Xiaomi co-founder Wang Chuan： Xiaomi TV has been fully reduced in price, and low prices can also make money

　　On August 29, Xiaomi co-founder, vice president, and head of Xiaomi TV, Wang Chuan, released an article today entitled "Why did Xiaomi TV take the lead in cutting prices?" Wang Chuan said that in the second half of this year, we found signs of a decline in upstream raw material prices. Our first reaction was to return the benefits to users and become the first TV brand to cut prices comprehensively.

　　It is reported that the categories of this price reduction include the comprehensive price adjustment of Xiaomi TV 4A from 43 inches to 65 inches, with a maximum decrease of 1,000 yuan.

　　Wang Chuan said that in the first half of this year, the entire TV industry’s overall market was declining, and the strong TV companies in the past also encountered various problems. However, Xiaomi TV has achieved frequent success and achieved rapid growth against the trend.

　　Wang Chuan said that at such a low price, Xiaomi TV is still making money, mainly for the following three reasons: first, in the upstream supply chain, we have more advantages than traditional manufacturers; second, Xiaomi’s self-built Xiaomi Mall and Xiaomi Home are very efficient channels; third, Xiaomi TV’s business model is a tipping model – internet service, Xiaomi TV is still profitable in the case of hardware not making money, forming a healthy business closed loop.

　　The following is the full text of Wang Chuan’s article "Why Did Xiaomi TV Take the Lead in Reducing Prices?":

　　Yesterday, we announced a price adjustment, becoming the first TV brand to cut prices across the board. As you may remember, the price of TV panels and other raw materials rose sharply in the second half of last year. Xiaomi persisted until the beginning of this year before it had to make a small price adjustment. It is the company that has raised prices the latest and lowest in the entire TV industry. In the second half of this year, we found that the prices of upstream raw materials showed signs of falling. Our first reaction was to return the benefits to users: Xiaomi TV 4A fully adjusted prices from 43 inches to 65 inches, with a maximum decrease of 1,000 yuan.

　　Adhere to high cost performance and grow against the trend

　　Does anyone say Xiaomi TV is crazy? No, insisting on high cost performance and saving every penny for users is the core value of Xiaomi. In May this year, we launched the world’s thinnest LCD TV, Xiaomi TV 4, with a thickness of only 4.9mm, 30% thinner than iPhone. The price of this top-of-the-line 55-inch TV is only 3,999 yuan, which is not much different from the price of an ordinary 55-inch TV. In March this year, when all the TV companies launched new spring products with sky-high prices, we launched a new cost-effective series – Xiaomi TV 4A, starting from 2,099 yuan, which is called the fighter in the TV industry.

　　Why did you set such a price? Mr. Lei has said many times that Xiaomi is a kind company, a company that follows cost pricing and pursues low gross margin. It is a company that has the ability to sell products to 9999 yuan but insists on pricing 3999 yuan. This TV is priced as much as we don’t lose money. Now that the price of raw materials has dropped, we continue to follow the cost and reduce the TV price as soon as possible.

　　Xiaomi is a company founded by a group of engineers. When other companies use technology as a selling point for them to obtain high gross profits, as engineers, our idea is very simple. The technology we have worked hard to develop is used to benefit millions of users, not a tool used by manufacturers to make huge profits. This is our dream when we created Xiaomi. "Let everyone enjoy the fun of technology."

　　We want to be friends with every user. Lei always said, if you think about how to earn 100 yuan more users every day, how can you be friends with others? You have to think about how to save 100 yuan every day.

　　In the past five years, Ray has never set a KPI for us. We have not discussed sales, sales volume, and profits. We believe that as long as we can make a good product, these things will follow, and the facts prove it.

