Handset prices continue to fall, even as high-end features rise, says NPD

According to The NPD Group, buy-one-get-one (BOGO) offers and other price reductions on smartphones led to a 3% decline in average prices in the third quarter of 2009. The overall average purchase price for handsets in the US fell to US$85, which is down from US$88 in third-quarter 2008. Smartphone unit share held steady against feature phones; 28% of handset sales were smartphones last quarter.

"Carriers have been heavily promoting the latest advanced handsets, which has spurred recent growth in the smartphone market and an increase in the number of smartphone brands available to consumers," said Ross Rubin, director of industry analysis at NPD. "For example, while there was only one Android device available in the fourth quarter of last year, now there are eight available from three major carriers."

NPD indicated smartphone price reductions by carriers helped push the Blackberry Curve, iPhone 3GS, and iPhone 3G to the top of the sales rankings for mobile phones. LG Electronics dominated sales of feature phones; for example, phones sold without an operating system, with LG enV3 and LG enV Touch rounding out the top-five sellers. Mobile phone accessories sales reached US$2.3 billion in third-quarter 2009, which is an increase of 12% over the prior quarter.

"Carriers and retailers are increasingly looking to the holiday season for the increase in sales traditionally enjoyed by other consumer-electronics categories," Rubin said. "Growing revenue opportunities offered by accessories and service are just two ways that handsets offer revenue potential beyond someone switching carriers."

When it comes to consumers' preferred shopping venues, in the third quarter of 2009 68% of new handsets were purchased at carrier stores, 8% were purchased at mass merchants, and 9% at electronics stores. "Although carrier stores lead sales throughout the year, around the holidays consumers tend to purchase more handsets from mass merchants, due in part to the allure of one-stop shopping for a variety of holiday gifts," Rubin said.

As NPD noted last year, sales of pre-paid handsets represented 17% of the market in the third quarter, increasing to 20% the following quarter. "We expect to see even greater gains for pre-paid phones during the holidays, as they are quite easy to give as gifts, since they don't require a signed contract with a particular carrier," Rubin said.