Units shipped != Units sold

There are reports and then there are more reports. What many people don’t realize is that these reports are fraught with assumptions and sometimes the reports are interpreted the wrong way. Nothing wrong with the reports per se as the reports are careful with their wordings. It’s the interpretations by the so-called media which is the culprit. Nothing catastrophic really happens with the misinterpretation but it would be nice to know things as they are.

One of the things in the industry reports related to mobiles and other high tech devices is the units shipped. This is often confused with units sold. Let me confirm that Units shipped is not the same as units sold. Manufacturers ideally want it that way but it rarely happens. Except if you are Apple.

Units shipped is not equal to units sold

When Nokia manufactures it N8, completes its testing, it knows that it is ready to ship. Nokia cannot possible sell 24 million mobiles across the world all by itself. It befriends with good folks in each country who are called distributors. When a shipment of a million phones leaves Nokia’s warehouse, that’s the only count Nokia knows and can be 100% sure. Once it leaves the warehouse, what happens across the world is something Nokia would like to know but it will not know in full detail. This is the blind side which every body in the high-tech industry know full well.

Let’s take one more example.  Around 2.5 million Windows Phone 7 equipped phones were shipped as per the recent Canalys report. But till date only 674000 phones were sold. The 674K estimate is doing the rounds with no genuine source, but comes from a well renowned person who is good at making these kind of estimates. I have a reason to believe that the 674K figure is right. That might be the number of Windows phone sold so far. What is happening to the other 2 million windows phones? Well your guess is as good as mine. They are sitting somewhere in the warehouses of the distributors or retailers or etailers or at customs. They are going stale while the HTC’s and Samsung’s continue to launch newer models. A possible 2 million phones going stale isn’t such a good idea. So retailers and manufacturers get into some kind of agreement and try to slash the price or come up with a buy one get one free offers (though the later rarely happens). That would kick the sales curve a bit.

There is a cycle for this whole thing to happen. By the time everyone realizes that phones are not selling well it is time for the next quarter report where another 3 million phones are already shipped when the phones from the first shipment aren’t yet sold. A cycle which is all too familiar for someone in the retail industry. When the inventory piles up, manufacturers will be told that a particular phone isn’t doing well. That’s when the manufacturer like HTC or Nokia will pull the plug on that product. Though in case of Apple and iPhones the whole thing works in reverse. Retailers will be asking for more phones and Apple pacifies them with supply shortage and Foxconn suicide stories.

So when you see a report which is talking about units shipped you know what to think about it. In the recent Canalys report 35.7 million Android powered phones were shipped and 19 million iPhones were shipped. Given the track record of iPhone, it could so happen that all the iPhones will be sold out and the Android powered phones are still lagging and they might be 19 million Android powered phones which are actually sold.

The sales information is golden. There are ways to gather it but it is a painful process which never ends. That’s the reason why reports stick to shipments. There’s less noise at the top of the distribution cycle.

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