The makers behind the Flagship Killer of 2014, OnePlus has been churning out phones at surprisingly cheaper rates. We look at the various factors that enable it
Right. I’m pretty sure you’ve all noticed it by now. OnePlus is all over the place. Their smartphones are all over the internet, and it’s no surprise why. OnePlus has been able to release very budget-friendly smartphones since the company’s rise in 2013. And hey, I’m talking full-fledged flagships. Not those mundane mid-rangers. If you’ve been living under a rock for the past couple of years, let me recapitulate. OnePlus was founded by Pete Lau, in the year 2013. If that name rings a bell, he was the vice president of the Chinese mobile giant, OPPO. So, how budget-friendly are their smartphones?
Their first smartphone, the OnePlus One, had the same (if not better) top-notch specs of the flagships of the year 2014. But, here’s the catch. It was priced aggressively at just $299 for their base model. That’s less than half of the 2014 Samsung flagship, the Galaxy S5! The OnePlus Two is no exception, priced competitively at $329. They’ve also just recently released their new mid-ranger, the OnePlus X, which is available for $299. So, I suppose you can probably see where this is going. Today, I hope to tackle the question of how OnePlus manages to perform this seemingly impossible feat.
Content
OnePlus’ cheaper handsets are a culmination of a myriad of factors. To explain, there are a couple of business terms I would want to introduce. So, bear with me here. Let’s begin with the most important one.
Margins
Let’s start this off with a basic question. What in the world are margins and why do they matter? Margins are the difference in price between the cost of what it actually takes to make a product, and the price it’s sold for. In layman’s terms, Retail price – cost price = margins
Where, retail price is the cost at which the product is sold, cost price is the cost at which the product is manufactured, and that extra money left behind are the margins. Obviously, a company needs margins to make profit. But, not all of that profit is actually, well, profit. What I mean is, the extra money used by the company for research, marketing, and advertising, especially advertising, is added to the retail cost of the product. A company like Samsung, for example, have way bigger margins for their flagships. Therefore, they can spend money on those extra needs. Plus, they can also increase their income.
In an interview with TechRadar, Pete Lau said,”We are selling the phone at cost. We are able to do that by redistributing our costs to better benefit the user.” What Pete means is that they don’t have over-the-top margins for their smartphones. Google is able to feed off their iconic and budget Nexus line because they earn through various other sources, such as the Play Store, for example. But, then, how does OnePlus survive? Advertising, retailing, and marketing is where a company like OnePlus cuts corners. But, how do they do that? Let’s go over their cost-cutting measures, shall we?
Advertising
Samsung uses their margins for various other constituents, like research, marketing, and retail stores. But, they go way over their heads on marketing. I recently purchased the OnePlus X, and once people noticed a shiny new smartphone in my digits, they obviously wanted to know more about it. Most of the conversations went the same way. Here’s a very accurate re-enactment.
“Hey, new smartphone, huh?”
“Yeah”
“Which one is that? A Samsung?”
“No. It’s a OnePlus X”
“Wait, a what?”
I’m pretty sure you can guess what’s at play here. Samsung spends most of its margins on getting the word out. They advertise their products like crazy. But, how does OnePlus get their product out into the world? They use something called strategic marketing. OnePlus uses the internet as a medium to release their smartphones, and props to them for that. The internet is a place where billions of people commute, and OnePlus’ idea is a good one. They also rely on word of mouth for the mitigation of their smartphones. This is why you’ve seen their handsets floating around the web. They depend upon viral media marketing.
Retailing
Companies have retail stores all over the world. Huge companies, like Samsung, utilise these retail stores for additional advertising. Obviously, they’ve to spend a little bit more from their margins, but hey, when has Samsung ever been lacking financially? OnePlus dodges another bullet by cutting out the middleman. They do this by selling all their phones online. This works well as they’re able to serve their consumers better, and they can cut down on costs, as well.
Manufacturing
This is where OnePlus uses another tactic to prevent wastage. That’s right, the dreaded invite system. The invite system is virtually the only con that OnePlus has had to face. So, why do they implement this seemingly unwanted technique? You see, building a single smartphone requires resources and for a company like OnePlus, manufacturing a smartphone that will not sell in the end is a huge loss. So they make sure that every consumer needs one smartphones by using the invite system. But, this also works the other way round. Making the smartphone harder to get, actually increases the value of the smartphone in the eyes of the consumer. This increases the consumer’s perceived value. So, long story short, the invite system is kinda like a double-edged sword, really.
Stock chipsets
Have you ever thought why budget smartphones are suddenly popular right now? The trend began a couple years ago. All the way back in 2011 AD. (That’s ancient in internet time) But, seriously, it has been 5 years! Alright. So, I’m pretty sure you’ve heard of MediaTek, right? They’re a major smartphone chipset manufacturer based in China. Most of the Chinese smartphones use their processors. MediaTek began selling their leftover chipsets for dirt-cheap prices, and this trend goes on even today with other manufacturers as well. Now, I’m just speculating, but I’m pretty sure that the OnePlus X is cheap for this very reason.
The OnePlus X is powered by a Snapdragon 801 processor, courtesy of Qualcomm. The most recent one (at the time of writing) is the Snapdragon 810. The 801 series is based on the year 2014, and the 810s are 2015 material. You can probably see where this is going. I suppose Qualcomm had some stock processors left, which they sold to OnePlus at a cheaper rate. By the way, did I mention that this is just a speculation?
Conclusion
Well, now you know. So, keep an eye out for lesser-known companies like OnePlus, since Samsung is not the only manufacturer capable of building top-notch smartphones. A culmination of the above factors affect the retail price of any product, be it a smartphone, or a hairdryer. Hopefully, you’re now smarter than yesterday.
Main img source: Flickr.
Disclaimer: The views expressed in this section are of the respective Digit Squad members. Neither Digit nor 9.9 Media takes responsibility of their claims whatsoever.
This article was first published in the March 2016 issue of Digit magazine. To read Digit's articles first, subscribe here or download the Digit e-magazine app.
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