Did you know that Xiaomi put 3 lakh units of the Redmi Note 5 Pro, still during its first sale, and the phone was sold out in under three minutes? That's not new now, is it? People in India, who have been following the trend and queuing up in lines on the internet - as well as offline - looking to buy a new Xiaomi phone, are quite familiar with the process. Buying Xiaomi phones could be horrible for buyers. Especially when there are people who buy Xiaomi phones, not for themselves, but to sell them off, often at higher prices in the stores.
"We don't take 'out of stock' as a badge of honor. It's just that user high demand for our products far exceeds our expectations," Xiaomi co-founder and CEO Lei Jun said while speaking with select reporters at the company's plush new headquarters in Bangalore. "Honestly though, buying a Xiaomi product today is easier than say a few months ago. But of course some of our bestsellers are still out of stock today." A good case is Redmi Note 5 Pro, a dual camera Xiaomi phone which was launched in February this year, and is perhaps one of the hardest to get your hands on. Even though most of Xiaomi's products, including the Redmi Note 5 Pro, are mostly always available on open sale now unlike before when the company used to hold flash sales for them.
A lot of this demand and supply mismatch actually stems from Xiaomi's business model because of their cost optimisation. The Chinese brand tends to sell products at cost, or with a profit margin of 1 or 2 per cent which is very low. As such margin for error is bare minimum. In fact, any erroneous judgement can be catastrophic for Xiaomi, according to Lei Jun. "Everyone tells us why don't we have a larger forecast from the beginning. But then what if we can't sell it? We'll go bankrupt. Because we have such thin profit margins, it wouldn't cover the extra inventory cost in case we're not able to sell it. We can withstand some 10-12 per cent of buffer but not more than that."
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