Discover the secret behind Xiaomi's ability to offer high-spec smartphones at surprisingly affordable prices. Many consumers often wonder, "Why are Xiaomi phones so cheap, even with high specs?"
This question points to the brand's innovative business model and cost-effective strategies that don't compromise on quality or performance.
Xiaomi has managed to disrupt the market by providing devices that challenge the notion that a lower price means lower quality.
To understand the intricacies of Xiaomi's pricing strategy and how they maintain a competitive edge while offering feature-rich phones, here's our analysis:
Xiaomi phones are cheap even with high specs because the company has figured out a way to keep their costs low by limiting their quantities, staying online, using smart marketing strategies and even by hiring extremely few people. Most important Xiaomi sells multiple digital products through their phones to keep them profitable.
Why are Xiaomi phones so cheap even with high specs
Cost Cutting
Unlike the top three smartphone brands in the world, Xiaomi has made sure not to spend much on advertising. Having next to no physical stores with no retail staff to maintain, Xiaomi has managed to cut their expenses by relying on E-Commerce.
- Xiaomi has been able to reach its current position globally from just mouth-to-mouth publicity and social media networking. They’ve successfully tapped into a wide array of users who are keen on buying their smartphones by using social media as a tool.
This principle works quite well and effectively. It focuses more on selling products through online platforms like Amazon rather than approaching the retailers and shopkeepers cutting out the retailers profit margins. Hence Xiaomi Smartphones are sold at affordable prices.
Social Influencers
Xiaomi relies on social influencers for the marketing of their smartphones and is the only brand to have been successful at doing so. Xiaomi has been known to conduct influencer parties, conferences and even take feedback from customers rather seriously making their business model quite interesting.
- They have been known to reach out to the influencers for feedback on their products, this system helps create a buzz around ‘Xiaomi’ on social media and in return they are able to gain a lot of customers without investing much on advertisements.
Xiaomi realised that the social media network has a lot of potential when it comes to brand marketing and revenue generation. This is quite unlike other companies that increase the price of their smartphones just to compensate for advertisements.
Flash Sales
Xiaomi works by releasing a limited number of smartphones at any given time. These batches of phones are sold via Flash sales that help them regain their margin and helps them in bringing down the per-unit cost.
- Having faced less risk while heading in this direction, Xiaomi gradually ramped up production of their smartphones as their overall costs declined. With Flash sales, Xiaomi has been able to earn a good profit without major repercussions by producing a limited number of phones and having them sold immediately.
The only drawback however is that by following the Flash sale policy, Xiaomi has not been able to cater to all their fans due to limited stocks.
Low Production Cost
Since Xiaomi smartphones are manufactured and assembled in China there are no incurring costs for any of the components required like, screens, chipsets and other parts needed for their smartphones. This results in their price in the global market being set relatively low
- Most other smartphone brands that manufacture and assemble their devices elsewhere would have to import the parts from China, thus increasing their overall product price to cover their expenses.
- Based on a total teardown done by TechInsights for Xiaomi’s flagship the Mi10, it’s components cost approx $400 whereas the actual retail of the product is an outrageously low $670.
However, Xiaomi’s Chairman Lei Jun clarified a while back that the factors which determine their actual production cost of smartphones range from taxes, processing costs, production losses, R&D cost, patent fees, operating cost among others.
Tie-ups
Have you noticed that though Xiaomi’s low price point, all their smartphones are powered by Qualcomm chipsets? This is thanks to the fact that Xiaomi and Qualcomm have partnered allowing Xiaomi to purchase Qualcomm chipsets in bulk for a fraction of the cost than other companies.
- Xiaomi in the past has also tied up with MediaTek, a leading electronic chip company to design the first phone to support the Helio G90 series which specializes in gaming edition smartphones. They’ve even partnered with Flipkart for their launches, Samsung for a share in regional markets and others.
Having a decent tie-up with leading companies allows Xiaomi’s products to be manufactured, packaged and sold at a lower rate than other companies which rely solely on importing parts.
Reliability
Xiaomi has shown the world that though they’re manufactured in China, the quality of each device is checked and delivered only upon passing the necessary inspection. This is the reason why Xiaomi has taken over under-developing and developing countries easily.
- The price of a high-end smartphone from Xiaomi would be affordable to those in developing countries and thanks to the quality of the build, the phones tend to last pretty long.
- Xiaomi has even set up dedicated Mi service centres which have garnered a decent reputation for their work ethic and how long they take to return your repaired smartphone.
Having a good build for a cheap smartphone helps make it last on the long run and reduces the overall after sales expenses Xiaomi may have to incur if the device is within it’s warranty.
Multi-Million Dollar Brand
Yes, Xiaomi is in fact a Multi-Million Dollar brand that does not focus primarily on smartphones. They manufacture different products and have multiple sources of revenue.
