OnePlus Moves Further Up and In: Up in Price, Into Verizon in the U.S.

Bottom Line

As smartphone flagship pricing has broken $1,000, OnePlus continues to chase the latest specs at a discount – however, while its phones remain relative bargains, they are still priced out of reach for more consumers. Offsetting this is a marked expansion in the U.S., where OnePlus now has distribution at two of the three national carriers.

OnePlus: A Qualified Success

While LG, HTC, Sony, ZTE, and Kyocera have all fallen dramatically from earlier smartphone sales volumes, a relatively new Chinese brand, OnePlus, is gaining ground. OnePlus claims that it was the fastest growing smartphone brand in the U.S. last year – an assertion also made by Motorola, though perhaps the methodology is different. OnePlus’ expansion comes off a small base, and its global unit sales are in the millions, not tens or hundreds of millions. However, no matter how you calculate, OnePlus is certainly establishing itself as a serious competitor in the U.S. now that its phones are sold by T-Mobile and Verizon.

Even if they were willing to accept lower unit sales, the OnePlus formula will be hard for legacy brands to replicate. OnePlus has focused on a very specific value proposition: a very limited line of flagship phones at a $200 - $300 discount off bigger brands. As the price of premium phones from Apple, Samsung, and Huawei has risen, OnePlus has moved up the price ladder alongside them, while still maintaining its core value proposition. OnePlus does plenty of inexpensive community-based marketing, but does not spend heavily on brand advertising. While that makes OnePlus seem like a scrappy start-up, OnePlus is helped by the fact that it is part of a larger operating group, BBK, which includes OPPO and Vivo, and some of the engineering and design work that appears on those sister brands is appropriated for OnePlus as well.

However, OnePlus is the only BBK brand to target the difficult, carrier-controlled US market. It did so by appealing to a niche of customers who valued OnePlus' specs and pricing over better-known brands enough to buy the phones sight unseen online. Once OnePlus had a large enough installed base of these customers on T-Mobile USA's network, it was able to make the leap to carrier distribution. To justify the investment in RF tuning and testing for individual carriers, it is crucial to have their support at retail. This becomes even more important if OnePlus wants to broaden its product line again to attract more mainstream consumers. (Back in 2015, OnePlus attempted a lower-priced, design-centric phone, the OnePlus X. It did not sell.)

Relative Bargains Can Still be Expensive

OnePlus’ newest flagship, the OnePlus 8 Pro, is priced at $899 - $999, which is hundreds less than Apple and Samsung’s best large phones, but still well outside the range of many mainstream consumers, especially in the current environment of economic uncertainty. OnePlus also offers a slightly smaller, slightly de-featured OnePlus 8, and that is the model that U.S. carriers are offering at retail. The OnePlus 8 is $699 at T-Mobile and works on the carrier’s sub-6 networks (from legacy T-Mobile and Sprint) but not on the small footprint of T-Mobile’s mmWave network. Verizon gets its own unique variant, the $799 OnePlus 8 5G UW, which supports Verizon’s mmWave 5G network.

Seven or eight hundred dollars is still be a bit of a hard sell for a relatively unknown brand, but it does create competitive pressure for Samsung. Samsung’s Galaxy S20 and S20+ have better cameras than either OnePlus 8 variant, but the S20 costs at least $200 more. Samsung lowered prices on the Galaxy S10 line and will have lower priced A-series 5G phones later this year, but by starting the Galaxy S20 at $999, it opens itself up to competition from more affordable flagships from OnePlus, Motorola, and, later this year, Apple. Samsung has begun offering more aggressive trade-in discounts to people buying the Galaxy S20; further price discounting may be necessary.

An Online Brand in a Newly Online-Only World

Covid-19 has disrupted nearly every industry, and it remains to seen whether consumers who have no experience with OnePlus will be willing to buy its phones online. However, this is how OnePlus' existing customer base has always operated, so the brand is certainly better positioned than most for an online-only sales environment. OnePlus has not historically expected consumers to get hands-on with its phones at retail, and its marketing strategy reflects that. For example, OnePlus sends out review units in ridiculously lavish packaging stuffed with accessories and related products, which encourages content creators to post elaborate unboxing videos.

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