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A smart way to sell a smartphone

Serious about mobile phones? A brand called Xiaomi is on its way. Rajiv Makhni explains what the Xiaomi craze is all about – from its much-in-demand ‘only sold online’ model to updating their entire phone OS and features ‘Over the Air’ every single week.

brunch Updated: Jul 27, 2014 10:52 IST
Rajiv Makhni
Rajiv Makhni
Hindustan Times
Rajiv Makhni,smartphone,Xiaomi

What is Xiaomi and why in heaven’s name should I learn how to pronounce it, anyway?
Very few companies can change the way a phone is sold and used. Very few companies can sell a top-of-the-line flagship phone at a loss and still make lots of money. Very few companies have a ‘only sold online’ model and still create a frenzy and demand in millions. Very few companies can claim a waiting list that runs into a few months. Very few companies can update their entire phone OS and features ‘Over the Air’ every single week. Thus, when a company that can do that and enters India, and is about to change the entire mobile phone retail landscape in the country, the least you can do is learn how to pronounce its name.

What’s the big deal? Lots of companies have different business models. It doesn’t mean I have to learn a new tongue-twister every time one enters my country!
Okay, you seem like the stubborn type and have to argue for the sake of arguing. Let me further expand this one. This is a company that is just about four years old. Eight partners co-founded this company in June 2010. The company’s founder CEO is Lei Jun, apparently one of the richest people in China. They announced their first phone, the Mi1 in 2011 and got about 3,00,000 orders in the first few hours itself. Then Mi2 followed with over 10 million devices sold and now the Mi3 is an even bigger and more astounding success.

Okay, so they sell a lot of phones. Lots of other companies do too. What’s so different about them?
Well, quite a bit. There is literally no company in the world right now that sells an ‘only online’ sale of cellphones. And, there is a reason and a method to this madness. They do this to cut costs of retail, running shops, retail staff, distributor margin, retailer margins and a whole lot more. Thus, they can sell top-of-the line phones at a really aggressive price.

How aggressive?
Very! Besides the obvious savings in the only-online model, they also have a second-level business model that is even more interesting. They practically sell the phone at a loss. Most people report that they sell the phone at exactly the price it costs them to manufacture it, but I suspect that they go even further and sell it at an actual loss.

Why? Are they insane?
Far from it. They seem to be a little ahead of the other companies in terms of setting up for the future. In a world where it’s becoming impossible to compete and differentiate and make money off selling only hardware, Xiaomi uses the razor-and-cartridge model. Sell the razor stick for a loss and make money off the cartridges. The good thing is that the Xiaomi cartridges (services, themes, apps, accessories) are also sold at a very aggressive price. The philosophy is simple. They sell a staggeringly large number of phones, and then sell small add-ons to that huge number of people on a very regular basis.

Ok, so give me an example of just how cheap these Xiaomi phones actually are.
That’s easy. Let’s take the one they have just introduced in India. The Mi3. Super thin 8.1 mm aluminum-magnesium-plastic chassis, weighs 145g, and has a stunning 5-inch Full-1080P HD screen, Qualcomm Snapdragon 800 2.3GHz quad-core chipset, Android 4.4.2 Kitkat OS heavily skinned with Mi UI, 13.0MP camera at the back, 16GB storage, 2GB RAM and a massive 3050mAh battery. What would be this level of specs and features from ANY other brand be priced at? Anywhere between `25K to `42K. How much is Xiaomi selling it for? `13K! They also introduced the dual-sim 5.5 inch RedMi Note with an octa-core processor, HD IPS display, OGS and a 13-megapixel camera for `9,999!

Wow! So, that’s super aggressive. This company seems to be heaven sent!
Well, let’s not get ahead of ourselves here. There are a few little niggles that I still think need to be pointed out. First, this company has built its reputation by always talking about how millions of devices are pre-booked in China and how there is a huge waiting period there. And yet, here they are, entering into India. Shouldn’t they first take care of the huge demand in China itself? The second and far more important point is to do with service centers. The phone will be sold only through Flipkart and Xiaomi’s own web site and I would be very concerned about service and support right now. The third one is to do with this whole ‘every week’ updates of the OS. Till we haven’t tried this for a few weeks and seen exactly how well they’ve understood Indian needs and wants, I would be very sceptical of a massive automated download every week.

Also read: It’s war of the smartphones

Cool, so I’ll wait for a few weeks then.
Yes, let’s give them time to settle in and get things right. These guys are about to change the entire paradigm of how you buy a phone, how much you buy a phone for and how you use it. Plus, they will make sure that every brand has to wake up and react and respond to this all-new Chinese invasion. On top of that, they have even announced that they will be bringing in tablets and TVs into India soon. That too a 49 inch 4K Ultra HD TV for less than `39,000!

Holy cow! Okay, so how do you pronounce Xiaomi?
Let’s first make sure we know how not to pronounce that name. It’s not Zai-omi, nor is it Zayo-my, it’s also not Exi-omi. The correct way to go about this one is Shao-Me. Rehearse it a few times, and try it with a slightly Chinese twang and you should be able to pull it off.

Rajiv Makhni is managing editor, Technology, NDTV, and the anchor of Gadget Guru, Cell Guru and Newsnet 3

From HT Brunch, July 27
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First Published: Jul 25, 2014 18:55 IST