(Writer: Lucy, Icey, English Editor:Ellie)1More, a new thriving company in MI’s ecological chain, is embracing its slogan to beat Beats in 5 years to be the top brand in the globe. Is this company just “bragging” about the future? Its rival —- Beats, acquired by Apple with $3 bn, has already taken position in the Chinese market. Beats was founded by a prominent American record producer and rapper, Andre Romelle Young, known by his stage name Dr. Dre.
So, how could 1More beat Beats? Will it be the legendary stories of its founders, product quality or just rely on MI’s ecological chain?
In February, 2015, 1More announced its new round of fundraising, however, there had been no detail of the total amount; the valuation published was $170 million, leading by GGV Capital with IDG Capital and GIC of Singapore.
Back to two years ago, when Carlyle invested Beats in autumn, it was valued at only $500 million. However, Apple offered a $3 bn acquisition a year later with this figure soaring up to $1.5-2 bn. Could 1More be successful just as Beats spiraled its value from $170 million to a least $1.5 bn when being acquired?
It is also noticeable that MI’s value is on a continuous growing with rapid pace at $45 bn in the financing by the end of November in 2014. By contrast, according to an April 19th’s report, Apple closed at $126.17 with a value at $734.91 bn by Thursday.
How long has MI to go as to cover the chasm from $45 bn to $734.91 bn? Another thing to be noted is that LeTV was quite active recently for the publishing of LeTV Smartphone at an OPP that resembled Steve Jobs vowing to subvert Apple! The news also revealed its plan to reach a value of $273.8 bn with in half a decade. LeTV’s value broke the line of 80 bn RMB last year and closed at 72.67 bn RMB on March 27th.
Everybody is so aggressive!
When asked for this aim, Yu Shierui, VP of 1More, indirectly answered with a smiled, “We want to be ‘Beats’ in China and MI would be ‘Apple’ in China.”
Now that they had avoided to use the word “beat”, then how could 1More stand out and to be the leader in China’s earphone market? It is also important to note that there is a large number of local brands with vast financing ability, powerful distribution and sales network as well as high cost performance.
Entrepreneurial threesome: the Aborted 49 RMB earphone
Speaking from the preliminary level, 1More was merely born out of the need of completing MI’s industry chain. When earphone was regarded as the bestselling of matching products of Smartphone, Lei Jun, CEO of MI, realized the role that earphone plays in the whole ecological chain. He also appreciated Xie Guanhong who was one of the youngest managers in business group of Foxconn Company. In 2012, Xie left Foxconn where he had worked for a decade and went to Taipei. When he met Lei in a café after YY’s publishing in Hong Kong, he felt reassured for Lei promised to support him for whatever he did and sincerely asked him for not joining any other companies. Deeply moved, Xie joined Lei at the end of 2012 with 1 million RMB funding.
During the 10 years in Foxconn, Xie had been on a leadership of designing and producing electronic products such as iPod, Kindle, tablet and cell phone of Lenovo and LeTV. Though sophisticated and widely recognized, Xie could not be compared to Dr.Dre, who is credited as a key figure in the popularization of West Coast G-funk, a style of rap music characterized as synthesizer-based with slow, heavy beats. In Dr.Dre’s legendary career, Beats is only one of his summits. His co-founder, Jimmy Iovine is also a well known record producer, and film producer as well as an outstanding seller with close relationship to Jobs.
As for more information of the three founders of 1Moere, Xie (CEO) is nicknamed as “Idea Man”; Lin Boqing (VP), responsible for research and development, has approximately 20 years’ experience on soft/hardware and being involved in nearly all of the important electronic products’ programs; and Yu has a well understanding of cost structure of supply chain. When Lei put forward the idea of “49 RMB earphone”, all of them were shocked for not being produced anything under the price of 49 RMB.
However, under the influence of Lei, all of the three seriously aimed at earphone business. They found that well-known brands only took 30% of the domestic market after investigation, which means nearly 60% of the products were from unknown factories, some even of poor quality.
Yu said, “Compared to some expensive foreign earphone brands, there are seldom top ones in China. And what we want to do is to establish a brand that is affordable for the young people and also of high quality. It might be much harder in the process, but once decided we would focus on it. ”
1More, determining on earphones, was found at the end of 2012. Three months later, the prototype of “Piston earphone” published and was supported by MI and Shunwei Capital. In the same year, it won the B round financing of those two companies. In June, 2013, their products made the first debut to the market. However, the price is not 49 RMB but 99 RMB. The second generation came to public in 2014.
Yu Shierui, VP of 1More
Appearance + Quality + Price = Success?
In fact, when the 99 RMB-earphone first launched on market in 2013, lots of customers were shocked. Recently, MI released its headsets with a price of 499 RMB, not daring to set a higher price.
