One of the most intriguing Android handsets this year has been from Chinese manufacturer OnePlus. The first handset, the OnePlus One, was announced in April, and has been sold on an invitation basis since then. That strategy has created a significant amount of interest in the tech sphere, as well as driving sales to the company’s web portal.
Speaking to Carl Pei at Dublin’s Web
Summit, he told me that sales to date have passed half a million
handset, and there is a push to reach a stretch goal of one million
units before the end of the year. ”It’s going to be hard,” the
Co-Founder and Director told me “but I think it’s possible.”
All of this has been down with an
advertising budget of just $300. “All that money was spent experimenting
on different types of Facebook ads. We found that we’ve now reached a
critical mass of users, and they are helping us spread the word
organically.
“Normally when you launch a [smartphone]
product it gets really hot in the first month, and in the second or
third month, sales start to drop really fast. For OnePlus, when you look
at our internal metrics, our sales just keep growing.”
OnePlus One....
One of the advantages that OnePlus has
is the specifications of its ’One’ handset. It sports a Snapdragon 801
CPU system-on-chip, coupled with 3 GB of RAM. The quad-core CPU runs at
2.45 GHz, and is paired up with the Adreno 330 GPU. I reviewed the
OnePlus On here on Forbes over the summer and found it to be a strong
handset with many more options for configuration and customisation
than a typical Android handset found on the High Street. Part of this is
down to the use of CyanogenMod as the operating system (and Pei has
promised that Android Lollipop will be on the OnePlus One within ninety
days of the release of Android 5.0… the clock is now ticking), but the
ethos of being able to tinker is clearly evident through the handset.
It’s also exceptional value for money.
Costing $349 for the 64 GB handset (currently the only storage size in
production), it offers the power of handset that would cost twice as
much. How can OnePlus afford to sell the handset at this price?
Because the company only makes a few dollars profit on each handset.
“We’re making a single-figure dollar
amount on each phone,” Pei told me. “That’s not the way we’re going to
make money in the future, it’s just to keep the operation going.” This
strategy is certainly effective in getting OnePlus noticed, but every
business needs to make money at some point. OnePlus is looking at
peripherals to make up the shortfall of revenue per user.
“Accessories will be a big part of it.
We’ve made a really social brand, that people are fans of. If we make
lifestyle products or specialized accessories, I think those will do
really well.” It’s an approach that feels like a razor and blades model,
or the console gaming market – get the handset out to customers at
cost, and make up the ARPU through sales of supplementary products and
consumables.
Looking
to the future, Pei sees one more area which will benefit OnePlus’
bottom line. “The main shift will come when we have a few million users
and start leveraging the user base by building our own software and
services layer for monetization.”
OnePlus
has taken a different approach to the smartphone market, and much of it
is built around delivering as much value to its customers as possible
while changing where the profits come from. It also places a huge
emphasis on just-in-time manufacturing as the company cannot be left
with any significant levels of stock sitting in a warehouse. With
profits as lows as they are to boost sales, handsets built but not sold
are a huge drag on the balance sheet. So far it’s working out, and if
the growth can continue to the end of the year and into the next,
OnePlus will become a much more recognisable name in 2015.....
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