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Xiaomi has pitched itself a neat tent in the Indian smartphone market — that of an agile online sales whiz that sells affordable products. A little over two years since it stepped into the country, the Chinese phone maker has become the second largest smartphone player in the market and its marketing strategy, the talk of marketing institutes. However as Xiaomi looks to push sales via offline channels and get into the grime of physical retail, can it continue down the same path?
Xiaomi’s calling card is affordability. Its phones compete with the best, but they are never advertised in traditional media. Its customers, the Redmi S model has over three million in the country, are part of online fan clubs. They wait for sales days and track the brand online, keeping up the chatter about features, price and new models. The company earns a significant amount of mentions online and its users are also its brand ambassadors.
As it focuses on offline sales, Manu Jain, Xiaomi’s head in India believes that they goodwill of their online fans will spill over into the offline world. He says that despite almost zero marketing costs, Xiaomi has become India's second largest smartphone player. The company is facing excess demand for its phones and is giving leading smartphone makers in India a run for their money.
The secret of Xiaomi’s success is that it has stuck to its positioning even as other Chinese phone makers have experimented with different strategies. It is a brand for the massesand has stuck with providing the best price for the best product, he says. The company has deliberately stayed away from big ad campaigns and has not signed any brand ambassadors unlike competitors who have turned to cricket and Bollywood to give power to their labels. In fact Xiaomi is globally seen as a pioneer of the digital and social approach of selling smartphones. The company pitches its products to a band of phone enthusiasts and focuses all its efforts on wooing them online.
In India, 90 per cent of the company’s sales currently are from online marketplaces. The company now wants to expand its offline footprint and this is where experts question whether Xiaomi can afford to keep walking down the same track of not marketing, not advertising directly to the consumer. Jain is confident they can.
“We are able to make affordable phones by cutting costs by selling directly online. It helps us save on distribution margins. Also, we spend close to zero on branding and marketing unlike other players. Also, we make money from our own operating software through in-built features. Our aim is to make the process as lean as possible and pass on the benefits to customers and we will continue to do so even in offline,” says Jain.
By the end of 2017, Xiaomi looks to bring up the offline share from 10 per cent to 25-30 per cent, says Jain. But it will keep its positioning intact, he adds. Xiaomi will continue to be an affordable smart phone that does not compromise on features or technology upgrades. It will also keep the same lean distribution model, spend almost zero on marketing and make money from its own operating software MIUI.
The company has seen a jump in its market share from around 13 per cent couple of years ago to now almost 30 per cent. In less than six months, Xiaomi has sold more than three million units of Redmi 3S. Xiaomi also recently launched Redmi Note 4 with the biggest first day sale of over 250,000. Jain says that despite such a high inventory of over 250,000, the first day sale was wrapped up in seconds.
The big draw for customers is price. Xiaomi’s phones are almost half the price of some of the other brands in the category and offer the same features. Price is the reason why, Jain believes, that Xiaomi has become India's second largest smartphone vendor in the fourth quarter of calendar year 2016. But experts warn, a sharp focus on price alone can turn counterproductive. It harms brand self-esteem and results in the product being associated with bargain buyers. The company could lose out on customers looking to upgrade their lifestyles who would not want to be seen with a cheap phone.
The company however seems unperturbed. It is buoyed by the steadily rising market share in the country and is convinced that its fans are loyalists and unlikely to jump ship for superficial attitudinal attributes.
According to IDC’s India Quarterly Smartphone Tracker (February 2017), “Xiaomi climbed up to second place with 10.7 percent share in CY Q4 2016 against 3.3 percent share in the same period last year. Year-on-year shipments grew three-fold while sequential growth was 15.3 percent.”
Xiaomi sells directly through its online platform and also through online partners such as Flipkart and Amazon, among others. Its offline retail platforms are very small still, but expected to grow in the coming months. The company also follows a minimal inventory model. As it forays offline, Xiaomi is planning to rope in partners in each of top 10 cities it is aiming at. These partners will in turn supply the phones to retailers. Xiaomi says that it is encouraging its partners to go for lower inventories.
“Our partners don't need to spend on inventories. This helps stocks move fast and offers higher return on investment,” Jain explains. With this, the company hopes to keep its positioning and position in the Indian market intact.
