Flash sales, pricing, superior products: How Xiaomi captured India

In today’s environment, smartphones are competing with each other for visibility and consumer recall in the domestic market space. The Indian market, which has over 180 phone brands, frequently sees quick rise and fall of these brands as they raise the pitch. Chinese handset major Xiaomi (also known by its brand - Mi), however, has proved to be the exception for the past two-and-a-half years. 

While steadily capturing the pie of the market since it entered India in mid-2014, the company has also managed to post healthy topline growth. And its latest revelation of earning Rs 7,000 crore (over $1 billion) from India sales in 2016 is another feather on its hat. 

While many established phone makers like Blackberry, Nokia faded away with the rise of an era when mass usage of smartphones has become a part of daily lives, Xiaomi’s journey in India so far has been kind of a fairy tale. So, let’s look at some of the factors that worked for the firm and eventually led to the fourth spot that it currently holds in the country:

Shedding the taboo: Till 2013, the success of Chinese brands in India has been limited with a few exceptions. Chinese tag on a mobile handset led to a preconceived notion of a non-durable product. By the time Xiaomi entered the market, the attitude of consumers had begun to change. Since 2014, the share of Chinese brands has been rising – from some 15 per cent to nearly 50 per cent at the end of 2016. This factor has played a key role in its success story in India.

4G/LTE focus: While most of the Indian smartphone brands forayed into 4G space in 2015, Xiaomi came up with 4G handsets way back in 2014. Some of its early handsets like Mi2 are still been used by many customers as they did not have to buy a new phone in the wake of 4G internet services across the country even in 2016.

Online focus: Apart from providing it with an easy distribution and sales channel, the e-commerce helped the firm in keeping its distribution cost in check. Being a new entrant in India, setting up a traditional distribution network takes time and money. Experts say, at the initial phase, if it had gone for an offline channel, it could have hampered its primary focus on product, technology and brand building. Hugo Barra, vice-president of Xiaomi Inc., says that its business model is based on lower distribution cost and passing the benefits to customers. This lets it sell products at a lower price than the competition. Xiaomi's flash sales have been a big hit, as consumers waited for weeks for the stipulated dates. Even today, the handset maker gets nearly 90 per cent of its sales from an online channel.

Mi-Fans: While the majority of its peers have been aggressively using the television commercials and print ads for promotion from the beginning, Xiaomi counted on word of mouth publicity. It has an army of bloggers and patrons – called Mi-fans community. This group constantly creates buzz on the internet including social media and also during phone launch events. Word of mouth publicity is still considered the most credible one.

Its products: Superior products at value for money proposition is an asset for any company and that applies for Xiaomi as well. Its two main series of handsets – Mi and Redmi — has been constantly delivering popular smartphone models. While in 2015 it rocked the market with Mi 4, 4S and Redmi Note 2, in 2016, it continued its run with Mi5, Redmi Note 3 and Redmi 3S. According to IDC, Redmi Note 3 was the highest shipped device in the history of online smartphone industry with more than 2.3 million devices sold in 6 months. The success of its latest models led the firm to the fourth spot in the September quarter with over 7 per cent market share in its kitty and over 2 million unit sales.

Pricing: Xiaomi kept the prices of its products lower than most of the competitors. However, it did not venture into high volume price segments like below Rs 6,000 category. Currently, average selling price of its handsets stands in the range of Rs 9,000 to Rs 10,000 – much higher than the industry average of Rs 4,000. This has helped its top line to grow past many others’ even though its volume sales lag (in the entire handsets market, including feature phones).

The year ahead will be crucial for the company as sales at the industry level have started to slow down. Xiaomi meanwhile is preparing to launch new models – Redmi Note 4, Redmi 4A and Mi7.