Analysts suggest that the Samsung Galaxy Note 7 was selling better than its predecessor, the Galaxy Note 5, prior to the recall of the phablet due to battery problems.
The Galaxy Note 7 was one of the most anticipated smartphones and the company probably thought it would be one of the bestselling handsets in the market. However, the battery exploding issue with the phablet changed everything for the Korean company. Samsung had to temporarily halt sales and arrange for an exchange of potentially faulty devices.
More than 90 cases of the Galaxy Note 7 battery catching fire have been reported so far in the United States alone, and Samsung has started replacing the potentially hazardous devices. The recall is estimated to cost about $1 billion to the company, and is also expected to affect the Galaxy Note 7's future sales not only in the United States but across the world.
Analysts at BayStreet Research report that being one of the most sought-after devices at launch, the Galaxy Note 7's sales figures were 25 percent better than those of the Galaxy Note 5. Analysts believe that the newly launched phablet had the potential to achieve sales as high as those of the Galaxy S7 edge and the Galaxy S7, which were launched in February this year.
Following the recall, BayStreet has reduced the sales forecast of the Galaxy Note 7.
"We have now lowered our Note 7 forecast to ~60 percent of the Note 5 and are closely tracking how long consumer's memories are regarding this unfortunate incident. Best case, this is similar to an automobile recall and quickly forgotten with the new / replacement item viewed as safer than before. Worse case, this is remembered like the quality of Siri or Apple Maps and very difficult for consumers to forget," says Cliff Maldonado of BayStreet Research.
Samsung normally launches a new device in the Galaxy Note series during the IFA event in September each year. Since 2015, Samsung has rescheduled the launch date of the Galaxy Note series phone to an earlier date. Some market observers believe that the move is to attract customers to the phablet before the official launch of new iPhones, which normally happens within the first two weeks of September.
The recall of the Galaxy Note 7 has adversely affected Samsung and is a blessing in disguise for the bigger iPhone 7 Plus, which poses a direct threat to the Samsung offering.
Although Samsung has addressed the issue, the reputation of the company is now at stake. Following the entire battery fiasco with the Galaxy Note 7, many smartphone buyers may think twice before buying a Samsung phone.
Samsung has apologized for the error and has taken swift steps to exchange the faulty handsets. In some regions the company is also offering a free Gear VR to compensate for the delay in the arrival of the Galaxy Note 7.
However, it remains to be seen if Samsung is able to win back customer trust in the brand.