How does Xiaomi make money even after selling the Device to you?

Xiaomi was founded in 2010 by serial entrepreneur Lei Jun, who believes that high-quality technology doesn’t need to cost a fortune. Lei Jun likes to work with Smart people from Google, Kingsoft, Microsoft, Motorola, Yahoo, and other Internet and tech companies from around the world.

Xiaomi provides high-quality tech for low prices. They sell their devices at a cut-throat price which has a very narrow margin of profit. But how does Xiaomi  makes money? Is it losing money on every device it sells? Or does it have an innovative strategy of its own?

Xiaomi is used to sell its Flagship device Mi 11 at the half price compared to Samsung Galaxy S21. Pricing is probably one of the most difficult parameters to optimize, for any company. The Pricing also involves several other factors like branding, positioning, marketing, Research & Development etc.

But this is not the case with Xiaomi, and this is where Xiaomi Saves money and provide their handset at a very affordable price compared to others. As we know, Xiaomi sells most of its products online only, through e-commerce does a saving lot of money on warehousing and distribution.

Unlike other rivals, Xiaomi doesn’t spend money on traditional advertisements and depends solely on Social Media marketing and word-of-mouth.

“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 fulfillment and shipping cost,” explains Hugo Barra, VP Global

How does Xiaomi make money Afterall?

But the most important thing to note is that Xiaomi still making money even after selling it to you that’s just because of you….

Well, Xiaomi is a ‘mobile internet company‘ who doesn’t make money on its hardware but by selling apps, games and special Android themes and Internet services on top of its custom MIUI. The company states that it receives about $4.9 million as monthly revenue from apps, games, and theme customizations installed on MIUI.

Similarly, the thing many of you don’t know is that Xiaomi earns a percentage of commission when you shop online through MIUI browsers from their partners like – Flipkart, Amazon, Myntra, Jabong etc Other than this you also see some of the apps on the browser.

Xiaomi also receive commission as CPA = ‘Cost Per Action’ when a user downloads it on their Mi Device with this technique they can earn money till the end Life of Mi device, and we aren’t complaining about it as Xiaomi deserve all the credits for bringing perfect competition in the Indian market among big and small brands.

Xiaomi Integrated ads in MIUI

The company has committed to maintaining hardware profit margins at a maximum of 5% indefinitely. Xiaomi aims to generate revenue through diverse avenues, including the provision of add-ons, additional services, and advertising.

Xiaomi strategically incorporates ads within native applications such as the browser and themes to enhance its revenue streams. Additionally, the company earns profits when users purchase games or themes from the Mi Store. Ads are present on every Xiaomi phone, regardless of whether it is a budget or flagship device, although users have the ability to control the frequency of ad displays.

Bottom Line

According to Beijing report, Xiaomi’s profit in the first half of 2023 hit RMB8.4 billion, close to last year’s figure. This 147.0% YoY growth is the highest quarterly profit since Q4 2021, surpassing market expectations.

Xiaomi is pretty smart in marketing their smartphone as they intend to produce less per unit smartphone to reduce the cost of production which eventually tends to rise up the demand due to less supply of Xiaomi Devices on the online platform. Do tell us about your experience with Xiaomi in our comment box below.

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