Note 20: How do you sell a $1,000 phone during a pandemic? Samsung has a plan
The company is rethinking the online and in-store buying experience.
Samsung is launching its highest-end smartphones, including the Note 20 Ultra, during the pandemic.
Virtual sales pitches and consultations. Touchless in-store device demos. Deals galore. Those are just some of the plans in Samsung's playbook for selling phones during a pandemic. Last week, the South Korean electronics giant unveiled the Galaxy Z Fold 2 alongside the $999 Note 20, the $1,299 Note 20 Ultra, the $649 Galaxy Tab S7 tablet, the $399 Galaxy Watch 3 and the $170 Galaxy Buds Live earbuds. Samsung has already begun taking preorders for the new Notes. Orders should arrive around Aug. 21.
Samsung hasn't yet detailed pricing or availability for the Z Fold 2, but said it will share more information on Sept. 1. The first generation of the device cost $1,980 and came with 4G in the US. The new model packs in 5G connectivity across the three major US carriers, a glass screen and a redesigned hinge, all of which could make it even more expensive.
Samsung, which recently lost its crown as the world's biggest phone maker to Huawei, is launching its new devices in a tough environment. Instead of facing a strong market for phones, with 5G and foldable screens getting people to upgrade their devices, most handset makers are seeing lower demand amid the raging coronavirus pandemic. Millions of people are out of work, hundreds of thousands have died and regions around the globe continue to battle a seemingly unending surge in infections. Consumers are opting for less expensive devices, saving their money altogether or spending their cash on PCs and other work-from-home and entertainment supplies.
Samsung's task with its new lineup is finding buyers willing to fork over a grand or two during a pandemic and recession. The new products were designed before the novel coronavirus spread around the globe, which meant Samsung couldn't tweak the Note 20 or its other new devices to address the pandemic.
What it could do, though, is change how it goes about selling the Note 20 and the Note 20 Ultra, Drew Blackard, vice president of product management for Samsung Electronics America, said in an interview ahead of the launch event.
"It was a bit more of how you react to the current situation as opposed to kind of retool everything that you're doing," Blackard said. "Despite the fact that we couldn't change the device, we very much rethought how we go to market."
That includes those virtual consultations that'll make the online buying interaction more like the in-store experience. Touchless digital demos will give in-store shoppers a glimpse into the Note's features, right from their own devices. And Samsung is exploring ways to tailor its future products and services to the needs of people who are largely stuck at home, like making it easier to track fitness and stay healthy while quarantining.
Lower phone sales
Samsung's phone sales have taken a hit during the pandemic. Its Galaxy S20 lineup became available about a week before parts of the US issued stay-at-home orders. Because consumers were worried about money -- and couldn't see the new devices in person -- demand fell. Last week, Samsung said its mobile business revenue tumbled 18% from the previous year.
In the second quarter, Apple was the only smartphone vendor that saw its shipments grow, according to Canalys. Apple's iPhone SE, its first major revamp of its popular small phone in four years, arrived in mid-April with a starting price of $399. That seemed to be the perfect phone for the times and helped buoy Apple's results. The device costs $300 less than the iPhone 11 but contains many of the same specs, appealing to people who can't afford a $700 phone, let alone a $1,000 iPhone 11 Pro .
Samsung, despite launching its new Galaxy S20 lineup in March and its less expensive Galaxy A phones, saw the biggest year-over-year drop of the world's top five phone makers in the second quarter, Canalys said. Its 30% decline allowed Huawei to leapfrog Samsung to become the world's biggest smartphone vendor for the first time, the firm noted. It was the first time in nine years that a company other than Samsung or Apple shipped the most phones.
Samsung said in a statement it'll continue to "focus on creating innovative mobile experiences that improve our users' lives." Part of that includes its new devices from Unpacked, and it noted during its earnings in late July that it also will strengthen its "mass-market lineup" of less expensive phones.
At least in the US, Samsung "found that, actually, demand for premium devices is still quite high," Blackard said. Still, Samsung sold about 44% fewer Galaxy S20 models in the US in the first four months of sales than the Galaxy S10 last year, according to M Science, a data analytics provider that tracks stats like mobile adoption.
Google , meanwhile, unveiled its new smartphone, the Pixel 4A, last Monday. Instead of introducing a high-end, flagship phone, Google opted to slightly pare back the Pixel's specs to price it at $349. The phone doesn't have 5G or a premium processor, but "for its price, the Pixel 4A has one of the best cameras you can get on a phone," CNET's Lynn La said in her review of the device.
The new Note 20 lineup is nowhere near that price level, with phones starting at $1,000. For some people at this time, that pricing could be hard to stomach. Working in Samsung's favor is the rabid Note fanbase.
"What we've shown here in the past five months is we probably have the broadest portfolio of any company in the industry," Blackard said. "We are down to $99 on the A01, up to Galaxy Fold , which is [about] $2,000. ... Our portfolio is very well suited to the current situation."
