Today, while announcing the third quarter financial results of this year, Xiaomi CEO Lei Jun explained why the company’s smartphones are cost-effective. He says that the company has a gross profit margin of just 8 percent to 9 percent, which makes the company’s devices cost-effective.
He believes that the costing of the smartphones will get more outrageous and the devices will become expensive as the industry is moving towards 5G technology. However, he adds that compared to others, Xiaomi’s price-performance ratio will be better.
Lei Jun 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 further reiterated that the company will be continuing with the same sales strategy going forward in the 5G phase as well. This makes sense given that the current model of the company seems to be working fine.
Coming to the financial data for the Q3 2019 shared by the Xiaomi Group, the company’s total revenue for the said quarter stands at RMB 53.7 billion, which represents an year-on-year increase of 5.5 percent — making it the highest quarter since Xiaomi’s establishment.
The company reveals that its adjusted net-profit was RMB 3.5 billion which shows year-on-year increase of 20.3 percent, exceeding the market expectations. The total combined net profit of the company for the first three quarters of this year stands at 9.2 billion yuan, exceeding the total net profit of the last year.
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