The makers of the world’s cheapest smartphone will make a profit of Rs 31 on every unit of the Freedom 251 despite being besieged by thousands of irate customers and possible tax troubles.
Priced at Rs 251, the phone made a splash days before its high-profile launch in Delhi but has been in the news for all the wrong reasons lately, including possible copyright infringement, customers concerned about late deliveries and a visit by income tax officials to Ringing Bells office in Noida.
But the firm’s founder Mohit Goel – also known as ‘cutemohit’ on social media – dismissed all these charges, saying the company will deliver all phones on time.
“Why am I being hounded? What wrong have I done? Why am I being called a ‘bhagora’ (who’ll run away with the money)? I intend to do a valid business, just like any other startup, and I have a business plan ready,” Goel told the Times of India in an interview.
The company said it received over 70 million bookings for the phone three days.
“We are taking online bookings for only 25 lakh units in the first batch due to limited supplies, while giving another 25 lakh through offline distributors. I will deliver the handsets before June 30,” he told the newspaper.
“All the money that we receive from customers through the payment gateway will be kept in an escrow account and we will touch it only when we deliver the devices.”
He also dismissed charges that the design and logos of the Freedom 251 were copied from Apple’s iconic iPhone.
“Some of the devices had the Adcom branding as we sourced panel (screen) from them. However, the final device will have our branding and the phone will have the same features and design that we had showcased,” said Goel.
Ashok Chaddha, who is the president of Ringing Bells, appeared confident about the phone’s business model and its dispruptive pricing. He justifies how they’ve managed to bring down the cost of the device to Rs 251 and still earn a profit.
“Economies of scale gets it down to around Rs 1,200, and thereafter an online sales model cuts down marketing and sales expenses, giving us further savings,” he said.
Chaddha also added that he was banking on the app ecosystem that brought the cost down to around Rs 800. The rest, according to Chadha, will be recovered by the earnings from a marketplace that the company will be setting up.
“So here is my marketplace, you want to sell something, come to me, pay me revenue for it, and I will pass the revenue on to my customer,” he says. That’s how, according to the company, the Freedom 251 can sell for Rs 251.
The company is also joining hands with various e-commerce companies, which include travel website Goibibo to get their apps on Freedom 251 smartphone.
“We will also monetize from the heavy traffic on our website and will make it into a marketplace for other brands to hop on. This will also help us to bring down the cost,” he added.