Xiaomi makes excellent phones, but its price is surprisingly low. We talked to various industry experts and Xiaomi phone users to discover why Xiaomi phones are so cheap.
We found that Xiaomi phones are cheap because they don’t do any advertisements for their phones. Their product has a longer life cycle, Xiaomi copies other phone designs saving its R & D costs, collects and sells users data, keeps their profit margin very low, and sells all their phones online.
Below we described each of the points mentioned above in detail.
Xiaomi does virtually no advertisement.
Before we talk about Xiaomi, let us speak about the world’s most popular electric car manufacturer, “Tesla.” Tesla does not spend a dime on the advertisement. Still, throughout the world, almost everyone knows about Tesla. They rely entirely on word of mouth advertisement where a Tesla customer or a fan talks about Tesla to their friends and relatives and inspires them to buy a Tesla vehicle.
Xiaomi also follows this same word of mouth advertisement strategy. They do not spend money on advertisement.
Every other company spends a lot of money on the advertisement from its profit. But if a company can eliminate this cost, it can improve its profit margin or lower its product prices. Xiaomi chose the later — taking less profit and pass the savings to consumers. It is one of the reasons why Xiaomi phones are good but cheap.
Xiaomi phones have a longer product cycle.
If you look into Apple, Samsung, Huawei, or any other phone manufacturer, you will find that every company brings out a new phone each year. Every year they present a phone with the latest and greatest display, RAM, memory, processor, etc. Every new technology costs more and only drops in prices after several years. But these companies are always chasing after new technologies. So, the prices of the parts they use on their phone are higher. As a result, phone prices are also higher.
However, Xiaomi takes a different approach. Instead of releasing phones with newer hardware each year, Xiaomi keeps their phone hardware the same over 24-36 months. It is a brilliant strategy.
A newly released hardware is always expensive, whether it is a display, RAM, sd card, or processor. However, the prices of this hardware decrease rapidly after 12-16 months. Xiaomi takes advantage of this. Instead of iterating hardware every 12 months, they keep their phone hardware the same for 24-36 months. This way, they can provide superior quality hardware at lower prices. Moreover, as their product cycle spans to 2 to 3 years, they can buy equipment in bulk at lower prices.
Xiaomi copies other phone designs.
Xiaomi makes a lot of products. Though they make a lot of products, one thing is right for all of its products. None of its design is original. Xiaomi shamelessly copies the design of other famous companies.
Xiaomi is called the Apple of China. It’s because they copy the design of iPhones. Because they copy, they don’t need to invest the time and money behind the design R&D. It saves them a lot of money. They only need to focus on manufacturing. This way, Xiaomi saves a lot of money, and they pass these savings to the consumer. Hence, Xiaomi phones are so cheap.
You may ask how Xiaomi can get away with this practice of copying other company’s product designs? The answer is simple. Xiaomi is a Chinese company. In China, intellectual property (IP) theft is rampant. Moreover, they only sell their product where IP law is not that strict. It is why they only sell in China, India, or in African countries. But not in the US, Canada, or in Europe.
Xiaomi collects and sells user data.
It is known secret that Chinese brand phone manufacturer puts spyware and other user tracking apps in their phone. Xiaomi also collects and sells these user data. It makes Xiaomi a lot of money.
Let’s look at some examples, Facebook and Google. All of their products are free, but they make billions of dollars each year. How they do it? They track users and collects user data and show ads based on these user data. There is a phrase if a product is cheap or free, then you are the product. The same applies to Xiaomi.
Xiaomi collects user data. It may include but not be limited to which apps you use, when you use, and how long you use the apps, when you charge your phone, where you use your phone, your location, your sleep pattern, which website you visit, your internet traffic, your phone network, etc. Xiaomi collects and uses these data for themselves and also sells these data to third party advertisers. This way, Xiaomi makes a lot of money. So, even though Xiaomi sells its phone at a low price, they are making money off your data later.
Xiaomi shows advertisements on OS.
Don’t be surprised to hear that Xiaomi shows ads on their OS and in their native apps. It is possible to turn these ads off from settings, but not everyone is familiar with this. Xiaomi earns a lot by these ads on their phone. Even if you turn these ads off, Xiaomi will still collect your data in the background.
Here is an honest opinion. For most of us, it does not matter whether any company tracks and collects our usage data. It does not harm us in any way. Just look at Google, Facebook, Yahoo, Amazon, Tiktok, and other apps and websites. Did we lose anything in our life because these companies track us online? The answer is NO. So, don’t freak out about this issue.
Other companies track us and make money off our data. They do not share any profit with us. However, though Xiaomi makes money off our data, they share their profit with consumers in the form of lower product prices. So, instead of criticizing Xiaomi, we should praise Xiaomi’s practice.
Xiaomi sells its products only online.
As we previously stated that Xiaomi follows many business strategies of Tesla. Online sale is one of them. Xiaomi has no physical storefront to sell their phones. They only have a handful of stores throughout the world. Xiaomi saves a lot of money by not keeping any physical store.
Moreover, Xiaomi does not need to keep any middleman — the dealership. By eliminating dealership and selling directly to consumers, Xiaomi saves a lot of money, and they pass these savings to consumers by keeping the phone price low.
Xiaomi has a low-profit margin.
According to Xiaomi CEO, Xiaomi committed to keeping its profit margin between 5% to 10%. This low-profit margin allows them to sell a lot of phones. They believe that if they sell good phones at a lower price, it will convince you to buy more Xiaomi products in the coming years.
And this strategy worked. Xiaomi has a dedicated user group throughout the internet. This dedicated user group is crucial for the Xiaomi business. No other phone company even ever tried to engage with its customer like Xiaomi.
There’s no doubt Xiaomi makes good phones and sells them at a dirt-cheap price. Xiaomi follows a unique business strategy that allows them to sell phones at a lower cost.