During the presentation conference of the new Xiaomi Mi 6X, the company's CEO, Lei Jun, he made an announcement decidedly out of the pack which will significantly influence the entire range of products sold by the company. Over the years Xiaomi has achieved a positive reputation partly thanks to his aggressive strategy with which he proposed (and proposes) high quality products at very competitive prices. To contain costs, the company has traditionally avoided costly marketing campaigns and has concentrated the sales of its devices solely through its official channels, exploiting poco third party resellers.
The bulk of capital comes mainly from the purchase of accessories and gadgets rather than important products such as smartphones, at least according to reports by Chinese analysts. Profit margins from the sale of Xiaomi hardware have always been considered low and a few smartphone manufacturers probably follow the same line of business, but the news that upsets is the fact that Xiaomi will commit, regardless of how much future prices (relating to components) can increase, to limit its net profit margin to a value of 5%.
If Xiaomi wants to become a great company, it needs to remember its mission first. In a few years, perhaps I will no longer be the CEO of the company that will have become number one in the world, just by continuing to follow this path. " Lei Jun CEO.
Xiaomi limits the gains from hardware sales ... forever
Even more interesting is that Xiaomi undertakes to return to its customers the part of the profits deriving from exceeding this value, even if it is not clear by what means and tools these profits are returned. In any case, Xiaomi's commitment does not necessarily mean that consumers will always have guaranteed a cheap product, for example the company could decide to release a USB stick priced at 10000 euros but keep the promise of a 5 percent limit in terms of Net income. It is interesting to note that these statements are made a few days after the presentation of the IPO application in Hong Kong that will happen next week.
Put simply, Xiaomi simply will not have the same revenue incentive that other hardware manufacturers have when it comes to increasing sales costs. Xiaomi seems to want to adopt the strategy of: why sell a phone to 500 euro when it could potentially get the same profits by selling the same phone to 400 euro, but bringing its brand in the hands of more users?
