Dakele’s Bankruptcy Is The Result Of "Natural Selection" In The Chinese Smartphone Market, Not “Capital Winter”

摘要: Discount is no longer enough to attract consumers, so many small-sized smartphone manufacturers who survived by selling more smartphones at a lower profit margin failed to keep a steady cash flow.

(Chinese Version)

On March, 8th, Ding Xiuhong, founder and CEO of Dakele, announced through his Sina Weibo account that hardware&software development, market operation, business operation of Dakele had all stopped as of that day, and that KeleUI wouldn’t be upgraded anymore. The smartphone manufacturer who struggled to survive for a long a time finally went bankrupt.

However, rumor had it that Dakele’s mother company Beijing MornCloud Technology faced bankruptcy and liquidation as early as last October, and that its founder Ding Xiuhong had already resigned.

In his Sina Weibo account, Mr. Ding stated:

“In this capital winter, Dakele also met its death. We’ve got to make this tough decision, because Dakele has already failed in face of fierce competition in the Chinese smartphone market, and the reshuffling of the capital market”.

In other words, he means that Dakele failed because the Chinese Internet industry has entered into a “capital winter”, so that Dakele failed to keep a steady cash flow. “The unexpected capital winter ruined everything. All the previous investment plans were given up by our investors,” he complained.

Mr. Ding’s statement aroused heated discussion on the Internet. Many people rushed to announce that “the Chinese smartphone market has already entered a winter” or “there’s going to be a wave of bankruptcy”, etc. However, can we really jump to these decisions merely because of Dakele’s failure?

Dakele’s failure is doomed

Dakele rose to fame because it broke the record and raised 16.5 million RMB within only 25 minutes on JD Crowd-financing.

How possible? Mr. Ding promised that every participant in the crowd-financing will be rewarded a Dakele3, and the latest smartphone model of Dakele every year for free. In addition, he promised that all the participants would have the opportunity to get involved into the R&D of Dakele smartphones.

However, when we see the crowd-financing campaign now, we might find that Dakele’s setback and failure might have started since then.

Since Dakele devoted most of its efforts to promoting itself, it focused less on the quality of its smartphone models. Although it managed to win a large crowd of consumers via effective marketing strategies, it failed to satisfy their basic needs and provide them a proper user experience, let alone keeping a high user retention rate and expanding its markets.

In addition, Dakele’s failure might have something to do with the distrust of its customers and partners, because Dakele failed to attach enough importance to them, according to MyDrivers.com.

After some research, we find that Dakele did establish an official post bar for its partners and fans to communicate with each other. The platform could have become a great way for every one to get involved and help it win more consumers. However, it turned out that the platform only made things worse.

How so? Later on, when some customers posted articles, complained about Dakele’s quality, and offered their advises for further improvement, the administrator simply blocked them from posting any more comments. At last, even Dakele’s partners’ application to join the post bar were rejected.

In addition, Dakele hired some astroturfers to delete negative comments and only post positive comments on the official post bar, which forced many partners to get into private post bars in order to communicate with each other, feeling angry and distrustful of Dakele.

Dakele’s failure has nothing to do with “Capital Winter”

Although the Chinese smartphone industry was quite volatile in recent year, few smartphone makers went bankrupt because the competition was too fierce. Those who went bankrupt did so because they are generally immature, lacked enough experience in marketing, operating, hardware R&D, and devoted so much time winning consumers by playing gimmicks and being sensational.

It’s obvious that such strategy began to not work in these years.

Discount is no longer enough to attract consumers, so many small-sized smartphone manufacturers who survived by selling more smartphones at a lower profit margin failed to keep a steady cash flow.

The Chinese smartphone market is already almost exhausted. To stand firm, smartphone manufacturers have to expand their influence, polish their brand name and even go abroad. Small-sized smartphone manufacturers, however, don’t have enough capital to transform themselves or expand into other markets, as well as to even play gimmicks.

It is reported that VIVO spent 350 million and 700 million RMB to become the exclusive sponsor of Happy Camp for 2015 and 2016 respectively, a popular entertainment interview in China, while Xiaomi and LeTV spent 22.38 millionn and 71.99 million RMB to bid for less than 60 seconds for commercials amid CCTV’s 2016 Spring Festival Gala.

How can we expect small-sized smartphone makers to spend so much money doing commercials like this way?

In conclusion, there is no need to treat Dakele’s failure so seriously and exaggerate it. Dakele’s bankruptcy is the result of natural selection in the Chinese smartphone market. No going of the old, no coming of the new. The Jungle Principle might also applies in the Chinese smartphone market.

While smartphone manufacturers who rely too much on old-fashioned gimmicks and don’t care too much about user experience (Dakele is a typical example) are gradually driven out of the market, smartphone manufacturers who respect the basic market principle, attach high importance to user experience and develop products of high quality (such as Huawei and Xiaomi) will after all stand firm in the Chinese smartphone market, no matter how fierce the competition will be in the future.

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

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.

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