(Chinese Version)

The smart phone market is becoming saturated gradually and the market growth is slowing down. In this very period, luxury phone Brand Vertu was recently acquired by a Chinese enterprise.

According to Vertu’s announcement, the company was acquired by a Hong Kong-based company, Godin Holding, in alliance with other foreign individual investors. After the acquisition, Vertu’s headquarter and factories will still remain at Hampshire and Vertu will become a sub-brand of Godin Cyber Security Company in mainland China. Vertu stated that it wished this act would help the company understand the local markets in China better and learn to find ways to enter the second and third-tier cities in the country.

Vertu is famous for its luxurious design and high price. Compared to iPhone, Vertu is the real example of high-end luxury phone. Vertu was a British manufacturer and retailer of luxury, handmade mobile phones established by Finnish mobile-phone manufacturer Nokia in 1998. In October 2012 Nokia sold Vertu to private equity group EQT VI for an unspecified amount, (rumored to be $200 million), but retained a 10% share. And currently Vertu belongs to Godin Holdings, a Hong Kong-based holding company. Known for its luxurious appearance and expensive high-end materials, Vertu phones are sold at the price of over a hundred thousand RMB on average. The latest basic model of Vertu is priced at about 7,000 pounds. If the customers want to order the rose gold color ones or other customized colors, then the price could go up to about 17,000 pounds (around 170,000 RMB). The most expensive models are sold at the price above 300,000 US dollars, which pretty much could be used to buy quite a decent size apartment in first or second-tier cities in China.

It’s fair to say that iPhone is no match to Vertu in terms of luxurious aspects, not even close.

And Vertu had been a popular phone brand among rich people for its high-end image

Since its first model in 2002, Vertu has sold over 450,000 phones so far globally. Vertu phones’ tech specs and actual performance lag far behind iPhones or other Android phones, but still the brand survives the tough competition.

Before smart phones became widespread, Vertu was actually a unique star in the world of phones.

Vertu became popular for its luxurious brand image among rich people. Its concept is simple, that is to serve high-end consumers that want phones made from luxurious and expensive materials such as precious metals, leathers, and sapphire.

In China, Vertu’s main target audience is businessmen since this brand for them just looks more glamorous and smells like cash, which could show their social status and expand their social network in a way. Vertu’s market goal was obvious, that’s separate its users from iPhone users, making them truly high-end users. As a matter of fact, Vertu had done studies on rich people’s psychological needs: for instance, if rich people see babysitters and gardeners they hired were also using iPhones, then they would tend to find other alternatives to show off their social status.

In this case, Vertu is actually not a threatening competitor for other phone brands. Vertu’s selling point is never about advanced technologies, tech specs, operating system, or marketing strategies. It’s true that the fierce battle in the phone sector has nothing to do with Vertu. All Vertu cares is the luxurious appearance and special position in the phone sector.

Vertu’s marketing strategy is similar to Apple’s, which means they both prefer the Chinese market. Vertu’s CEO Massimiliano Pogliani had revealed that Vertu had a large market share in Europe and Asia, and that the Greater China region was Vertu’s most important market in the world. In this case, Vertu’s idea is just the same as Apple’s. Statistics show that Vertu has 44 outlets in mainland China. If we add up the outlets in Hong Kong and Macau, the number will hit 57, over half of the total outlets in the world.

Even so, the best time for Vertu has gone. Rumor has it that Vertu had started to look for potential acquirers early as last year for its terrible financial situation. It’s said that it was so bad that Vertu almost went broke. That’s why Vertu had no other options but to sell itself to a Chinese enterprise.

Trapped in a pit, Vertu has to modify its position strategy

Besides the financial crisis it faces, Vertu is also under storm brought by the economic environment today.

Up till now, emerging global economies, including China, are slowing down, which results in the decline of the sales of luxurious goods such as Swiss watches and Burberry items etc. The harsh reality is that less people are buying luxurious goods. According to the Global Luxury Study 2015, in 2015 the sales volume growth of the global luxury goods market is expected to go down from the 3% last year to 1% to 2 %. There’s no doubt that luxury goods are entering a winter and they need to adjust their pricing strategy in order to survive.

On the other hand, consumers who prefer Vertu phones are generally collectors. They buy Vertu phones purely out of their hobby or interest. But now Vertu phones’ collecting value is decreasing, which is a turn-off for this group of consumers. In this smart phone era, Vertu’s design is actually outdated and not appealing anymore. The worst part is Vertu hasn’t been really focusing on improving its fashion design all those years, let alone technological aspects. Versu is merely regarded as a brand that only rich people would buy. That being said, Vertu has a major brand image problem. The truth is in highly developed economies such as South Korea and Japan, there’s no Vertu outlet at all. It indirectly suggests that in developed countries that have a large proportion of middle class, Vertu has no market.

On the one hand we understand even though Vertu phones’ features are its design and luxurious materials, in a rapidly-changing smart phone era, even rich people still prefer useful smart phones that might be common looking. Rich people embrace the conveniences and intelligent life smart phones can offer to them instead of owning Vertu phones which only allow them make phone calls. In today’s world, information is everything. Even rich people need to stay connected. They need to have access to the Internet to manage emails or stuff, and Vertu phones can no longer meet their needs. So far 1/4 of Vertu phones’ sales is contributed by basic phone models that only allow users to make phone calls, which cause people to think that only uneducated people that became rich overnight would use Vertu phones, since only this group of rich people doesn’t need to use smart phone and the mobile Internet to handle work, browse through information, and enjoy life services. In general, people think that only rich mine owners from Shanxi province and upstarts with new money from the Middle East would use Vertu phones. Needless to say, this is a devastating blow for a luxury brand.

