Shirky: Xiaomi leverages flash sales to secure bulk component discounts
Clay Shirky · a16z Podcast | 'In the Eye of a Tornado': Views on Innovation from China · Jan 2, 2019 · at 2:59
Clay Shirky, NYU Shanghai professor and author, details how Xiaomi's business model reduces manufacturing costs prior to production.
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“What it lets Xiaomi do is do these flash sales where they say, Look, we've got a 100,000 of the Hongmi, or we've got a 100,000 of the Me Too. We're going to sell those now. You have to sign up for the right to get a ticket to have a chance to buy the phone, which means Xiaomi has now used e-commerce as a way of signaling massive unmet demand. They can then take that down to Shenzhen and say, we know how many people want this phone, and we want you to give us these components at the million unit price. So they can actually squeeze costs out of the manufacturing system even before they make the phone, and they can use that money to invest in design without driving costs to the roof.”
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