It is reported that Germany brands like Sennheiser and AKG have taken much of market share with headphone price over 1500 RMB; American brands such as Beats and Bose at 500-1500 RMB; Japanese brands at 200-1000 RMB. Nevertheless, most domestic brands put their price under 200 with fierce competition.
As for 1More, it is very difficult to be “undefeated”. It is also unrealistic to make good earphone with 49 RMB while 99 RMB also sounds a bit of expensive.
In order to figure out a rational price, they collaborated with MI and conducted a market survey of millions of people at three prices: 149, 199 and 259 RMB. It turned out that most respondents prefer to buy products at 149 or 199 RMB. Yu said, “The result gave us much confidence, which indicates that most of people were willing to spend more on better products. So the final price was 99 RMB. Based on it, we worked on better quality.” It is surprising that this survey skipped 50 RMB to start with 149 RMB. If this is true, how to explain the final 99 RMB, which is much lower than the price in the survey?
Yu concluded three advantages of their earphone: First, appearance: If you were not professional, appearance would be your first focus. So it was important to design a splendid outlook. Second, quality: we paid attention to the quality of earphones at 400-1000 RMB and used as the standard of 1More, including vibration mode, magnetic circuit, tune trope, wire and modeling. In the development phase, we also invited many experts to test, such as artists, president of music academies and famous foreign musicians. Third, price: 99 RMB was a quite bargain for customers.
“Lots of companies in music industries complained about pushing up the price. I asked the reason and they said that the earphones used to sell at 40-50 RMB increased the price to 99 RMB in the Chinese market. However, I hope that young people could buy earphones with quality as the foreign after spending their money. What’s benefit? If our customer wants to buy other brands with the same price, he would find the quality differs. The only thing he could do is to buy some products of higher price at 500-600 RMB or even 700-800. Finally, he would choose our earphones for a reasonable price.”
Sales statistics showed that on November 11th2013, 1More’s earphone sold more than 200,000. By the end of 2014, the sale was over 10 million and it became the bestselling of single earphone in China. In January, MI promoted its headsets which were also manufactured by 1More. The revenue reached to 500 m RMB in 2014. At present, 90% of its market is mainland China and 10% in Hong Kong, Taiwan, Singapore and Malaysia.
Cost management plus flat sales mode
Yu analyzed three reasons for success: first, most customers accepted their cost performance; second, the company focused on cost management; third, they used flat sales mode to cut down mid-operators.
Specialized in supply chain management, Yu is familiar with cost managerial skills. He changed the chain to a circle to reduce brand exploitation and profit share which diminished distributors’ sacrificing the quality for profits. In contrast to traditional e-business that “seek for suppliers and take contract orders”, 1More emphasized on a brand new supply chain mode to improve on product design, Standardized production, low cost and more market channel as well as sufficient funding.
“Our joint sale is win-win and we have similar gross profit with MI. Thanks to MI’s platform, we haven’t lost money since the founding. They supported us a lot both on resources and service; meanwhile, we believe that they also gained profits or they wouldn’t offer us so much help.” Yu agreed that it was very difficult to achieve a break-even point at the very beginning, but he was proud that 1More was able to gain profits at such an early stage.
1More is the first earphone brand in MI’s ecological chain. While 1More is responsible for production, MI devoted on sales and both of them share profits. This cooperation mode is now expanding. Though MI owns most of the sales resources, 1More is looking for more partners. At the moment, AsusTeK and Belkin already have become its clients. Yu took a vivid example, “In the bank-robbery case, someone take the gun, someone keep watch or unlock the door. Different people have different missions and only when everybody completed their own task could the whole plan accomplish. And they have to learn how to divide money equally. We have to work with someone of mutual understanding.”
Future: Connect product to people
In regards to the understanding to smart earphone, Yu said, “We hope the kind of intelligenc that not only limits on music but other applications as measuring pulse or heartbeat. Smart earphone allows us to coordinate with lives at a simple touch. We hope to do something simple but useful.”
“Our future goal is customization. We don’t want to put Android or too much things into our earphones. The only aim we hope to achieve is to solve trials in live. This is what we called light-intelligence. ”
Besides, there’s mysterious department in 1More to develop future smart earphones. Fromo Yu’s description, it planned to promote “1 to 1: connect product with people”, which means that each ID could record personal information like ID card. It is not only on music but a wider range of personal preferences like favorite songs or musicians. Their phones can select what they like for them.
In the 2015 PFDP, 1More revealed that they would cooperate with more entertainment companies and expand product lines at the same time to create online smart earphone and wearable earphones. With the purpose to embark on oversea market, they would enter into India market or set branches in Europe or San Francisco, or even through merger and acquisition.
“In the future, there might be higher standard of sound qualities. We believe our value will rise if we do our product right. ”, Yu said, “It is a good point to combine cell phone with a promising audio or earphone company. In the next 5 years, 1More would be ‘Beats’ in China.”
From beating “Beats” to be the Chinese “Beats”, it seems their aim is more realistic. So the only thing to insist is keeping on move.
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