However, the new generation of rich people is no longer mine owners or upstarts, but rather entrepreneurs from the IT industry and the Internet sector. On the Hurun Global Chinese Rich List 2015, emerging and successful entrepreneurs are becoming more prominent, who definitely don’t have a thing for Vertu phones that are designed for showing off but have little useful functions. In this case, Vertu really needs to reconsider its brand strategy and its position in the market.

As a matter of fact, Vertu is working to keep up with the current fashion and design tendency. For instance, its basic model Aster series is priced relatively lower and has color options of blue and rose red etc. aiming to attract young female users. But if Vertu wants to continue its path on fashion, then it would probably encounter problems like Swiss watch brands do.

Just like Swiss watch brands, Vertu is under heavy assaults from Apple

So far Vertu is losing its edge in social status symbol. Industry insiders point out that rich people nowadays tend to prefer iPhone over customized Vertu phones, which might further oppress the demand. Vertu has to improve its competitiveness to appeal to consumers.

In some way, Vertu phones together with Swiss watches, are under attack from Apple. As far as we are concerned, the export volume of Swiss watches in the third quarter this year encountered a major plunge like it did back in 2009. Although this downfall is closely related to the slowdown of the global economy, Apple watch is also one of the main driving forces for this situation. Apple Watches look as luxurious as traditional watches while having the high-tech features that are needed in today’s information world. This combination of strengths is something traditional watch makers find it hard to compete with.

Swiss watches’ success mainly attributes to the brands behind them for their leading design and concept on watch making. However, they are vulnerable in the tech world. Swiss watch brands don't produce engines, chips, software, or hardware, which is their fatal weakness. Swiss watch brands are also making efforts to develop smart watches, but the situation is still bad for them.

Vertu is no exception. Vertu is more about customization and less about useful functions or innovative technologies. For instance, we literally see changes on smart phones with every passing day and Vertu phones are still what they were a few years ago. What’s more, Vertu phones are still using the Symbian system. Although Vertu is starting to adopt android system, still it lacks far behind other android phone brands and its brand image is going straight down.

On the other hand, Vertu phones have a lot of bugs, which makes the brand image even worse in the eyes of high-end users. It’s said that phone repair organizations always assess the malfunctions as the result of man-made fault or the entering of fluid. Plus, it takes a really long time and costs a lot to fix a Vertu phone. Such awful aftersales services are definitely making Vertu look bad. Vertu lacks innovation on technologies and products, adequate market positioning strategy, and it rarely has promotion or publicity campaign. In China, there just aren’t many ads or promotion campaign from Vertu.

Besides customizations, Vertu doesn’t really have innovations. As we know, Vertu is known for its personal assistance service: for instance, Vertu users would automatically become members of some high-end clubs and be able to book exquisite high-end hotels and golf clubs. In 2014, Vertu launched over 600 exclusive services range from travel, fashion, world-class games, and high-end restaurants. Unfortunately, these services can no longer attract rich people.

Apparently, Vertu’s sales will rely heavily on its investors and high-end consumers’ network. So far the high-end image of Vertu still has great potential in Chinese second and third-tier cities. Although Vertu’s strength is its exclusive services, the lack of user base and relevant high-end service in the second and third-tier cities still make it hard for Vertu to expand its sales channels, build a user base, and accumulate client resources.

At core, Veru fails for its lack of technologies

Vertu’s problem, in nature, is that as a luxury brand, it chose to stand in line with other technology-based brands. In sectors that don’t really require cutting-edge technologies to enhance competitiveness, once the brands have established their dominant control, then their business path would be stable. For instance the handbag and clothing sectors, LV, Gucci and Prada are dominant and stable in their respective areas. What they need to maintain their brand value are unique design and brand value. But in the tech world, without leading technologies, any brand value would be gradually weakened and eventually die out.

It’s hard for us to imagine high-end cars from luxury brands such as Ferrari and Rolls-Royce not to have outstanding performance and driving experience, right? If these high-end cars’ technological standard is even lower than average cars, then their brand value will just break.

In the past, consumers didn’t buy Vertu phones for their tech specs. But time has changed. It’s probable that when Godin Holding bought Vertu, the company didn’t consider the changes that had occurred in the tech world and the current trend in the market. Consumers’ needs have changed greatly and with every passing day new technologies are developed. People from the elite class need much more than phones that are for purely showing off. It’s for sure that showing off is a human nature. But in today’s world having that function is no longer enough.

Vertu has already been trying to improve its design and develop new technologies and so far Silent Circle communication encryption and Kaspersky mobile security service are provided on Vertu phones, but still it’s far from enough. Vertu needs something unique to appeal to high-end users as high-tech and luxurious brand. But due to its lack of the ability to innovate and experiences, Vertu is definitely struggling to do so.

As Apple launched the high-end version iPhone, which uses luxury materials such as gold and silver, Vertu’s brand value is gradually weakened by the attacks from the tech giant, especially the brand now belongs to an enterprise in China, a country that’s usually associated with cheap products of low quality. After all, cases in which an international brand was acquired by a Chinese enterprise then was abandoned by the market gradually are not uncommon. Vertu’s future can be more or less foreseen from the previous cases.

Luxury products in the tech sector can’t win it all with merely expensive materials and high-end services. They need advanced technologies to back their high-end image, which is inevitable. If brands keep treating tech products as antiques or items for collection, then they would ultimately meet their true death under the siege of the changing era.

[The article is published and edited with authorization from the author @Wang Xinxi, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at ECHO), working for TMTpost.