Never Settle. With this short slogan OnePlus, a Chinese smartphone manufacturer which was founded in December 2013, is taking the market by storm. The smartphone world has been anything but easy in the last few years. Apple’s hegemony is long gone and many old and new players are competing with Apple and Samsung for a place in customers’ pockets. Still, OnePlus, in less than two years, has successfully entered the market and created a loyal fan base. The first OnePlus phone, holding the creative name OnePlus One, sold ~1.5 million units in its first year, a modest number compared to 191 million iPhones, and over 300 million Samsung phones sold in 2014 (http://www.gartner.com/newsroom/id/2996817), but still very impressive for a brand new company with just one model in the market. With sales projections of 3-5 million units in 2015 and a new model, the OnePlus Two I believe OnePlus will continue to grow and will emerge as a digital winner in the cutthroat consumer electronics market.
The key driver behind OnePlus success is their value proposition. OnePlus has set out to build “the flagship killer,” a smartphone with specs better than any other smartphone, with a price tag of half of its competitors. At its date of release, the OnePlus One was priced at $299, compared to $649 for the iPhone5, and $649.99 for the Galaxy S5 (the newest models at the time). This aggressive pricing created a great value-for-money deal for customers – a better phone for less than half the price. OnePlus was also quite creative with its marketing strategy. To buy a OnePlus One, a customer had to get an invite, either from someone who bought a OnePlus One, or by winning an online challenge (e.g. upload a video telling what they would do to win a OnePlus One, or a video of themselves smashing their old phone). This strategy helped OnePlus build its brand and increase the desirability of the One (and thus customers’ willingness to pay) . But, in my opinion the main advantage of this strategy is on the operational side – it enabled OnePlus to control demand and match it to the level of production, which, for a new firm with no demand history, can be an extremely difficult task.
This all sounds fantastic – getting a great product at a low price is appealing to customers, but the real question is how does OnePlus plan on making money considering its thin margins? Carl Pei, Co-Founder of OnePlus answered this question in an interview last December. Pei says OnePlus sees its hardware product as a vehicle for software sales. Much like Google before it (who subsidized the price of the Nexus phones to drive software sales), OnePlus acknowledges the increasing commoditization of hardware and understands that to win in this market it will have to differentiate itself through software. So far the first step in this plan – to create a wide, loyal user base – is going better than expected (the new OnePlus Two sold 30,000 units in the first minute after its release, and more than 1 million fans have signed up to receive an invite before the Two was even launched). The multi-billion-dollar question is how well will OnePlus be able to monetize its fan base through software. While it’s too early to tell, a good indication for OnePlus’ software development abilities can be found in its newly deployed operating system, OxygenOS, which is the first OS to be developed in-house and, as far as I can tell, as a OnePlus user (and former OSX and pure Android user), works amazingly well. All these factors strongly convince me that OnePlus understands the market and its trends and is well positioned to grow and emerge as a winner in the digital age.