Recently, while he announced the third quarter financial results for the year 2019, the CEO of Xiaomi in Lei Jun explained why exactly the company’s smartphones prove to be so cost-effective. He stated that the company has a gross profit margin of only eight to nine percent, which goes on to make the Chinese manufacturer’s devices ever so cost-effective.
He also claimed that the prices with which phones are being introduced are only likely to increase in the coming future as the smartphone industry is moving more and more towards the 5G technology. However, he said that Xiaomi’s reputation will be maintained, stating that the company’s price-performance ratio will be better.
He said : “I think the gross profit margin of 8-9% is very low and since our sales model is based on e-commerce sales, the pricing that the end customer ends up paying will buy will be very cheap. The most important thing is that our own gross profit is very low, and the middle channel is very short, so the final price in the retail market remains very attractive to the buyers.”
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He discussed further that the company will indeed continue with the same sales strategy going into the 5G revolution as well. This makes all the sense in the world as the business strategy that the company currently operates with has yielded great results for it.
The Chinese manufacturer has revealed that its adjusted net-profit RMB 3.5 billion which represents a year-on-year increase of around 20.3 percent – this has certainly been more than market expectations. Also, much to the delight of the company, the combined net profit for the first three quarters of the year 2019 stands out at 9.2 billion yuan – this means that the net profit of last year too has been exceeded!