The Rs 251 phone has taken the technology world by storm. While there are both fans and sceptics of the Freedom 251, the lingering question is how Ringing Bells will manage to sell a full-feature smartphone at such a low price.
The phone is said to be a rebranded version of the Adcom Ikon 4 that is selling online for about Rs 4,000. Our quick calculation of the components of the Adcom Ikon 4 pegs the cost to at least Rs 2546 and Ringing Bells aims to sell their comparable phone for a tenth of the price. How will the company manage the feat? Or is it only a marketing gimmick?
In an interview with IBNLive, Ringing Bells president Ashok Chadha demystifies how his company seeks to achieve this seemingly unachievable feat of selling a phone at a mere Rs 251.
"We put in a lot of research and a lot of thought," says Chadha." Agreeing to our calculations on the component pricing, Chadha says that the general assumption would be to sell such a phone at Rs 2,300 or Rs 2,500. The idea of selling the phone at Rs 251 came to Chadha and his colleague Mohit Goel, a director at Ringing Bells, on a midnight stop at dhaba on the highway to Jhansi.
With the goal of achieving the Rs 251 goal, Chadha and Goel went back to the drawing board and calculated that they could bring the price down to Rs 800.
Chadha says the company will pass on the 13.8 per cent duty protection (around Rs 450-Rs 470) for Make in India to the customer. And they will be saving an additional Rs 530 from the economies of scale (given that the company plans to mass produce the phone) which theoretically will bring down the costs. Another Rs 460 is said to be saved from marketing and selling costs (given that the company is largely opting for online sales).
This still leaves a wide gap between the Rs 251 price tag and the costs, that according to his calculations, is Rs 800. "I am selling at Rs 251. So I have to cover Rs 550," says Chadha.
Ringing Bells president Ashok Chadha speaking to IBNLive (Photo: Archit Sinha/IBNLive)
This balance, according to Chadha, will be recovered by the earnings from a marketplace that the company will be setting up. "So here is my marketplace, you want to sell something, come to me, pay me a revenue for it, and I will pass the revenue on to my customer," he says. That's how, according to the company, the Freedom 251 can sell for Rs 251.
He says, the company isn't in the business for huge profits, but will manage profitability with the "reasonable margins and that structure allows us."
The marketplace model will be built around the phone, Chadha says his company "will invite partners who need to showcase their goods for sale. So just as what happened with the online shopping to the malls, the same thing will be driven by the Freedom 251, and again the benefit that we accrue from that we do not intend to retain."
The company intends to sell around 2.5 lakh to 3 lakh units a month. The Freedom 251 will be available on sale both online and offline, however the company accepts a bulk of the orders to be online.
Ringing Bells, has set for itself, another seemingly unachievable target of 30 per cent of the Indian smartphone market in the next 12 months.
Chadha also clarified to IBNLive that there is no subsidy from the government for the Freedom 251.
"The investment required will be anything between Rs 230 to Rs 250 crores, for the first round," says Chadha which, he says, the company has arranged through debt equity.