Still, the new Note lineup has a lot in common with the Galaxy S20 devices from earlier this year. In the past, the Note got the latest and greatest technology first, and it also had the biggest screen. Now the Galaxy S lineup gets a lot of features first, and the foldables are Samsung's new ultra-premium lineup. There've been questions for years about where the Note fits into Samsung's overall lineup.
"It will be interesting to see whether this will be the last evolution of the Note in its current format," said CCS Insight analyst Ben Wood. "These days consumers tend to hold onto their smartphones for at least three years, so having two flagship launches a year may no longer be necessary."
Encouraging online shopping
A big focus for Samsung during the pandemic is boosting online phone sales, something that hasn't been a huge market in the US. Here, most people buy their phones from carriers like Verizon and AT&T , and they usually at least look at them in person before making the purchase. But the pandemic has forced many stores around the country to close, preventing people from holding new phones in their hands before buying them.
"People shop on their phones, but they don't shop for phones with their phones," Blackard said.
To make people more comfortable with buying smartphones online, Samsung started offering contactless delivery and increased the return window for its devices to 30 days from 14. It also created a first responders discount for all of its products, which is on par with Samsung's employee discount.
Since the pandemic began, the amount of US purchases made online across the phone industry has almost doubled compared with in-store, Blackard said.
Samsung also will be offering virtual consultations starting this month, providing information that would-be buyers typically get when they go into physical stores -- like detailing features of a device, explaining their phone plan and potential deals for the phone and answering questions.
"From your computer, you'll be able to just log in, and you'll get a Samsung representative who can walk you through that purchase process as if you were there in a retail store," Blackard said. He added that while the consultants initially will be Samsung employees, the company hopes to partner with others, like carriers, to provide the same sort of experience.
Changing the in-store experience
For stores that are open, Samsung is rolling out a new "touchless digital retail mode" with the Note 20, Blackard said. Typically, people visiting stores pick up new devices and play with them before deciding to buy. Samsung's technology will let people scan a QR code using their own devices and launch "a virtual experience of what it's like to use the Note 20 on the device you have in your hand," he said.
"People might not want to touch a phone right now as they go into a store," Blackard said.
Samsung's new Galaxy Note 20 and Note 20 Ultra come in a striking bronze shade
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Samsung also knows it has to make its devices more attractively priced for consumers. After introducing the Galaxy S20 in March, Samsung offered "work from home bundles" that gave deals on equipment. And last month, it partnered with Postmates to give anyone who bought certain Galaxy devices a free year of Postmates Unlimited, the service that gives free delivery on orders.
Though the new Note lineup doesn't come cheap, Samsung plans to offer generous promotional deals for the phones. Note 20 buyers will get $100 Samsung.com gift cards, while Note 20 Ultra purchasers will get $150. Samsung also has trade-in offers to give up to $650 for older devices, and it's expanded its upgrade program, which lets device owners get a new Galaxy phone every year.
And Samsung on Wednesday detailed a new partnership with Microsoft for a gaming bundle that includes three free months of Xbox Game Pass Ultimate and a Bluetooth controller. The two companies also have worked to bring Android apps to Windows and include other productivity features in Samsung mobile devices, something that's attracted more buyers and could appeal to people who are working from home.
"The Note occupies an evolving space in Samsung's lineup," Reticle Research principal analyst Ross Rubin said. "Samsung has shifted it toward productivity enthusiasts."
Future products
Huawei , which sells most of its devices in its home country of China, has already made some design tweaks to its phones, like adding a temperature sensor to its Honor Play 4 Pro so the smartphone can work as a thermometer.
Samsung isn't ready to talk about changes to its devices, Blackard said, but it's looking at three broad areas for innovation: fitness and health; shopping; and entertainment.
The areas "are very exploratory," Blackard said. Samsung won't be deploying new services or features immediately but considers them "areas of investigation and product collaboration to bring these solutions to market."
When it comes to fitness, Samsung is exploring tools to help people "figure out ways to exercise from home," Blackard said. For health, Samsung is looking into features to support telehealth, those digital doctor appointments more people are having during the pandemic.
"How do we dive deeper with consumers on some of the things that they're going through and then ultimately craft solutions around that?" Blackard said.
When it comes to retail, Samsung is exploring ways to improve the online shopping experience. "Considering all the technology we have in these [new Note] devices -- 5G connectivity, great augmented reality solutions, three cameras -- the mobile shopping experience is still pretty basic," Blackard said.
And with entertainment, Samsung is considering how it can help people enjoy concerts, sports, movies and other content from home instead of in person. Rather than create its own services -- something Samsung has struggled with -- it's opted to partner with other companies over the past several years, like working with Microsoft to offer Xbox Cloud gaming on the Note 20. It's looking at even more ways to work with partners in entertainment, Blackard said.