Despite announcing a pair of phones -- the Galaxy S7 and S7 Edge -- that were markedly better than prior generation products, a report out of Business Korea suggests that Samsung's (NASDAQOTH:SSNLF) latest flagships are faring worse in pre-orders than the prior generation phones did.
Business Korea claims that "market watchers" attribute this not necessarily to tepid demand for the S7 series of phones, but to the fact that "consumers no longer prefer the preorder system."
Let's take a closer look at Business Korea's arguments and see if it holds up.
Subsidies and pre-order goodies
The first reason that the site gives for this reportedly weak pre-order activity is that "consumers cannot know the exact factory prices and official subsidies during the preorder period."
I'm not sure how well this argument holds up (or perhaps I am simply misunderstanding it), because the prices that the carriers seem to be offering the S7/S7 Edge at are pretty much the same prices that high-end Galaxy smartphones always tend to sit at launch.
Next, the report claims that the "free gifts" (either a Samsung Gear VR or a Galaxy Gear S2 smartwatch) "are not that attractive." It goes on to say that customers can buy "new" versions of these products at dramatically reduced prices to what Samsung says they're "worth."
On a personal note, one of the reasons that I actually went ahead and pre-ordered mine, rather than wait for the launch, is that I figure that I can reduce my effective cost on the device by just selling the "freebie" that Samsung is throwing in.
Indeed, my carrier is apparently offering a free Gear S2 smartwatch with the purchase of an S7 series phone. Looking at a popular auction site, it would seem that I can sell this product -- which I don't want -- for more than $200.
That means my phone will effectively be $200 cheaper than what I paid upfront for it when all is said and done. In my mind, if somebody wants an S7 series phone, pre-ordering and dumping the extras is the way to go.
The real reason is that demand probably just isn't great
I suspect that the real reason is that demand for the S7/S7 Edge just isn't as good as it was for the S6/S6 Edge last year. Although technology geeks such as myself will appreciate the improvements made to the camera, processor, display, and other new features here and there, none of them seems truly "game changing" for the average consumer.
Additionally, Samsung has to deal with the harsh reality that ultra-high end Android phones will have a tough time existing in a world where a $200-with-no-contract Android phone can offer casual users virtually the same functionality at a much lower cost.
Yes, the S7 is intrinsically much better than a typical $200 Android phone, and yes there will continue to be a market for premium Android smartphones. However, that's not where the real growth in this market is going to be going forward. The low-end and mid-range are where it'll be at.
Indeed, Business Korea pointed out that the Galaxy J7, a solidly mid-range device, is a "steady seller."
Ashraf Eassa has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.