On April 25th, Xiaomi Chairman Lei Jun made a promise at the Xiaomi 6X conference held by Wuhan University. Xiaomi’s overall after-tax net profit rate for the entire hardware business (including mobile phones, IoT and consumer products) does not exceed 5%. Exceeded, Xiaomi will return more than 5% of the profits to Xiaomi users in a reasonable way.
Lei Jun said that the red line of 5% hardware comprehensive net profit rate is an inevitable choice for our business model. He said that Xiaomi is different from traditional hardware companies and does not rely solely on hardware to gain major profits. Xiaomi is essentially a mobile phone, smart hardware and IOT. Platform is the core of the Internet company. This is Xiaomi original 'triathlon' business model: hardware + Internet services + new retail - to design well, superior quality products close to hardware cost pricing; through its own or direct supply The efficient online and offline retail channels deliver products directly to users; and continue to provide users with rich Internet services.
Since its inception, Xiaomi has experienced a roller coaster-type development. From the very beginning of its rapid growth, to the rapid decline in mobile phone sales, the Xiaomi model was once questioned by the industry. In 2017, Xiaomi’s mobile phone sales were reversed, and annual revenue exceeded RMB 100 billion. .
Lei Jun said that in addition to Xiaomi, there is no mobile phone company in the world. It can be reversed after the decline in sales volume. The miracle of Xiaomi’s reversal and the achievements of Xiaomi’s success have fully demonstrated the correctness and advancement of Xiaomi’s model.
In his view, the essence of commercial competition is the dispute over efficiency. Dare to promise that the comprehensive net tax rate after hardware taxation will never exceed 5% is proof of Xiaomi's high efficiency. He said that Xiaomi has the courage, determination and perseverance to promote a profound The revolution of business efficiency: Every effort is devoted to making good products, so that every penny the user pays is worth it.
Lei Jun also stated that the resolute implementation of the 5% hardware comprehensive net margin red line is to fulfill Xiaomi's corporate mission. Because Xiaomi always believes that compared to the pursuit of one-time hardware sales profit, the pursuit of product experience is more promising; After all, real materials pricing is more rewarding.
Mass consumer goods should actively control reasonable profits, and this belief will become an irresistible trend of the times. Any move that is reluctant to high-margin profits will go to no return.