‘Grey market’ sales keeping the mobile device market afloat

(Sony Ericsson)

Market researcher Gartner predicts worldwide mobile device sales will show flat growth in the fourth quarter of 2009, instead of declining by 3.7 percent as they had previously predicted in September.

This trend is partly due to the manufacture and sale of "grey market" devices, in other words, devices which are manufactured and or sold through unofficial or unauthorized channels said Gartner on December 15.

"Although the grey market or ‘white label' is not a new phenomenon and has been generated by Chinese device manufacturers who do not have a licence to sell and manufacture devices without a valid international mobile equipment identity (IMEI), today grey-market sales are no longer limited to China," said Carolina Milanesi, research director at Gartner.

"All manufacturers will have to compete with grey-market players as they expand into emerging markets in Asia/Pacific, Eastern Europe, the Middle East and Latin America and bring a lower weighted average selling price (ASP). The grey market will affect Nokia's market share the most."

News papers and online technology blogs have been hot with the news of the latest mobile gadgets in 2009, despite this fanfare, mobile device sales reached 1.214 billion units in the third quarter of 2009, a 0.67 year on year decline in sales.

Worldwide market economic conditions had a huge impact in the technology sector in 2009 and forced many consumers in mature markets to hold on to their old devices for 18 months instead of the average 12.

"Despite a projected return to growth in 2010, the times of 20 per cent growth are certainly over as mature markets are saturated and most growth will come from emerging markets," concluded Ms Milanesi.

"Pressure will remain for manufacturers to sustain and grow margins as ASP continues to decline. Software, services and content will be much bigger drivers than hardware, pushing traditional mobile phone vendors to reinvent themselves to remain at the top of their game."

In 2011 Gartner believes smartphones prices will drop and mobile operators will offer these devices on shorter contracts to ensure consumers return to 12 month replacement cycles. Second hand device sales and SIM-only sales are expected start decreasing globally in 2011 "as consumers feel less macro-economic pressure," said Gartner.