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How Does Xiaomi Produce Awesome Smartphones and Keep Their Prices Low?

If you want a gear that gives you the feel of an iPhone but costs way less than one; then you are bound to turn to Xiaomi. The company started off with eight partners’ way back in 2010 and it has since then been providing the customers with some of the best phones that the audience have seen and that too for an unbeatable price. Given the price structure and the high-quality gear provided by Xiaomi, one is bound to wonder how do they manage to keep the cost of Xiaomi Phones so low! Are they losing money while pleasing their customers? Or do they have an innovative strategy to deal with the whole situation?

Here are some conclusions experts had drawn when they analyzed the situation and marketing strategy of Xiaomi:

  1. Market Disruption: Since their first release, Xiaomi has always targeted at disrupting the smartphone market by a low-cost phone which has high end features. While iPhones were available for 4999 Yuan, Xiaomi provided their customer a phone with similar features for just 1999 Yuan which is almost one-third of its price. But what Xiaomi did was introduce an even low budget phone by the name of Hongmi which had low specs. It helped Xiaomi to become the 3rd largest smartphone company in China.
  2. The cost of Xiaomi Phones: If you look at Xiaomi Mi 3, you will find all the high-end features of a smartphone, fitted into a metal casting for the customers to use. It has got a 5 inches’ screen with a 1920 x 1080 pixels’ resolutions and NVidia quad-core processor which is 1.8 GHz in size and also a superb 13MP camera that clicks great pictures. With these specifications in place, Xiaomi is capable of maintaining a profit of around $100 on each phone as each of the Xiaomi devices is sold at around $324 whereas it just costs $157 to make them says one of the analysts. The $100 profit is said keeping in mind the distribution cost of the company. Hence keeping a low-profit margin has helped Xiaomi to reach out to a lot more people and that too in a short period.
  3. How Does Xiaomi Cut Cost? One of the most important things that Xiaomi does to cut its costs is not to choose the conventional advertising methods that are usually used by its rivals; this saves a lot of money which can be used to giving customers low-cost smartphones, despite the high-class features they sport. Another step of Xiaomi which is commendable is the lack of physical stores the company has. Not having a physical store automatically translates to the fact that you don’t have to maintain it and ends up in cost savings. It also reduces the cost of staff who would cater to the customers coming into these physical stores. Instead, Xiaomi chose the vastly popular e-commerce route to reach out to its customer base. In China, Xiaomi also has its own online store which caters to the customers residing there. The company owned online store allows Xiaomi to sell accessories such as headphones and other branded things like T-shirts and their very own rabbit mascot. The company claims to have sold 180000 of its mascots in 2012 alone, generating a large amount of profit from it. For marketing, Xiaomi has selected the popular social media sites to reach out the huge number of users. Xiaomi also relies on its own fan base called the Xiaomi Fans to reach out their news to the common customers. This may not have made Xiaomi as popular as Samsung or Apple, but it has fulfilled the company’s target of reaching out to the youth who are always hooked on to the social media sites.
  4. Limited Devices: Another cost cutting strategy of Xiaomi is the limited availability of their devices even after their announcements. This helps them by reduction of inventory cost. As the Xiaomi supplies a limited number of phones which are almost sold out within minutes of them being available, there is no inventory that Xiaomi has to maintain which helps in cost cutting. Although this also has a negative side as the long wait time of the availability of phones may result in lost sales, yet the huge amount of pre-orders that Xiaomi receives shows that people are eager to get their hands on the phones and they are not disturbed about having to wait.
  5. Business Model Like Kindle: Xiaomi has the target of revenue generation, just like any other company in the business. But Xiaomi wants revenue from software as well as hardware companies. Just like Amazon has made their customers purchase more and more e-books by introducing low-cost Kindle devices. But Xiaomi’s plans regarding this software revenue generation is a bit shady now. It will only be possible by flooding the market with its device as Xiaomi allows the users to change the look of the device’s interface by buying themes with Xiaomi credit points.
  6. Expansion into International Markets: Another thing that Xiaomi has done to be able to sell low-cost phones which have high-end features is due to its rapid market expansion. Xiaomi has quickly expanded into the international markets that have allowed the company to gain a huge customer base that led to increased sales and greater revenue for the company.

This was a sneak peek into the low-cost secret of Xiaomi phones. However, Xiaomi has just started its journey in the smartphone industry and has a long way to go. With growing reputation and an increasing customer base, Xiaomi is surely on the right track to becoming the world’s best smartphone manufacturer. We hope to gain more insights on the Xiaomi company and how they manage to get a low price when it comes to providing their consumers with phones which are rich in features and is has helped them become the Apple of China.

Argam Artashyan

Back in 2010, he was dismissed from his position as a lecturer at the university. This made him get another job at his friend’s digital marketing company as a blog writer. After a few years, when he was thinking the article writing is his mission, Google pushed the Panda update and affected the company and websites he was working at. (Un)fortunately and surprisingly, he got an offer to head a large knitting factory. In 2016, he got his Ph.D. and resumed teaching at the University … and writing tech-related articles following his passion.

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