To create Apple’s AppleCare+ revenue of 15.7 billion, Xiaomi has opened a new business

Nowadays, the speed of introduction of electronic products is accelerating, and product strength alone may not be enough to allow consumers to renew or shift their camps.

As a result, many brands have gradually begun to focus on "follow-up services." In the beginning, the "service" provided by everyone was only after-sales warranty, such as three years for motherboards and two years for screens. Later, some brands began to add some additional "exclusive" services to their flagship series to increase product style and user experience.

At this time, whether it is "ordinary after-sales" or "exclusive" services, they are all additional services and no additional fees are required.

In the future, the competition among electronic products has become fiercer (especially mobile phones), and manufacturers have introduced a variety of paid "special services." Don't think too much, this service is more like an after-sales maintenance add-on package, the best example of which is Apple's AppleCare+.

Xiaomi launches MiCare, exclusive to Xiaomi 10 series

Not surprisingly, Xiaomi recently announced the launch of MiCare protection service, designed to help Xiaomi users protect high-end flagship mobile phones in all aspects.

▲ MiCare only supports the flagship Mi 10 series for the time being.

Let’s take a look at MiCare’s services first:

  • Support Mi 10, Mi 10 Extreme Commemorative Edition.
  • Repair broken screen twice in two years.
  • The warranty is extended for one year, and quality problems are repaired free of charge.
  • Renewal within 1 year, old machine recovery price + replacement subsidy (1.5 times MiCare sales price).

MiCare purchase method:

  • It can be purchased together with the mobile phone at Xiaomi Mall, Xiaomi Home.
  • It can be repurchased within 3 days of activation of the phone.

MiCare is divided into three gears of 549 yuan, 679 yuan and 899 yuan. In terms of price, it is not cheap. However, referring to the "broken screensaver" and "extension service" on Xiaomi's official website, this service package still has A certain price/performance ratio.

The services it provides are mainly divided into "broken screen repair" and "renewal" . The renewal service is not just a replacement for a new flagship. It will be issued to you in the form of subsidy coupons and recycling coupons. You can only buy goods of corresponding value in Xiaomi Mall and Xiaomi Home. On the whole, this type of renewal experience is still relatively flexible, but how to define the value of old machine recycling is temporarily unknown.

Every manufacturer "Care" your phone

Earlier than MiCare, Xiaomi launched the so-called "Xiaomi Care" service 6 years ago. At that time, it was released together with the flagship Xiaomi Mi 4, which is the water ingress insurance for broken screens, and the price is 99 yuan. After that, this kind of whole machine accidental service pack appears in a page of each manufacturer's official website, and there will be a check prompt on the page when purchasing.

In recent years, the scope of this type of service package has begun to expand, covering every model, down to the screen, back cover, water intake, etc. These additional service packages have gradually become part of the manufacturer's marketing system.

▲ OPPO Find X2 Pro Lamborghini version of OPPO Care+. Picture from: official website

In addition to the more common service packages for the purpose of "protection", Hua OV also "bundles" many "exclusive" services on some flagship models.

For example, the recently released Huawei Mate 40 series. After the sale, Huawei services will officially launch the new machine to enjoy service rights, including exclusive spare machines, on-site service repairs, broken screen service packs, extended service packs, and Porsche exclusive services.

On the other side, the Lamborghini version of OPPO is launched, which also provides exclusive services for this flagship product. Similar to Huawei, it is free for purchase. The exclusive service package of Find X2 Pro Lamborghini Edition is the same as that of Mate 40, but has some special rights, such as 7×24 hours dedicated line service and manual priority for network connection, which has a hint of Vertu.

In addition, drone manufacturer DJI has also launched DJI Care's value-added services for drones, aiming to ensure that your drones "fly with peace of mind". DJI Care’s strategy is different from that of mobile phone manufacturers. It does not limit the number of times and only has a certain amount. When the amount is reached, the service will be terminated.

The various services included with the machine are still paid for later. As long as there is an accident in the purchased product, these services can reduce our maintenance expenses. If there are so many "accidents", you can even earn back the previous "pay" .

This idea looks familiar, right? In fact, no matter how the Care service provided by the manufacturer changes, its essence is a type of insurance business.

Paid Care services are essentially insurance

When it comes to Care, one cannot fail to mention the industry benchmark AppleCare+.