　　In the first half of this year, the overall TV industry was in decline, and the strong TV companies in the past also encountered various problems. Xiaomi TV has achieved rapid growth against the trend. According to data from Zhongyikang, in the first half of 2017, Xiaomi TV’s online sales increased by 91.2% year-on-year; according to the "Analysis Report on Home Appliance Online Shopping in the First Half of 2017" jointly released by CCID Research Institute and China Electronics News, Xiaomi TV was the TV brand with the largest increase in online sales in the first half of this year; according to statistics from Aowei Cloud Network for the second quarter of this year, Xiaomi TV won the online sales championship of the two mainstream sizes of 49 inches and 55 inches. This year 618, we won the sales championship of 43 inches, 49 inches, 55 inches, 65 inches and other size segments on JD.com and Tmall platforms. These sales rankings are very exciting for us, but there is one ranking that makes me even more proud, that is, the repeat purchase rate of Xiaomi TV is No. 1 in the entire TV industry, including foreign brands, which fully shows that after experiencing Xiaomi TV, users know what TV is most worth buying.

　　Low prices can still make money, how did we do it?

　　So why is 2017 a cold winter for the TV industry, but spring for us? With such a low price tag, many people think we are losing money, but I want to tell you that we can still make money. Why is that?

　　As an Internet company, our huge core advantage in TV is emerging.

　　First, in the upstream supply chain, we have an advantage over traditional manufacturers. Today, the entire manufacturing industry has entered an era of overcapacity. Instead of building our own factories, we choose the best quality and most efficient manufacturers among the best foundries in the world to produce Xiaomi TVs. I can use Sony’s, Samsung’s, and Sharp’s foundries. We can use the best craftsmanship to build Xiaomi TVs.

　　Second, we have more and more advantages in sales channels. Xiaomi’s self-built Xiaomi Mall and Xiaomi Home are both very efficient channels. We are the first TV brand in the industry to achieve the same price online and offline; while traditional manufacturers hand over 40% of the cost to various offline channel providers. The same TV can only be made into two models. There is a big difference between one price online and one price offline. Bullying users who don’t know how to do it and relying on deception to obtain high gross profits. Industry insiders laugh at themselves as: "No pit, no deception, no color TV".

　　Third, our business model is the tipping model – internet service. If users like our products, we are confident that the experience will be good enough for users to be willing to tip. The average daily boot rate of Xiaomi TV is as high as 68%, far exceeding the industry level of 56%. This shows that users of Xiaomi TV prefer to turn on the TV, and Xiaomi has more than 20 million users on the TV side and more than 10 million monthly active users. It is the largest Internet TV platform in China. With a large and highly active user base, our Internet revenue such as e-commerce and membership has exploded. This has allowed Xiaomi TV to achieve profitability even though the hardware is not profitable, forming a healthy business closed loop.

　　Companies from the future

　　Xiaomi TV’s dream is to "make the best TV, so that everyone can buy it". The three advantages of supply chain, sales channels and business model make the two seemingly contradictory ideas of "best TV" and "everyone can buy it" unified, so that we can use a lot of energy to polish each product under the premise of insisting on high cost performance. In recent years, many companies have been busy grabbing the market, and we have improved our products little by little from image quality, sound quality, craftsmanship, content, intelligence and other aspects, each of which has reached the top level in the industry. For example, Chinese TV manufacturers do not pay much attention to sound quality, but we are willing to make great efforts to hire world-class acoustic experts, establish a first-class acoustic laboratory, and successively launch Soundbar speakers, independent subwoofers, surround sound home theaters, and the first Dolby Atmos cinema TV, allowing users to enjoy sound quality comparable to cinema without leaving home.

　　From the first generation to the fourth generation, each generation of Xiaomi TV has made great progress and is at the forefront of the TV industry. We are the first to create an artificial intelligence system that "understands the content and understands you better", so that users don’t have to struggle to find a large amount of TV content; the first to develop artificial intelligence voice TV, so that illiterate children and the elderly who are afraid of smart TVs can easily use smart TVs. We launched this year’s flagship product – Xiaomi TV 4, which looks like a borderless design of a piece of glass, a 4.9mm body that is 30% thinner than iPhone, and a price starting from 3499 yuan, all of which make the entire TV industry admire.

　　With the popularity of the Internet, users are becoming more and more experts and buying smarter and smarter. We firmly believe that the era of relying on fooling users to obtain high gross profits is over, and the future belongs to companies like Xiaomi that insist on "making products that move people’s hearts and are affordable." Xiaomi is a company from the future.