- The main reason Xiaomi does not have drastic hikes in the prices of their smartphones is because they don’t rely solely on their smartphone sales for revenue. Xiaomi has been able to change the world's outlook toward Chinese products by delivering high-quality devices and gadgets at a reasonable rate.
Rather than reaching a small customer base, Xiaomi has been able to spread its boundaries to other countries and regions of the world. This has enabled them to maintain a good impression in several countries for their products and service.
Customer Base - Target Market
Xiaomi’s primary target of customers is in the market of South Asia where millions of individuals fall in the middle class category making it difficult for one to own a high-end Samsung or Apple smartphone.
- Here customers can’t buy expensive phones by paying full cash upfront, hence Xiaomi has been able to build and maintain its base in South Asia with ease by selling their low-budget high-end smartphones.
- Xiaomi has been successful in reaching out to the youngsters who are looking for a premium device but don’t have the funds for one. The smartphones sold by Xiaomi have top notch specifications quite similar to the great Samsung S9 or the Apple iPhones.
However, the main reason Xiaomi has taken over this segment in the market is due to their low priced smartphones that are something not every company can pull off.
Eliminating unnecessary investments
Many companies hire human capital to help promote their products in the local markets. However, Xiaomi does not follow this model and believes that it would be an unnecessary investment.
Xiaomi is one of the few companies that manufactures phones in limited quantities. They only start manufacturing the second round of phones ones the first batch is done. This helps them save a ton of money as there's no extra casting.
Another way Xiaomi stays profitable is by staying completely online. They save a lot of money by staying online. All of their phones are usually sold by Xiaomi authorized sellers. So, they don't even have to spend a lot on warehousing costs.
Interestingly, Xiaomi is known to be a lean company. There tend not to hire a lot of people as this helps them make faster decisions. This is why they overtook Huawei in less than a decade. Huawei is massive and takes a lot of time to not only respond to the market but also implement technology and ideas.
A company with a start-up mindset like Xiaomi is killing it because they can allocate money that could be spent on hiring new employees on other growth decisions.
Take India for example, Xiaomi has hardly 100-150 employees in India to handle the world's largest market. This allows Xiaomi to save on their expenses by handling most of their sales and promotions online rather than in stores or through third party retailers.
Delivering Up-to-Date Tech
Xiaomi has built their reputation as one company that does not use obsolete and outdated tech. As we’re living in a world with rapid and constant changes in the field of technology, it is the new technology that turns heads and grabs anyones attention.
From the processors to the displays and structure of the smartphones, Xiaomi has been able to bring in updated models of their smartphones at every launch. This makes it one company that guarantees a new technology is powering their smartphone everytime.
No Warranty void on Rooting
A positive point to note about Xiaomi smartphones is that rooting the device does not void your warranty. This is not the case with all brands. Xiaomi has given the user full access to upload modified Roms on their devices and the user would still be able to claim warranty on the device if it happens to crash. Check out our guide on Why are Xiaomi phones so cheap even with high specs for more details.
This is beneficial for developers and other individuals who wish to change either the operating system on the smartphone or simply add third-party apps from outside the Play Store.
Unique Business Model
Xiaomi's business model is quite unique, they are not in the business of only selling phones. To be more accurate their plan is not to selling the handset itself. Their long term plan is to sell digital products through their phones. In fact, the precursor to this is the innumerable ads you get on the phone. These advertisements are huge portion of Xiaomi's traffic.
- By selling digital products through its products like Amazon, the company hopes to evolve to a similar degree. As you can see advertisements are actually built into the system and the user doesn't have a choice when it comes to the what they get to see.
Xiaomi eventually wants to use their Mi credits system to get users to purchase themes and other interfaces add ons
Conclusion
From what we have gathered, we can conclude that Xiaomi smartphones are affordable and come with great specifications. The devices are overall great with a good sturdy build.It’s clear that Xiaomi has thought their marketing strategy through and have been able to pull off something most companies can’t.
A plus point is that Xiaomi does not operate only in the smartphone market and has dominated in home security, laptops and other consumer electronics. With its strategy, Xiaomi remains the most affordable Chinese smartphone manufacturing company in the world. check out our entire guide on Why are Xiaomi phones so cheap even with high specs.
Why are Xiaomi phones so cheap?
Xiaomi Phones are known for their high specs and insanely cheap prices. The are budget-friendly nature of these phones help not only disrupt the market but also dominate it. For example, Xiaomi sells most of it's phones in India and it has managed to dominate the entry level. No other brand comes even close. They manage to keep it cheap and yet stay profitable due to various reasons like cost cutting when it comes to advertisments and eliminating unecessary investments. Check out our guide on Why are Xiaomi phones so cheap even with high specs for more details.
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