In only a decade, Xiaomi managed to become the world’s fourth-largest manufacturer of smartphones after Samsung, Huawei, and Apple. The most frequently asked question that has arisen over the last ten years has been why Xiaomi phones are so cheap? Don’t worry! We are here to explain almost everything related to this topic.
Reasons Why Xiaomi Phones Are So Cheap?
Xiaomi is a Chinese private company, known popularly in many countries for their electronic products such as laptops, tablets, TVs, routers, smart home devices, and smartphones. They primarily sell all their products through their website or third-party online shopping applications.
Despite its excellent quality phones, higher and better specifications among Android smartphones, Xiaomi has a surprisingly low price tag. While numerous factors can contribute to this, here are some reasons why Xiaomi phones are so cheap.
Why is Xiaomi so cheap even with high specs?
Xiaomi produces and sells more than just smartphones. Unlike many companies, their source of income does not depend on one single product. They are currently manufacturers of world-class high technology products and many in the making, from which they generate revenue. Hence, they do not need to use drastic pricing strategies to sell their smartphones in the market. Their main concern is not to match the rates of competitors.
Xiaomi aims to change the perception of ‘Made in China’ brands worldwide that due to their mass production, exports, and low rates, Chinese products are of low and cheap quality. Xiaomi is well-known for its high-quality manufacturing at affordable prices.
Does not self-advertise
Xiaomi follows a brilliant marketing strategy of having the consumers advertise the product for them. The company does not believe in spending their money on advertisements or promoting a newly released phone to gain customers. Their approach may be unorthodox, but Xiaomi takes pride in this strategy. Using the freedom of social media publicity and word of mouth, it has made a fortune in the smartphone market.
Xiaomi also uses another marketing technique wherein they sell their products on their web store or applications like Amazon, Flipkart, etc. however, it has a few stores worldwide. Still, most of their sales come from e-business. It cuts down expenditures that would be otherwise used on retail outlets, thereby eliminating the need to have expensive smartphones.
Longer product cycle
The biggest smartphone brands in the market, like Samsung, Huawei, and Apple, bring out new phones every year, and each year these phones have the latest or better specifications than the previous phone. The new technology used for RAM features, screen display, memory, etc. is high in costs, resulting in higher-priced phones.
Xiaomi, however, uses a different approach in this area. They use the same hardware in the new smartphones they release over a period of two or three years. Since the price of hardware is expensive and only decreases after several years, Xiaomi takes advantage of this by iterating the same hardware for a longer period. This way, they can provide superior quality phones at lower prices.
Low-profit margin
The CEO of Xiaomi had once stated that the brand committed to keeping a 5-10% profit margin. Setting this margin has allowed them to sell more phones. Xiaomi believes that selling good phones for lower prices convinces consumers to buy their products in the future, and it has worked wonders for them.
Xiaomi has a dedicated user group worldwide, which plays a crucial role in their business. It engages with its consumers personally to provide a better understanding of the product and services.
Avoiding unnecessary investments
Human capital is an essential requirement for any business, and a lot of revenue is spent on hiring employees. Xiaomi has avoided this by making their business an online one. India is one of the largest consumers of Xiaomi products, and yet they have less than 100 employees in the country. This helps Xiaomi save the money to pay for employment like salaries and other investments. The company uses this money in other sectors that are profitable to them.
Having a target market
Xiaomi entered the smartphone market with the sole focus of presenting their products to South Asian countries. These countries came under the category of ‘developing countries’, and most of its population belonged to the middle class. Since these people live on a monthly-wage and could not afford high-priced smartphones produced by Apple, Samsung, and other brands, Xiaomi came to their aid.
These more prominent brands follow the procedure of monthly installments and credit cards, which were not common in these countries, hence paying for expensive phones upfront was not the wisest option.
Xiaomi’s introduction of low-budget yet hi-tech smartphones helped them gain a large customer base. They successfully achieved their goal of pleasing its target market by maintaining a consistent pricing system.
Limited production and flash sales
Xiaomi produces only a limited number of phones every year. In the beginning phase, the first batch of Mi 3 launched in October, with 100,000 phones sold out within two minutes. The following week, a second stock of the same number of units was released, which sold out almost immediately.
This strategy not only helped them gain sales, but the fury that low-production caused on the people helped them in promoting their brand since the brand was relatively unknown to many customers back then.
Using some of the most innovative and well-thought-out marketing strategies to make their product a success, Xiaomi has managed to sell millions of smartphones with high specifications at low prices. This article answers the question of why is Xiaomi so cheap even with high specifications.
The main reason is that Xiaomi sells most of the products in flash sales and they don’t do advertisements for their phones.
Yes, Xiaomi phones are reliable because of its superb build quality, performance, battery backup, etc.
Xiaomi Black Shark 3 Pro has the best battery life.