Editor’s Note: This is the second and final segment of Jacqui Zhou’s post on China’s “Bandit” cell phone industry. If you missed the first installment, you can find it here.
Shan Zhai Ji, or Bandit Cell Phone, is gaining huge attention these days in China. In my previous post, I showed you its cool functions. Besides these functions, what other factors enable Shan Zhai Ji to obtain 25% of China’s cell phone market? Here are several:
Low price
A killer advantage of Shan Zhai Ji is its low price. Usually Shan Zhai Ji is sold at a fraction of the price of brand name phones. Check out the prices here from Taobao, the largest online c-2-c ecommerce site. You can get a phone with all those cool functions mentioned earlier for less than 2,000 RMB (about US $300). Unlike in the U.S. where cell phone hardware prices are subsidized by service providers, Chinese customers have to pay full price for their cell phones with the freedom to choose service providers of their choice. A decent cell phone can easily cost $500.
How can Shan Zhai Ji be sold at such a low price? In 2006, a Taiwan integrated circuit company called MediaTek developed turnkey solutions for cell phones which combine cell phone circuit board with software. It used to cost cell phone companies hundreds of designers months to develop such a solution and now anyone can buy the platform from MediaTek and make their own cell phones. Needless to say, Shan Zhai Ji has its cost benefits because their manufactures steal designs and ideas from other companies, avoid quality and safety compliance, sometimes use shoddy materials, evade taxes and spend no money on customer service.
Low-end target market
More than 90% of Chinese use cell phones. It has become a must-have communication tool throughout the country with more users than landlines. Yet not everyone can afford expensive handsets. Shan Zhai Ji aims at this huge low-end market with its functional yet inexpensive products. They pay a lot of attention to functions and details that are important to shrewd Chinese customers. They don’t invest in building their own distribution channel but are willing to share a big chunk of their profits with resellers and sales people, a very effective method to stimulate sales.
Fast innovations
Shan Zhai Ji manufacturers move very fast. Whenever they see a new trend, they study it and come up with near-identical copies within weeks. Even when the market seems small, they are willing to go for it. For example, they designed cell phones blessed by monks for Buddhists, cell phones with a taser feature for women and cell phones preinstalled with stock market program for avid investors. They even let you build-to-order, where you can add your name and design to the phone and personalize your functions. However small the niche market is, their nimble structure enables them to move along with the market trend.
Unique culture
Shan Zhai Ji attracts many Chinese with its grass roots humor. They do not try to hide the fact that they are copy cats. On the contrary, they make fun of it. For example, they named the knock-off of Apple “iPhone” as “Orange.” It really rubs Chinese people the right way. I asked my friends and most said they really appreciate the non-assuming attitude of Shan Zhai Ji. They laugh at Shan Zhai Ji but at the same time enjoy the convenience of multi functions at low cost. The Chinese media and blogosphere have been discussing the “innovation” side of Shan Zhai Ji, despite all its other obvious misdeeds. Right now, about 40% of Shan Zhai Ji is exported to Southeast Asia, the Middle East and Africa.
Don’t get me wrong. I don’t think you should buy such a phone. Besides the fishy copyright issues, you never know the quality/safety of the products and customer service and tech support after sales is practically zero.
Yet with such a trend happening in the world’s largest market, I cannot help wondering whether Shan Zhai Ji will evolve to become a force in the global cell phone market?