, ,

How and Why Google Sells Nexus 4 Cheaply

The family of Nexus devices is growing… and fast for that matter.  With some of the most dazzling devices on the market including the Nexus 7 tablet, which hands down beats most tablets in the market in terms of performance and price, the Galaxy Nexus phone and the latest entrant into the family, Nexus 4 smartphone, Google is causing ripples in the tablet and smartphone market – in a good way.  When Google announced the Nexus 7 in February, no one could believe that a tablet with such specs as quad-core processor and a solid build, no one imagined that it could retail for as little as $199 without any contracts.  It stunned everyone so much that it sold out within days of launch and established its position as the dominant tablet in the market.

Google Nexus 4: Google sells 8GB for $299 and 16GB for $349 while other retailers mark it $599

Nexus 4, made in collaboration with LG, was announced just a while ago but it is already the most discussed gadget on the tech world.  The main issue being talked about is the price.  Typical phones running on Android operating system with a quad-core processor retail for between $500 and $700 unlocked but the Nexus 4 is listed to retail for between $299 and $349 on Google Play Store.  How do they manage this?  As they did with the Asus Nexus 7 tablet, it seems the Nexus 4 is going to sell at a low price and get the device to as many users as possible, then make more money on Google Play Store.

The biggest issue at the moment is with the European retail stores, who claim that the Nexus 4 is selling for too cheap on Google Play Store that they will not be able to make any sales – with profit.  Most manufacturers often collaborate with retailers and network operators to arrive at a price where all the parties benefit, but Google is selling Nexus 4 for a price so low, they barely make any profit from the hardware.  Some major retailers including Phone House in Spain have now suspended selling Nexus 4 after learning that that Google will be selling it for €299 (8GB) and €349 (16GB) yet their recommended prices is €599, between €250 and €300 more.

According to John Lagerling, Android’s director of business development, some players in the industry are never happy when customers are offered competitive pricing for devices.  The Nexus strategy, he said, is to offer the end user high end quality hardware at an affordable price and not “pocket-busting $600 price”.

“There are players in the industry who were unhappy about more competitive pricing for the consumers” Lagerling said “They want to keep the prices high, they want to force the price to be so high that operators have to subsidize the devices very highly. That’s not only the Cupertino guys but also for the guys up in Seattle. They want higher margins, they want to charge more for software.” 

Customers have no reason to spend $300 more to buy the same phone from other retailers when they can get it for cheap from Google, and this is where the problem is.  It makes sense, just the way Amazon literally offered hardware for free with aim to sell software and services, but in the case of Google, they make money when users use the device, particularly from Play Store.  Most assume that the Nexus 4 price is subsidized, but this not the case.

In case you are wondering, the Nexus 4 phone boasts of a 4.7 inch 768 x 1280 pixels rue HD IPS Plus capacitive touchscreen with 318 ppi pixel density, a 1.5 GHz Quad-core Krait Qualcomm APQ8064 Snapdragon processor with an Adreno 320 GPU, Android 4.2 Jelly Bean operating system, 2 GB of RAM and a choice of 8 GB and 16 GB internal memory.  Other specs include an 8 megapixels rear and 1.3 megapixels front cameras, WiFi, Bluetooth 4.0, 2G and 3G, GPS and Gyro, Compass, Barometer, Accelerometer and Proximity sensors.

What do you think about Google’s Nexus strategy and pricing?  Will it stand the test of time as retailers will definitely reject it or will it work?