Xiaomi pricing strategy
The smartphone industry from China has already left a significant legacy over the last
couple of years. Oppo, OnePlusOne and Huawei have come out with world-class
products. Looking at these products no one can say that they are less interesting or
less appealing than products coming out of Korea, Japan or the US.
What separates Xiaomi from other smartphone manufacturers is its strategy of
selling high-end smartphones at cost, with virtually no profit margins. To start off
with, Xiaomi sells its products online only, through ecommerce. This ensures that it
doesn’t have to worry about the costs of warehousing and distribution.
“We are an e-commerce company. We live on the internet. We are selling exclusively
through e-commerce. And the price there can be much lower, because the price on
e-commerce is essentially fulfilment and shipping cost,” explains Hugo Barra, VP
Global, Xiaomi
Xiaomi also shuns traditional models of advertising and depends solely on Social
Media marketing and word-of-mouth. Apart from this, Xiaomi cuts cost at every
stage. It sources components itself and deals with these sellers with a different
strategy. Unlike other bigger players who discontinue their models after 6-8 months
in the market, Xiaomi sells it products for up to 18-20 months after launch. This
means that the price of the individual components goes down while the price of the
phone remains constant throughout.
In the past too, many Chinese handset players have entered the market with lowpriced phones. But with low prices, tagged along the low quality as well, giving the
Chinese market a bad name. Xiaomi set the tone right by bringing high-end quality at
affordable prices.
Questions
1. What is the pricing approach/ major pricing strategy used by Xiaomi?
2. What is the new product pricing strategy is implemented by Xiaomi to enter
the market?
3. Do you think they can be profitable with this strategy? Give reasons for your
answer