I have always been a fan of apple products. Since I got my first macbook, I fell in love with apple products and since then I have only used a MacBook and an iphone. Lets be honest, they look great, they feel great and they are so compact that you can’t simply ignore them.
But then in 2015 I really wanted to try something new. I was locked in this eco system for so many years already and I though its time to try something completely new, something that I am not familiar with at all.
While I was hanging out with some friends, I realised that one of them had a new phone. The phone looked quite unfamiliar, in fact I couldn’t even recognise the brand and when I asked him about it, he replied its Xiami. To be honest that was the first time I have heard about this brand, I had a difficult time pronouncing that name. I still can’t pronoun properly, how do you call it, Ciami, Shyawmi. Anyways, After playing with the phone for few minutes and then finding out its price, I was amazed because i didn’t think that you could get such a great phone for such a price.
The next day I ordered the exact same phone which was redmi note 2 and to be honest it was too good for a hundred fifty bucks. After playing with it for a sometime, the question that crossed my mind was, how on earth does this company makes money when they are selling such a great phone at such a low price?!
After digging into the company, I was shocked because the company was launched in 2010 and they have achieved an incredible success in such a short period of time. By 2014, they were the leading smartphone manufacture by number of sales in china, beating everyone else. I mean, with the release of iPhone some of the great players in the industry almost went bankrupt because they simply couldn’t stay competitive. Remember Nokia, they literally went from Hero to Zero and then a chinese company comes up and within 5 years surpasses even apple in the Chine and becomes one of the major players in the global market.
So lets take a look at xiamis business model and figure out how did they achieve such an incredible success in such a short period of time.
We usually complain about how phone prices are going up but we don’t usually understand the hidden costs that phones require before they reach our hands. Companies spend billions just to let you know that they exist or keep you aware of their latest product. But at the end of the day, we the consumers have to pay for that.
However, xiami has found ways to sell its products at unbelievable low prices. Instead of having a multi billion dollar marketing budget, the company does very little advertising and relies on social media. To reduce the cost further, they Don’t spend a fortune opening up stores around the world and hiring thousands of people and only sell their products online directly to customers. By cutting out the middleman, the company could further lower their prices. and by implementing just in time manufacturing strategy, the company doesn’t need to maintain a huge inventory.
The logic was simple, build great phones for extremely affordable prices that would simply attract eveyone. And guess what, It worked and made Xiami one of the major players in smartphone industry within few years.
But that’s just part of the story because the other part is, Xiami sells their smartphones nearly at their cost of production and often doesn’t make any profit. It doesn’t mean xiami is such a noble company that doesn’t cares about profit but rather they have a completely different business model. Instead of making a profit when they sell you the product, they would rather make a profit when you use the product by selling services, ads and so on. So smartphones are like a trap to get you into the Xiaomi’s eco-system. Because besides just selling you servics, xiaomi sell like everything.
in fact, If you are not familiar with companies strategy, it seems like they are selling whatever comes into their min from electrical scooters to rice cookers. I wouldn’t be surprised if one day they start selling oa xiami car or jets.
It might seem like a completely new business model, but its not because companies like google have had the exact business model since their inception. google doesn’t charge you when you use gmail, google maps, google drive, but they constantly sell you ads and other services like storage on google drive.
Of course, their sales figures have been in decline in recent years but they are not the only one because the entire smartphone market is deteriorating. But their rapid growth has given them a global awareness.
To build such a brand isn’t easy, imagine the number of skills that you need master, but every business starts with an idea, Most importantly you should be able to present that idea in such a way that it would inspire others to take action.