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It's interesting what's going on here. They have gone on record before that they're not making a profit on their phones, and evidently their tactics are creatin
by DCKing 10y ago
It's interesting what's going on here. They have gone on record before that they're not making a profit on their phones, and evidently their tactics are creating a bit of an internal mess. They've grown very rapidly.
I imported a Xiaomi Mi 4C a month or two ago for €100 (it still sells around that price). For that price you get a fantastic 5" screen, the same Snapdragon 808 chip / 2GB RAM as the €300 Nexus 5X, a more than decent camera and great build and battery life. The heavily customized OS is surprisingly tasteful and useable, and is being regularly updated with features and Android security updates. In addition the Android core of their custom OS will even get a promised update to Android 7.0 this year, despite the phone being on the market for nearly two years. I'm very happy with it.
If you look at the EU market in the same price category, you can only get utter crap. Specs and general usability of phones in the same price category do not compare, and you need to go well over €250 to find comparable phones. Even then, the software support of those competing devices still does not compare, mostly.
Given that, I do not believe for a second that Xiaomi is able to sell this phone sustainably for this price. Keeping costs low through a focus on Asian markets and low-overhead distribution costs does not magically remove the component and development costs that go into such a device for them to be able to make a profit on it for €100. What's more is that Xiaomi has several models with a 'low-end' price that have mid-to-high-end specs. You see that Xiaomi has quickly won popularity in the tech savvy west for their bang-for-buck value in smartphones despite usually not even selling there.
This is all great for the consumer, but evidently it cannot be (and is not) great for Xiaomi. They wanted market share and they got it, now it's time for the next step.
- Fnoord 10y agoIf their goal is marketshare and then profit, then step 2 is raising the price. Be it slowly (so it is less apparent to avoid bad publicity) or quick (guaranteed uproar, but only once). An alternative theory could be their business case is related to "Xiaomi Can Silently Install Any App On Your Android Phone Using A Backdoor" [1]. One could come up with a theory their business case is related to that kind of behaviour. Ie. a front for Chinese government. [1] https://thehackernews.com/2016/09/xiaomi-android-backdoor.html https://thehackernews.com/2016/09/xiaomi-android-backdoor.ht...
- petra 10y agoAnd even without being a malicious front, you can see them as part of the Chinese economic strategy, moving away from manufacturing to innovation/marketing . And it looks quite nice: Xiaomi build a phone brand. Uses brand to become a consumer electronic start-up hub(offering startups, Chinese startups, a great supply chain, marketing, IP protection - all the hard things for those startups) as a way to rapidly scale. And they will have better access, and preference to Chinese silicon suppliers(think the esp32 , a great chip, afaik it's only inside Chinese products) rising that industry.
- supergreg 10y agoAre you sure it is Xiaomi selling under cost and not the other way around? Prices for other phones are excessive compared to Xiaomi and other Chinese brands with similar specs.
- bostand 10y agoI don't think their business plan to sell things at a loss. This is a young company with many great engineers and known for their efficiency
- hkmurakami 10y agoConsidering the fact that no other smartphone manufacturer other than Apple and Samsung don't make a profit...
- dmritard96 10y agoThere is an important supply chain related nuance in my opinion - in the US, distribution channels are critically important - Amazon, Best Buy etc. - but in Asia, this isn't always the case, in fact a flash sale on JD or some vendors stores directly means they can play with skinny margins and sell products. If you are selling something in Best Buy, there is a good chance that there is a 50% markup in many cases which is the customer acquisition cost that Best Buy is charging amongst others (limited inventory holding, logistics etc). Because big box retail doesn't have the same kind of foothold in asia and more direct website purchasing is popular, they are able to seemingly to pull off marketplace magic but the reality is their pricing wouldn't look that different if sold in Best Buy for instance. It still might be cheaper, but it wouldn't be the insane rock bottom pricing you are used to seeing reported on TechCrunch...
- tajen 10y agoVendors (from Samsung to even clothing companies) make agreements with retail stores to have the same price in shops and online. Otherwise online would be cheaper and retail would refuse to list more expensive SKUs. The only ways to bypass the markup of the distribution network are: - Go "Tesla" mode: Sell directly online or manage your own distribution – Only works if you pull off a unique product, makes the pricesheet much cleaner (examples: Apple and most hardware startups). - Use Amazon for distribution to bypass retailers and their markup: That would have worked until 2015, but on one hand it seems no seller would rely solely on Amazon for distribution (lack of foothold of Amazon?); on the other hand Amazon decided to massively dispatch counterfeited products together with merchant-originated ones, casting a doubt on the brand and tainting all their providers together. To date, it seems like retail remains the safest way to order an item...
- newjersey 10y agoCan anyone comment on how Apple works with retailers? Do retailers "buy" from Apple (and pay within thirty days of delivery)? Can retailers return iPhones they can't sell without paying a premium? Sorry I don't know anything about the market. I don't even know if best buy's margin would be public information or if we'd need to make an educated guess.
- KaoruAoiShiho 10y agoI believe I read that Xiaomi has an ecosystem model where they sell phones as loss-leaders at low margins in order to build their brand and capture customers for high margin software. I don't think that's going to work as they don't own the operating system.
- dogma1138 10y agoIt will work there are quite a few alternative app stores that do make money. Considering that emerging markets sell phones without google play I would go on a limb and say that most android phones sold now come without the play store.
- dmritard96 10y agoThis is a great point! Because of google services being blocked in China, the play store is unavailable so people download their apps ('A-P-Ps' if talking to someone in China) via 3rd party sites. Trying to become a substantial app distributor is a nice idea but also very difficult between Apple have a locked down platform and serious competition from antimalware companies and others who already have a solid foothold in this space, but I can certainly see the value in trying.
- pcr0 10y agoI think China is the only market where phones are sold without google services. Even when Xiaomi sells to India or Hong Kong, the phones are often "global version" (different ROM), which come with google services because everyone outside China expects them.
- dogma1138 10y agoAfrica, India, Latin America Russia and many super cheap phones in Europe.
- Splines 10y agoThey have https://en.wikipedia.org/wiki/MIUI https://en.wikipedia.org/wiki/MIUI, but I don't know if MIUI enables them to sell services or have their own app store.
- bostand 10y ago> They have gone on record before that they're not making a profit on their phones Maybe not (I actually think they do), but they are making money on phone-plus-services.
- disiplus 10y agoi ordered xiaomi note 2 for my sister and you get what you pay. the rom is completly shit. its full of ads you cannot turn of. and the battery became unusable after only half year. because i ordered it online i dont have any warrany. my sister had to buy a new smartphone. dont just look at the specs when you buy something.
- dilemma 10y agoXiaomi roms don't have ads. You ordered from a third party vendor that had installed their own rom showing ads. This is a problem of their distribution model -- the phones are available internationally only via unofficial third parties -- rather than their product.
- disiplus 10y agothey have ads even in official roms. and sorry but the roms that xiaomi sells are without play services. the reason for customization. the rom is miui with google services.
- Markoff 10y agoYou can get them in major European electronics chains, no need any shady reseller. They are pricier than online but you will get clean software and two year warranty while price is still beating closest competition of Lenovo and Honor.
- DCKing 10y agoThere are certain gotchas when importing a Xiaomi phone, one of which is being wary of replacing the software the distributor has put on it with official Xiaomi software. Clearly you didn't do that.
- disiplus 10y agoofficial roms dont have play services, thats why there are those customizations in the first place.
- 10y ago