For most of the mobile companies it is about converting a successful model into a money minting machine. This trend was started by Nokia and Samsung has been following it quiet diligently, this is where OnePlus stands away from the crowd.
The Chinese manufacturers have silently gone past the half a million mark and are aiming 1 million sales in 2014, with only one model against their name. Interestingly, they are making a profit of only $10 from each model of OnePlus One, which may well be the lowest profit among all the available smartphones.
The only company that followed this route was Motorola under Google, while we are not sure about the strategy after the Lenovo takeover it would be suicidal to move away from it.
The approach seems to have been a hit, with OnePlus One’s ever growing waiting list. Keeping up with demand will be crucial for the company’s future as they make up with volumes for the marginal profits.
OnePlus’ ability to provide flagship device at low cost lies in the fact they have cut down on all unwanted expenditures. While there is no information about the profit margins of Galaxy S5, whose specs are similar to OnePlus One, S4 had a profit margin of $100.
What is surprising is the production costs of the devices seem to be pretty much similar. The 32 GB version One is being sold at $299 and the production cost of S4 was between $209 to $250. Add the other expenditures like engineering cost, it should come somewhere close to OnePlus One’s cost.
But, Galaxy S4 was sold at a price of $700 and with a profit of $100, the rest of the $250 was spent on advertising and marketing by Samsung. This is where OnePlus One has the advantage. The Chinese have a shoestring budget of $300 for advertising, which is entirely spent on Facebook.
This is a radical change from the traditional approach, where the buyer is the one who promotes the image of the brand. Making the most of the digital space, the company believes in interacting with its customers directly. The customers are chosen only through invites, which are valid for 24 hours and within which one has to confirm the order.
In a recent interview, the OnePlus CEO Pete Lau revealed that the product has its genesis in the drawbacks of other smartphones and the company was not bothered about specifications as long as the customers happy with the user experience.
Another big step towards reducing the cost was the OnePlus’ decision to make use of the Oppo’s existing infrastructure. This helped them save a lot of investment on infrastructure and it has been eight years of association.
Meanwhile, Oppos has also been growing as a brand and OnePlus is also exposed to some external influences.
On a whole it looks like the companies like Motorola and OnePlus and even Xiaomi to some extent seem to be reshaping the way smartphones are sold. They are also keen to transfer the money spent on advertising to the customer and thus offering flagships at low cost.
At present the future looks rosy for OnePlus because they have only one device. They will surely be tested when they have many devices under them and the demand increases. Going by the past they may well be ready with solutions for that also.