Apple AppleCare+ covers almost all product lines, and iPod Touch has not let go. Taking the iPhone as an example, the unified price of AppleCare+ is 1398 yuan, including one-year warranty extension, two paid repairs every 12 months, 188 yuan for the screen, 628 yuan for other repairs, and free battery replacement (the battery efficiency is lower than 80%).

In terms of purchasing methods, AppleCare+ has a lot of broad terms and more diverse methods. Take the iPhone as an example. You can join the AppleCare+ plan within 60 days of purchase, and you can purchase it directly from the official website, phone, Apple Store, and even on your iPhone.

As the originator, Apple's AppleCare+ service system is quite mature. And in recent years, whether online or offline, Apple is vigorously promoting AppleCare+ services. If you go to the Apple Store to buy an iPhone, iPad or Mac, Apple store staff will almost recommend you to buy AppleCare+. Many friends also take the initiative to pay to join Apple Care+ for peace of mind.

▲ The M1 version of MacBook Air was disassembled and highly integrated, which brought high-cost repairs, and the motherboard would need to be replaced if accidentally. Picture from: iFixit

In recent years, the integration of iPhone, iPad and Mac has become higher and higher, and the cost of peripheral maintenance has increased sharply. The trend of small repairs with hundreds of overhauls has made consumers gradually inclined to official additional services.

Ever since, I (consumer) paid a certain amount of money to participate (insure) the AppleCare+ service (insurance business) to reduce the maintenance risk caused by accidents in the equipment.

AppleCare+ is essentially an "insurance service" provided by Apple. Today (paying the bill) is preparing for tomorrow (repairing). The risks faced by consumers alone are transferred to Apple and shared with users.

Does the Care service that everyone has, really make money?

When purchasing AppleCare+ services, everyone will calculate such an account in their minds. As long as I change the screen and battery a few times, I can earn more than 1,000 AppleCare+ service fees. It seems to be a steady income. The Xiaomi MiCare at the beginning of the article is the same, but Is it really?

On the other hand, if the Care service is losing money (or not making money), will Apple still promote it? According to Apple’s CEO Cook’s character, he will definitely promote change, either by cutting off the business or changing the terms to make it profitable.

▲ Apple CEO Tim Cook. Picture from: Getty Images

Of course, this is just speculation, and we still need to find substantive data to prove it.

Apple’s annual financial report does not detail how much AppleCare+ has earned from this service, but only shows the overall revenue of the service business. Apple's services include digital content, iCloud, AppleCare, Apple Pay, and licensing fees.

After analyzing Apple's service business on the Above Avalon blog , analyst Neil Cybart roughly estimated that AppleCare's revenue in 2017 was about 4 billion U.S. dollars, accounting for 13% of the total service revenue, far exceeding the revenue generated by iCloud and Apple Pay.

And Neil Cybart also estimated the gross profit of these five types of service revenue. Apple Care has a high profit of nearly 60%, but it ranks second from the bottom. The highest is authorized, reaching 95%, which is a bit exaggerated.

▲ Analyst Neil Cybart estimates the revenue of Apple's five major service industries. Picture from: Above Avalon

If you have no idea about this number, here is an example. Xiaomi's annual revenue in 2019 was 205.8 billion yuan and its profit was 11.532 billion yuan. Apple’s Apple Care had revenue of approximately US$4 billion in 2017 and a profit of US$2.4 billion, which is about 15.7 billion yuan, which is very exaggerated.

Apple's service business, including AppleCare+, mainly relies on the ultra-high inventory of hardware devices such as iPhone and iPad. Without billions of devices, Apple's service business would not be so large, and revenue would not reach such an order of magnitude.

In the final analysis, the product is the basic disk, and the basic disk is large enough to have the opportunity to earn high revenue in the service business.

According to a Canalys report, in the third quarter of 2020, Xiaomi squeezed into the top three in the global smartphone market, with a year-on-year growth of 45% and occupying a 13.5% share.

At this time, MiCare launched by Xiaomi is firstly testing new payment services, and secondly, it remains optimistic about the future growth of mobile phone business. Although MiCare will only stay in high-end models for the time being, when the time is right, it will definitely cover multiple product lines. After all, this business has a lot of income.

Perhaps one day in the future, when you pass by Mi Home and hear the store staff continue to recommend MiCare+, don't be surprised.

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