the Argus Insights consumer review analysis, Samsung's recent effort to refresh their line of handsets was met with a dwindling volume of lackluster reviews, while Apple's reputation for innovation is apparently keeping consumers happy and willing to invest in the brand."

By gathering and analyzing consumer reviews for products, Argus can see "markets fall in and out of love with products," said Feland. "What we saw in the Galaxy S6 data was immediate high demand for the hardware, and then it fell out very quickly. People were disappointed with the devices, their reliability, battery life and build quality."

Until the release of Apple's larger iPhone 6 devices last September, Samsung had a bit of an edge on Apple due to Samsung's larger screen sizes, but the new iPhones "changed the whole dynamic," he said. "So Samsung tried new materials to get on par with Apple, but as the Galaxy S6 was diving with consumers, we saw the Apple devices rising."

What is likely occurring, he said, is that as much as companies want consumers to get new phones every year, more people are waiting perhaps an extra year to upgrade their phones due to cost.

"People are mostly satisfied with what they have today" as far as their smartphones, said Feland. "If you look at innovations, everything has been incremental. There's nothing major that makes us have to upgrade."

One thing smartphone vendors are doing to try to fight this trend, he said, is introducing limited-edition, smaller-run niche products that have features to beckon consumers, such as Samsung's S6 Active ruggedized handset, which is a variation of the stock S6. "They are targeting different parts of the marketplace," he said.

At the same time, smaller smartphone vendors like Blu, which markets unlocked handsets that consumers can buy through sources such as Amazon, are getting some traction lately, said Feland. "It's interesting. Just as the big guys are failing, there's a bunch of small guys coming on line. It's another sign that the market is saturated and fracturing."

Apple's last big innovation was a bigger screen, but it has lost its luster a bit, said Feland. "Apple's off their game. Their Watch isn't doing so well. Everyone was following the leader, but the leader is scratching its head trying to figure out where to go next."

So what could be the next innovation that could get consumers back into a smartphone buying frenzy again?

"I think the next thing is coordination: How do we stay better connected with co-workers, friends and family using our phones?" so that the phones of these groups of people all share coordinated information, said Feland. "We are getting notification fatigue, but there's nothing on these devices that can help us coordinate all of that. I think that's a huge opportunity for someone to figure out."