Ever wondered why the Chinese brands hit the markets with such a small price tag? Lower prices but still provide better specs for which other brands would have charged double or more. Then how do Chinese phone makers earn good profits? Hmm makes you wonder right?
China has always been a home of the cheap. They provide products at cheapest price to the world. And still they earn a lot. They don’t use any magic. They just have some ecological advantages and also they use some simple market strategies. What are they? Aha! Lets go through them in detail.
1. Human Labour Cost
The first factor is the human labour cost. The notion that china has the world’s lowest paid labour is only partly correct. There are other countries with less labour wages like Srilanka and Vietnam for example. But the difference is productivity of those labours. Yes Chinese labours are bit more efficient compared to others with the same wage rate. So this helps to reduce the overall labour cost for each product. Also they are readily available to work whenever the need arises.
2. E-Commerce
Chinese brands focus on setting up E-Commerce site rather than having hundreds of physical stores around the country. So they start their own websites for sales or partner with others like Amazon or Flipkart for sales. Some companies like Xiaomi and ZTE may have opened experience store recently. But they are few in numbers and are focused on servicing rather than sales.
So this strategy helps the Chinese brand to cut the cost to a large extent. And these savings are passed onto the customers as special benefits.
3. Social Network Marketing
Companies like Sony, Samsung or Apple spend millions of dollars for promotion of their products. They use celebrity endorsement, TV adverts, Billboards, sponsorships to attract customers. But these are too expensive campaigns and add a lot to the cost of device.
But Chinese brands use social networks like facebook and twitter to promote their products. They may pay few bucks for for facebook adverts or to promote a tweet. But these help in viral marketing and thereby promote their products in a short time.
Here’s a simple set of world which describes the process.
Followers become fans and fans get converted into forum members. And by word of mouth the brand spreads and hype / sale booms.
4. Low volume production
Xiaomi and some other chinese brands use flash sales to sell their products. Flash sales is a technique where a limited amount of stock is kept on sale. Usually these stocks get cleared in seconds. So if you miss then you may wait for weeks for next stocks to arrive.
This may have been a major reason for critics but it does help them to cut cost. Wondering how? let me explain.
The smartphone value decreases exponentially from the date of its launch. But the flash sales helps the company to maintain their prices for a long time. This also reduces risk of loss as the company can seize the production whenever the demand drops. This leads in few unsold products. Also the flash sales annoyance somewhat helps in some free advertisements.
5. Investments on new Technologies
The Chinese brands focus on using the trending technologies rather than investment for new. This cuts their expenses and helps them to maintain a small profit range. They are also quick to adapt to change in technology and change in market demands.
While major brands like Sony, Samsung spend millions of dollars on research of new technology, they spend few thousands for same. They cant spend more as they have less profits.
Conclusion
So these are the strategies which helps the Chinese branded smartphones to provide the products at such incredibly low price. And thereby helps them to compete with major giants like Sony, HTC and others by providing same features but at almost half the price.
So what are your opinions about their strategy? Share your thoughts in comments.
