Xiaomi was among the last to enter the Indian market, but has quickly notched up sales. This year, it wants to double its sales here to $2 billion. Find out how
At Xiaomi’s headquarters in Bengaluru, Lei Jun, the company’s storied Chinese founder is taking a quick “smoke break” before he dives into a press briefing. Jun is on a whirlwind trip to India, his biggest market after China.
Xiaomi was an underdog for the longest time. It was among the last to enter the Indian market, but has quickly notched up sales. In the last quarter of 2016, the company raced past Indian rivals to become the country’s second largest smartphone seller (see graphic). About 109.1 million smartphones were sold in India in 2016, according to IDC which tracks smartphone shipments.
“I’m 99% confident and 1% not confident, that 1% could be the most difficult 1%” — Lei Jun, founder of Xiaomi
Before flying to Bengaluru, where most of Xiaomi’s India operations are based, Jun met with Prime Minister Narendra Modi, finance minister Arun Jaitley and minister for information technology Ravi Shankar Prasad in Delhi.
Modi posted pictures with Jun on Facebook and Twitter. The Prime Minister is also learned to have asked if Xiaomi could pre-install some government apps on its phones. Jun said he agreed.
“Our fans are having difficulty buying our product as they are getting sold out. For the full week, we sell only for four minutes and only once,” said Jun, one of the eight cofounders at Xiaomi. Meeting this demand would also mean setting up new factories and tapping more incentives from the government.
Jun was keen to point out that the company has spent nearly $500 million to set up its research and development centre, two call centres, three warehouses and two factories in Bengaluru and invest in five Indian startups. “Ninety-five per cent of the phones sold in India today are made in India,” he says.
Most of Xiaomi’s $1 billion sales came by selling online and a considerable portion of that was through its own website . The company has also partnered with Flipkart, Amazon and other online retailers and sold millions of devices through “flash sales”. With India’s ecommerce market slowing down, this might not work for long.
“Xiaomi created a buzz when it entered the Indian market by focusing exclusively on the online channel to build the brand. There is a limitation to this approach,” says Anshul Gupta, research director at Gartner.
Last year, the company started diversifying its sales channels. It started by selling exclusively on Flipkart, moved on to Amazon and Mi.com. In January 2015, it had started selling at Airtel outlets and in March that year, the company tapped offline retail chains such as Poorvika, Sangeetha, Lot Mobile and BigC.
Meanwhile, Xiaomi’s India head Manu Jain has turned Mi.com into a powerful ecommerce engine. Jun reckons that Mi.com is already the fourth largest e-commerce portal in India by sales
It is important to Jun to make sure that people perceive Xiaomi as a high-quality device brand that sells at affordable prices. “Because we sell good phones at such affordable price points, users might distrust (us). (We) Need to set up a quality control committee to quickly identify and react to issues. This is even more important than $2 billion goal,” he says.
The company, which calls itself the “Muji of consumer technology” has invested nearly $500 million in the Indian market in the last two years. Muji is a minimalist Japanese retailer with a range of products that include everything from clothing and home accessories. In many ways, Xiaomi mimics Muji’s focus on beautiful design, quality products at reasonable prices and wide product range. This positioning works for Xiaomi in a price-sensitive market like India.
“Because we sell good phones at such affordable price points, users might distrust (us). (We) Need to set up a quality control committee to quickly identify and react to issues. This is even more important than $2 billion goal” — Lei Jun
Jun is completely against traditional retail sales, where the cost of selling the phone, hiring promoters and celebrities is passed on to the buyer. But luckily for Xiaomi, it has “fans”, who do a lot of the company’s selling through word of mouth.
The Mi Community India was officially launched in June 2016 and has since garnered more than one million registered users.
“When they landed here, they started engaging with key influencers, more specifically tech bloggers and mainstream media editors to create a buzz even before it was launched,” said V Shakthi, tech blogger and owner of The Quill.
Luckily for Xiaomi, it has “fans”, who do a lot of the company’s selling through word of mouth… The community’s direct impact on sales is hard to measure
Xiaomi’s communications team wrote to us in an email that it did not “appreciate” us asking “random feedback” from Mi Fans. We were also booted out of the group by an admin who was asked to do so by the company’s publicity managers
At the press briefing, Jun breaks into a sales pitch for his products from time to time. It is clear that most of Xiaomi’s products have better specs than competitors and are much cheaper than them. That may be enough to sell $2 bn worth of phones in a market which is expected to clock double digit growth next year. But that’s not going to be enough to battle Samsung, a formidable rival with deep pockets, a wider range of products, an established distribution network and a well-oiled marketing machine.
“The main challenge for them now is differentiation. Their marketing tools, such as exclusive online sales, offering high specs for a attractive price and clever use of social media have been copied by rivals such as Lenovo,” says Gupta of Gartner.
Xiaomi’s prospects might look up in India, but back in China, its home market, it’s facing a tough time from competition. It registered a massive negative year-on-year growth of 38.4% in the second quarter of last year, according to IDC.
“The main challenge for them now is differentiation. Their marketing tools, such as exclusive online sales, offering high specs for a attractive price and clever use of social media have been copied by rivals such as Lenovo,” Anshul Gupta, research director, Gartner