I’ve been using Xiaomi Phones for almost a decade. With the amount of Mi phones that I’ve reviewed, It’s been a love-hate relationship, to be honest. Although there have been hits and misses with the quality of some phones, there’s one thing that all Xiaomi phones have in common: the cheap price. The cheap price isn’t an exaggeration. It’s always been a mystery as to how Xiaomi has grown by pricing such high spec phones at such affordable prices. Check out our guide on Why Xiaomi Phones Are So Cheap for all the details.
The smartphone space is ultra-competitive with Apple and Samsung leading the forefront. Xiaomi has who was a newcomer actually managed to dominate the market with their competitive pricing. Well, according to company officials, Xiaomi has always managed to price a bit above their cost margin. However, this can’t be the only reason for their tremendous growth. So, Why Xiaomi Phones Are So Cheap
After going through official press releases and breaking down Xiaomi’s business model, my team and I zeroed in the reasons as to why Xiaomi is profitable even though they’ve priced their phones at such low prices:
Other than cutting a few costs here and there, Xiaomi had completely forsaken traditional marketing. Companies such as Apple factor in the marketing costs when pricing their product; which is why the phones are so expensive. Xiaomi on the other hand on depends on Internet marketing to drive sales. And they managed to snag up a huge chunk of the market share by primarily selling their phones through online platforms. This helps save a tremendous amount of money.
Why Xiaomi Phones Are So Cheap
#1 — Cost Cutting
Xiaomi is probably the most famous company on the planet when it comes to cost cutting without letting it affect the quality of their products. Xiaomi has cut all the costs that the other smartphones giants deem “necessary” to drive sales. For example, Xiaomi does not market using traditional means, their only focus is Internet marketing and word of mouth.
- Xiaomi also has very limited retail stores, the primarily depend on E-commerce platforms to drive sales. This is also where they put the most amount of effort. By cutting costs on logistics they save a lot of money. Interestingly, they’ve directly set up shops on the E-commerce platform in order to cut retailer, distribution and middlemen costs.
What’s even more amazing is that while Xiaomi is a behemoth, it actually does not employ a lot of human resources. Even their largest market which is India only employees, 150 people. Their focused on automating their business and processes as much as possible and save money wherever possible. This startup mindset is why Xioami is still growing by leaps and bounds every year. This is also the primary reason behind their competitive pricing.
#2 — Low Production Cost
Since Xiaomi’s home ground is China, they can ensure low production cost. In fact, they have no incurring cost on extremely expensive components like chips and screens. While other companies have to get these parts shipped from China, Xiaomi always has the upper hands with respect to the production cost. This one of the main reasons why they can afford to set their prices and such low margins.
- When shipping expensive parts from China to other countries, that expense will be added to the cost of the phone. By eliminating this Xiaomi has taken over the small to mid-range market. In fact, even a high-end flagship phone such as the Mi 10 which costs around 650$ only takes around 400$ to manufacture. This low margin is virtually unheard of.
In fact, the only factors that determine the cost of the phone are processing cost, R&D, Operation costs, Labour costs and Taxes
#3 — 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
#4 — Clever Marketing Strategy
This smartphone giant is also extremely good at marketing. Xiaomi has not just utilized internet marketing to cut cost but they’ve also used social media influencers to propagate their technology and save even more money.
- Xiaomi is famous for its influencer parties where they network and connect with customers on a personal level. This strategy not only drives sales but also propagates brand value.
Xiaomi ties up with other tech suppliers to save massive amounts of money. For example, they have an exclusive contract with Qualcomm and Mediatek for their chipsets. This saves a lot of their costs and ensures consistent quality.
Are Xiaomi phones reliable?
Yes, Xiaomi phones are reliable. With a solid build and an exceptional UI, Xiaomi prides itself on quality. Xiaomi actually builds good quality phones that last long not because they want to prove a point that Chinese products can also achieve certain standards but because they understand having poor quality phones are bad for business.
If the phone quality is poor not only will people refuse to buy it but the after-sales costs of repair and replacement will go up an this would drastically impact their growth. So, by manufacturing phones that have passed a quality check, they can ensure steady sales and growth for years to come.
In fact, they’ve dominated the low to mid-range smartphone market in countries like India due to their exceptional quality and customer service. By selling phones and further selling products through those phones, Xiaomi has grown into the behemoth it is today.
Specifically, Xiaomi phones will last for around 4-5 years if maintained well and it can also handle the wear and tear of life. Software on the other hand will have issues if not updated regularly. However, overall it’s an extremely reliable brand. Check out our guide as to Why Xiaomi Phones Are So Cheap for more details.