In product development and design, as mentioned above, the participation of Xiaomi users is very high, and the whole process can be said to be completed by Xiaomi R&D personnel and users. This is also completely different from traditional mobile phone manufacturers.
In inventory and supply chain management, Xiaomi borrowed from dell model's supply chain management, that is, "customization on demand", trying to achieve zero inventory and customization on demand. Every Tuesday at noon 12, Xiaomi official website will release a batch of mobile phone products. The specific model and quantity will be released in the forum in advance, which is determined by the inventory data fed back by Xiaomi Storage Center.
This reservation number is one of the important indicators of millet production planning. Based on this indicator, as well as weekly sales, Baidu index, number of forum posts, etc. Xiaomi will calculate the output after three months and the number of open purchases, and make corresponding production progress. After that, we will purchase parts according to the schedule, such as purchasing screens from Sharp, chips from Qualcomm and cameras from Sony. * * * It is planned to purchase more than 600 kinds of components, which will be finally manufactured by Inventec and Foxconn.
Xiaomi's sales method is also different from traditional mobile phone manufacturers. Xiaomi mainly uses e-commerce channels. In addition to its own e-commerce website Xiaomi. Xiaomi is also sold on e-commerce platforms such as JD.COM and Taobao. When Xiaomi Mobile Phone 1 went on the market, its logistics and distribution were handled by Vanke Eslite's wholly-owned self-built distribution company, such as Fengda. Later, SF, Shentong, Tong Yuan and Post also became the third-party distribution companies of Xiaomi. Offline, Xiaomi does not have its own offline stores, mainly through the offline channels of telecom operators. In 20 12, 70% of Xiaomi's total sales volume was completed through the e-commerce channel, and the operator channel accounted for 30%.
2. Business model and profit source
When thinking about Xiaomi's business model, the Xiaomi team believes that in this era of smart devices, the competition is not only hardware performance and hardware configuration, but also the user experience of software, including the smooth cooperation between software and hardware, as well as the future value-added services such as Internet mode and Internet service.
By 20 14, only Apple will truly achieve the integration of "software+hardware+Internet services". Xiaomi tried to learn from Apple and simplified Xiaomi's business model into a triathlon of "software+hardware+Internet service". That is, from the application software to the system level to the final hardware, we try to build an ecosystem composed of Xiaomi mobile phone, MIUI, Xiaomi box, shopping mall, cloud service and developers in a big Android ecosystem.
However, Lei Jun believes that the difference between Xiaomi and Apple is that Xiaomi does not operate around hardware profit, but extends from hardware to software and service profit, and does not pursue hardware profit. That is, the "free+premium" model is adopted. First, a large number of users are circled by hardware that does not make money or does not make much money, and then provide charging software and value-added services. Accessories, etc.
But it is not easy to make profits by software alone, and the establishment of an ecosystem is not overnight. Take Apple, which has a very healthy ecosystem, as an example. In fiscal year 20 13, the revenue from software services and other music-related products and services only accounted for 9.4% of the total revenue in this fiscal year, while the revenue from accessories accounted for 3.3%, and the remaining 87.3% was contributed by various hardware devices. And compared with Apple's IOS, there are very few developers who can make money on the Android platform. It will take time for Xiaomi to profit from software and Internet services.
By the end of 20 14, the main source of Xiaomi's profit is hardware. Take Xiaomi mobile phone 1 as an example, the initial pricing is to calculate the cost according to the sales volume of 300,000 units. There is really no profit margin after amortization. However, when the sales volume exceeds 300,000, the procurement cost will drop, the amortization of expenses will be completed, and the breakeven will be basically achieved.
In addition, according to Moore's law, the cost of components is declining, and the price of mobile phones is the cost price. After a quarter of price reduction, enterprises can get a quarter of reasonable profits. What's more, in the initial stage of new products, Xiaomi usually adopts a hunger marketing strategy and will not mass-produce. When large-scale users can buy products, the cost of components is much lower than when pricing.
The key of this profit model is to lengthen the product life cycle, because the life cycle is lengthened, Moore's Law can begin to play a role, and enterprises can have sufficient price adjustment space because of the decreasing marginal cost, thus ensuring profitability. Therefore, Xiaomi will appropriately improve the performance of mobile phones in the later stage, and keep the price/performance ratio of mobile phones at the highest level in the same price range while ensuring normal profits.