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Why are Xiaomi Phones so Cheap?

Our world is changing, and so do our smartphones. Back in the day, we used to have a simple black-and-white-display cell to make calls and texts. Now, smartphones are entirely different. These transformative times are good for innovation and technology, but the cost associated with it is ruthless. Consumers have to pay a handsome amount of money just to get their hands on the latest mobile technology. Remember how a few years back we found the $700 price tag for a phone to be completely absurd? Well, now the latest flagship phones from Apple and Samsung cost a whopping $1000!

However, many companies are working against the market costs and making hi-tech phones in a budget-friendly price range. Xiaomi is easily one of the biggest names in the world of smartphones. It has surprised everyone by offering the latest technology at an affordable price.

Even in the United States, Xiaomi products are so popular. If you want to turn your home into a smart home, Xiaomi offers top of the line products such as smart lights and security cameras that you can power with your Cox internet.

However, how do they do it? Why are Xiaomi phones so cheap?

This article will explain in detail all the reasons why Xiaomi phones cost us very less.

Xiaomi – A Multi-Million Dollar Brand

Xiaomi is a multi-million dollar brand. They have developed their unique niche in the market. Unlike most of the other phone companies, their entire focus is not on smartphones only. They have different products in the making and multiple sources of revenue.

Since they do not entirely rely on smartphones for generating revenue, they do need drastic price hikes to match the rates in the market. This is one of the primary reasons why Xiaomi phones are cheap. Secondly, the company focuses on changing the market’s perception of Chinese products. Ever since the emergence of Chinese imperialism in exports, it is widely perceived that their products are of low quality. Xiaomi is a global company that produces high-quality products. It has entirely changed the perception of Chinese products in the market. Now, you can get high-quality products at an affordable price.

Xiaomi’s Target Market

Xiaomi came into existence with the sole focus of targeting the market of South Asia. This region comes under the ‘developing’ category, and a large majority of its population belongs to the middle class. These people work on a monthly-wage and cannot afford to buy Apple or Samsung’s phones. Secondly, there is a very limited trend of credit cards and monthly installments in these countries. As a result, consumers cannot buy expensive phones upfront.

Xiaomi’s primary goal to target this market has been successful so far. By introducing low-budget, hi-tech smartphones, Xiaomi has developed a great customer base. This customer base is responsible for generating a handsome revenue. Therefore, they have kept the prices the same in the global market.

Xiaomi Does Not Advertise

In this digital age, companies spend a fortune on social media marketing. They allocate a budget just to market their products so that they can reach their potential customers. To compensate for this expenditure, they take money off the consumers.

However, Xiaomi’s approach is unorthodox. They do not spend any money on advertisements. It saves them a lot of expenditure. So, how do they reach their audience? Well, just by using the open & free social media network and word-of-mouth publicity. Social media network has a lot of potentials when it comes to brand marketing and revenue generation.

Secondly, Xiaomi sells its phones through its online platform just like Amazon or Flipkart. There are many dedicated stores as well but the operation is mostly online. This cuts the need for retailers and their margins. Hence, the phones are cheaper.

Flash Sales

Supreme is a popular clothing brand in the United States. The brand produces a limited set of clothing wear and accessories for the consumers. Getting your hands on Supreme products is an achievement in itself.

Xiaomi works similarly. They produce a limited number of items. For example, Mi 3 was launched in October and the first batch was sold within two minutes. The batch had 100,000 phones. The company manufactured another 100,000 units the very next week and they were sold immediately again.

By releasing a limited quantity of smartphones each week, Xiaomi successfully brought down the per-unit cost. With a smaller inventory, the company faced less risk. At the end of the day, Xiaomi gradually ramped up the production of smartphones as their component costs declined.

With these flash sales, the company produces a limited number of smartphones and sells them immediately. In the end, they earn a good profit without any serious repercussions.

Low Production Cost

Xiaomi phones are manufactured and assembled in China. In recent years, China has been the hub of mobile phones, cellular products, accessories, and other parts. You can find cheaper mobile phone parts in China than anywhere else in the world.

Since the phones are assembled in China, there is no incurring cost for the parts, screens, and other things required. Thus, the cost of phones in the global market remains cheap. However, other smartphone companies have to import mobile phone parts from China and in turn, increase their product prices to cover up the expense.

Xiaomi Avoids Unnecessary Investments

It is a common practice among global companies that they hire human capital to promote their products in the local market. Xiaomi, yet again, does not believe in such practices. India is the largest market for the sale of Xiaomi products, yet there are less than 100 employees in the country. This is a smart approach as Xiaomi likes doing everything online so they don’t need human capital to market or promote their products. This saves them salaries and the amount saved can be invested in other sectors.

Final Verdict

Xiaomi is a privately owned company operating in Beijing, China. It started back in 2010 and now it is easily the fifth-largest smartphone company in the world. The company is not just limited to smartphones. Their products include laptops, consumer electronics, and IoT products. With the right marketing strategy, broad product line-up, and hi-tech technology, Xiaomi remains one of the most affordable mobile providers in the world.