October 17, 2014 by ...
Xiaomi’s parasitic pricing and competition are wreaking havoc across China. The country has 100 cellphone companies, few of which make profit. With their ‘dodgy’ business model, Xiaomi is making it even more difficult for anybody to make a buck.
Their latest foray is into the wearable fitness market where Xiaomi’s locust pricing has the Chinese competition seeing Red. Instead of charging the industry standard of $80-100 Xiaomi charges $13, thank you very much. The price delta must be found somewhere, ‘quality’ comes first to mind. Judging from this pic, they saved a ton on packaging by repurposing caskets for lab rats as well.
Once one opens the box more surprises await them. Tangled up inside is a semi viscous hunk of plastic with a creepy looking thing in the center. This less than robust looking jangle of uncertainty looks like the kind of object that falls from the pocket of a skid row bum on full tilt.
Of course the ‘fitness’ band has all the aesthetic appeal of warts, but what do you expect for kit costing as much as three Happy Meals?
According to Xiaomi the fitness band is as good as any other and they drew up some nifty pictures like this one to prove it. Come to think of it, aren’t those pics cribbed from another website?
In any event, for the price of a third tier city Chinese ‘shakedown’ you can have your very own Xiaomi band.
But the point of this article is to explain locust pricing and Bong hits.
A Chinese smart band manufacturer called Bong decided to fool the rest of us into thinking their product was actually good. Being astute business men and women they priced it as such. Their gear went for $79 and change.
When Xiaomi jumped in with its thousand penny piece, Bong shit a brick and climbed down the ladder to meet Xiaomi in marketing hell. Marketing hell is that special place where doomed marketers and business people scream ‘low prices’ that’s how to win markets! Lower the prices!’
Of course Xiaomi and Bong’s western counterparts have not followed suit as their gear actually adds value. Thus, their prices stuck. I myself have a Fitbit and am not embarrassed to whip it out in mixed company. Try that with your flimsy ‘gray thing’ on a rubber band Xiaomi gear!
But back to cost; Xiaomi pulled a ‘locust pricing’ on Bong, and has eaten up all the profit. Now Bong must scrape along on margins it most likely deserves as Lei Jun decides which market to infest next.
The xiaomi way of cribbing design and killing margins has about 300 million people happy, 100 million angry and the rest don’t speak proper Mandarin and this do not care.
The fact is that Lei Jun is cutting costs and Chinese companies are upset.