2018 was a great year for smartphones. We saw many trends go mainstream; tall displays, the notch, and the advent of the foldable smartphone. In between all the revolutionary devices, one underdog stole the headlines, the Xiaomi Pocophone F1. And for good reason; the F1 costs $300 yet spots internals identical to phones that cost upwards of $1000. But how does that happen? Is this even real?

This is not the first time we have seen such a move by an OEM. 2014 OnePlus One, aka the flagship killer, gained relevance using this very same strategy; flagship specs at a budget. OnePlus has since up-scaled from the entry level budgeting but still offers flagship-level performance, internals and craftsmanship at almost half the price of the other devices.

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How is the Pocophone F1 that cheap?

I think the biggest reason the Pocophone F1 is priced that competitively has to do with the fact that they didn’t have to put up any infrastructure of their own. They have Xiaomi as their parent company, complete with a robust manufacturing system, the technical know-how and Research and Development.

The Poco F1 also cut a few corners that helped them achieve such a price. For instance, other similarly spec’d devices like the Samsung Galaxy Note 9 spot beautiful glass designs that are truly premium. The Poco F1 has to make do with a hardened Polycarbonate shell. While this is obviously more durable than glass, it doesn’t feel as premium.

Most 2018 flagships boast of Gorilla Glass 5 covered displays. These ensure the very best in terms of protection technology. The Poco has to make do with the much older but still impressive Gorilla Glass 3.

The $1000 flagship devices have true edge to edge displays with top of the line OLED panels. Samsung devices use their Super AMOLED displays that have for a long time, been the market leader. The Poco F1 has to content with a rather mainstream IPS panel that is cheaper and a little less premium

How does Xiaomi achieve such a price?

Pocophone is merely a sub-brand. Xiaomi, Poco’s parent company basically runs the show on this one so the question should be, “How does Xiaomi afford to sell its devices at such low prices compared to their competition? And the answer to this is a combination of factors, mostly involving the company finding ways to make and save money where their competitors would have usually imposed the burden to the customer through the pricing of the device.

Xiaomi has for a long time managed to undercut their competition in price all over the world. This has particularly played well in markets where customers are very price conscious like India and China. To achieve that price, here are some of the things that Xiaomi does differently.

Earning from services instead of phone

Xiaomi has a very different business model and most of it revolves around software and internet. Do you know that the full form of MI is Mobile Internet! So xiaomi actually recognises itself as an internet company. Smartphone is a major division of xiaomi but the brand hardly makes any profit from smartphones. It uses a different strategy which is earning from software.

Generally a brand makes a phone, keeps a high margin, sells the phone and makes profit from the hardware. But, xiaomi sells the phone at lower price and earns money after user has bought the phone. Xiaomi phones come with pre-installed apps which requires paid subscription and it’s UI shows advertisements in apps.It’s like a free to play game installed from app store. The game is free to play and install but the developer earns through advertisements and paid items. In a similar way, Xiaomi uses MiUi to earn profits by showing ads and having paid subscription. And this is highly effective way to earn money especially in China where there is no Google, Microsoft or Facebook. So people have to rely on services given by Xiaomi at no matter what subscription fee.

2. Flash sales

Xiaomi sells it’s phone through online flash sales. Although it causes availability issues, but still this method helps xiaomi to effectively cut costs. Flash sales means that brands doesn’t need to keep their warehouses filled all the time and thus even less production will work. This means that costs of production and storage will be reduced. Also flash sales creates a hype about their phone and this there is no need of any extra advertisements. Even you get some free advertisements because of the news like-

Image text- Thank You Out of stock in 2 seconds.

Online sales also mean that there is no need to create a retailer network which costs a lot of money. Also, the prices could be kept low as there is no middlemen who need a commission.

3. Costly accessories and after-sales services

If you want to buy a back cover for your phone or any other accessories from the official store, it will cost you more than a local one. Also if the phone is out of warranty and needs to be repaired, then you will see how high the repairing costs are. This is because the company keeps the margin high in such products

Will the Pocophone F2 be as cheap as the F1?

If OnePlus’ case is anything to go by, the success of the F1 will determine the pricing of the F2. OnePlus used this aggressive pricing strategy to generate hype and therefore brand awareness before later on shifting focus to the mid-range section of the market. In this light, we expect to see the first few devices under this Pocophone line up to be aggressively priced.

Being a new brand, one would assume that Poco got a lot of support from Xiaomi. Sooner or later, the sub-brand will be expected to break even and be able to handle all its affairs, from Research and development all the way to pushing devices to market. This could mean later devices in this product line could be a little pricier to offset some of these costs.

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