Around three years ago, real money was to be made in the smartphone market. It seemed that companies could get away with high margins and high volumes, and customers would never catch on to their strategies.
Now, though smartphone sales are perhaps more than what they were then, but most smartphone companies are either getting razor thin margins, or are selling at huge losses (We are looking at you Sony) or in some other despicable situation.
What happened between then and now? Companies like OnePlus and Xiaomi happened. They established their names by providing flagship specs at low prices, and started the price wars. The prices started to spiral down, sales volumes increased, and bigger companies started paying attention.
However, these smaller companies, with their lean structure could get away with small margins. But bigger ones just couldn’t afford to sell that cheap.
It is perhaps the same reason why OnePlus scrapped plans for its Smartwatch. A few months ago, BGR India leaked photos that were allegedly of the OnePlus smartwatch, and now, its CEO, Peter Lu has revealed that there were in fact plans for a smartwatch, and in fact they got pretty involved with it before deciding to scrap it.
The reason? It is hard to stand out in the smartwatch maarket. Whilst in the smartphone market, the OnePlus One was revolutionary because it was priced hundreds of dollars below comparable devices. But in smartwatches, where the same chipset is used, mostly the same design and the same non-customizable operating system (For Android Wear smartwatches, that is), it is hard to stand out from the crowd.
Secondly, OnePlus can’t use its strategy of undercutting the competition with low prices, because the prices they sell at nowadays are pretty reasonable. Margins are pretty thin in the smartwatch business, and it is not worth it to reduce them further to get to aa price that will be just marginally lower.
Plus, the smartwatch market never really took off spectacularly, and OnePlus can’t really afford to misplace bets. In our opinion, it is a smart decision by OnePlus to drop the smartwatch idea. What do you think?