Why Are Xiaomi Smartphones So Affordable? Hugo Barra Explains How Xiaomi Keeps The Prices of Mi Devices Very Low
Xiaomi Mi3, the flagship smartphone of the disruptive electronics company that outsells Apple in China, goes for only $270 USD or around Php 11,800 with current conversion -- that's a far cry from the $700 to $850 USD price tags of competing top-of-the-line handsets by other brands with largely similar technical specifications.
I'm sure a lot of you are wondering how Xiaomi does it. How do they manage to keep the prices of their products very affordable without sacrificing the quality of materials and internal hardware? Is Xiaomi keeping an industry and trade secret that no other brand is aware of?
Well, I asked all of those questions to Mr. Hugo Barra, Vice President of Xiaomi Global, when I had a conversation with him the other day - June 9, 2014 - via his scheduled casual meet-up with Filipino technology bloggers and the local media. Here's what he told me:
"There's actually no secret.
1. First of all, we design our devices ourselves and we design them for ease of manufacturing so that at the end of the day, they cost less to manufacture.
2. Second, we negotiate really hard with our component suppliers and we've started to buy components in large quantities [resulting in economies of scale.]
3. Thirdly, the way we sell devices. We sell mostly direct through e-commerce and the only cost there is shipping. We don't have to pay a retailer fee, a distributor fee. We don't have to rent a space and pay store staff and all those things that cost a lot of money.
4. [It's also in] the way we market our devices. All of our marketing is in social media so we don't buy advertising space in newspaper or TV or radio. We do all of our marketing in social media, through word of mouth - one fan telling the next fan, showing them their device. We grow that way.
5. We believe this is what people expect. They expect to be able to pay something close to what it costs to make the device and not a huge mark-up on top of that. So we work hard to operate this very nimble business. We are never going to have an office with a hundred people in them. We don't need that many people. We only need a few people as long as they're really smart. That's how we stay nimble and fast."
Crystal.
Today, June 11, 2014, Xiaomi officially launched its operations in the Philippines. In a few days, Xiaomi Mi3 will be available at Lazada, which is currently the only distribution channel of Xiaomi in the country. Hugo told me, though, that Xiaomi is open to eventually working with other online gadget stores - like Kimstore - for their product distribution. No word yet on the exact SRP of Mi3 but off hand, I'm expecting the smartphone to be priced at around Php 12,000.
I'm sure a lot of you are wondering how Xiaomi does it. How do they manage to keep the prices of their products very affordable without sacrificing the quality of materials and internal hardware? Is Xiaomi keeping an industry and trade secret that no other brand is aware of?
Well, I asked all of those questions to Mr. Hugo Barra, Vice President of Xiaomi Global, when I had a conversation with him the other day - June 9, 2014 - via his scheduled casual meet-up with Filipino technology bloggers and the local media. Here's what he told me:
"There's actually no secret.
1. First of all, we design our devices ourselves and we design them for ease of manufacturing so that at the end of the day, they cost less to manufacture.
2. Second, we negotiate really hard with our component suppliers and we've started to buy components in large quantities [resulting in economies of scale.]
3. Thirdly, the way we sell devices. We sell mostly direct through e-commerce and the only cost there is shipping. We don't have to pay a retailer fee, a distributor fee. We don't have to rent a space and pay store staff and all those things that cost a lot of money.
4. [It's also in] the way we market our devices. All of our marketing is in social media so we don't buy advertising space in newspaper or TV or radio. We do all of our marketing in social media, through word of mouth - one fan telling the next fan, showing them their device. We grow that way.
5. We believe this is what people expect. They expect to be able to pay something close to what it costs to make the device and not a huge mark-up on top of that. So we work hard to operate this very nimble business. We are never going to have an office with a hundred people in them. We don't need that many people. We only need a few people as long as they're really smart. That's how we stay nimble and fast."
Crystal.
Today, June 11, 2014, Xiaomi officially launched its operations in the Philippines. In a few days, Xiaomi Mi3 will be available at Lazada, which is currently the only distribution channel of Xiaomi in the country. Hugo told me, though, that Xiaomi is open to eventually working with other online gadget stores - like Kimstore - for their product distribution. No word yet on the exact SRP of Mi3 but off hand, I'm expecting the smartphone to be priced at around Php 12,000.
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