The $130 Smartphone

12 August 2015

by Triin Sober Manager

Smartphone maker sets world record for selling most mobile phones in a 24 hour period – and it’s not Apple

Hands up if you’ve ever heard of Xiaomi? Neither had I until very recently. Since its foundation in 2010, the company has rapidly risen to become the world’s 5th largest smartphone maker. The reason why you probably haven’t heard of it is that 97% of its sales are in China. All that is about to change - Xiaomi has hired a former Google executive Hugo Barra to lead its international expansion and has its sights set on getting into Indonesia, Mexico, Russia, Thailand and Turkey before the end of the year.

So what is Xiaomi? The company has been hailed as the ‘Apple of China’ with its CEO occasionally adopting Steve Jobs’ style black turtlenecks and blue jeans for public events, its phones looking similar to iPhones (but they run on a customised Android OS) and the stores (Mi Homes) similar to Apple stores. The firm produces a wide range of products such as tablets, fitness trackers, smart TV's and phone accessories but the key product is its low-priced smartphone. 

How low exactly? The company actually makes no money off its phones which it sells at cost, with prices starting at around $130. The profit comes from apps and add-ons that are marketed to the increasingly large customer base. The devices themselves, maybe somewhat surprisingly given the low price mark, are of good quality and design. The firm has also shown a knack for inventive advertising campaigns which have helped create a loyal group of followers. Some ‘Mi Fans’ get together to sing songs about the company and others have even shaved the firm’s logo into their hair.

The aggressive pricing strategy, which is supported by focus on online sales to keep the costs low, would certainly be attractive outside China but without any brand recognition internationally they’ve certainly got their work cut out for them. It also remains to be seen whether Xiaomi can replicate its successful ad campaigns outside the Chinese market.

Even if the company finds success in their initial list of target countries, USA and Europe – the tier one markets - will be a tougher nut to crack. The US customers for example are quite brand conscious and other smartphone makers such as Nokia, LG and Sony, which do very well internationally, have had little to no success in the States where the market is dominated by Samsung and Apple.

Personally, I wouldn’t say no to a smartphone that cheap or a fitness tracker costing $13 but then I’m also not a devoted Apple or Samsung customer. If the price alone isn’t enough to sway you, maybe the firm’s adorable mascot – Mi Bunny – will help.

Have you had any experience with Xiaomi products and what would persuade or deter you from buying one if it became available in the UK?

If you would like to discuss these issues, or the impact of emerging technology on your industry, then please get in touch with Euan Cameron.

by Triin Sober Manager