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.

This year, it wants to double its sales here to $2 billion. “I’m 99% confident and 1% not confident, that 1% could be the most difficult 1%,” Jun says at the briefing. Globally, it’s targeting sales of $15 billion.

A look at Jun’s India itinerary reveals his strategy to achieve his target. Jun’s meeting government officials — to make sure it’s able to meet local demand by manufacturing in India and tap into incentives under the Make in India program; retail stores — to figure out how Xiaomi can go beyond online sales; the press, bloggers and Mi fans — to drive home that Xiaomi is not a “cheap phone company” but a premium device brand selling at a reasonable price so it can sell you more stuff later.

Corridors of power
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 are made in India,” he says.

Offline experiments
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.

ALSO READ:  Google Adsense Alternatives - Top 6 In 2020

“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.

“It will be interesting to see the impact on demand when prices increase and selling partners such as Amazon and Flipkart demand higher margins,” said Shubhodip Pal, chief opererating officer of Yu mobiles, a spin-off of Indian phone-maker Micromax. Yu too makes affordable Android smartphones, sold in flash sales online.

However, it may be some time before Amazon and Flipkart start asking for higher margins. The two online retailers are locked in a long-drawn battle in India and wooing brands like Xiaomi to sell exclusively on their platform is important for them.

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.

“India’s traditional offline costs are very high and efficiency is very low,” says Jun, who wants to bring the efficiency of e-commerce in offline retailing. In China, he says, the company has 51 stores that cost the same as e-commerce to run. “We’ll try this in India this year,” he said. These stores are called Mi Homes. But Xiaomi can’t technically own these stores yet because it doesn’t have a retail license yet. To be sure, the company only plans to test Mi Homes in India right now.

Not a ‘cheap’ phone
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.

ALSO READ:  Telangana CM KCR’s 'Federal Front' Plan 'Stumbles' As All 'Friendly Parties' Head For 'Congress Alliance'

For Jun, the smartphone is just an excuse to sell more products to Indians. “First we sell the smartphones. Revolving around smartphones, we build products around it. If we build only smartphones, this phone will have no foot traffic… if we have 20+ products, you can discover something new every month you go to the store,” said Jun.

Xiaomi already sells a few products including air purifiers, power banks and earphones through Mi.com in India. The company calls this the ‘ecosystem strategy.’ It has incubated over 75 hardware companies to build the products that go into the Xiaomi catalog.

Xiaomi’s Fandango
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.

The community’s direct impact on sales is hard to measure. “When it comes to sales, I believe whatever happens in the community, good or bad, could impact the overall figures in the range of 10-15%,” says Pal of Yu Mobile.

Xiaomi shares its new products in advance with some of the most active members of the forum. The fans get to review them and also to keep them. (At the press briefing, Xiaomi tried to give journalists one of their new phones as gifts).

Sometimes, the company even hires active members from the forum. Clinton Jeff, one of the public relations managers at Xiaomi, was an active tech blogger and a part of the community before the company hired him.

“It will be hard for Indian brands to replicate this model as it may backfire,” cautioned Amit Bhawani, the founder of PhoneRadar, an India-based mobile news and review site. “Indian companies such as Micromax are struggling with quality issues and updates are not forthcoming. Establishing a community with a large number of users might explode in terms of publicity,” said Bhavani.

For all the talk about being open, Xiaomi tries to protect the messages its fans give out. While researching this story, we joined the Xiaomi fan community in Bengaluru and asked fans for their feedback. 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.

ALSO READ:  Telangana CM KCR’s Budding Bonhomie With PM Modi Fuels Buzz Of Winter Polls

With good reason, we suppose. Fans can swing both ways. In Delhi last year, at the launch of Mi Max, some fans deprived of goodies resorted to sloganeering. The police had to intervene and some bad press followed.

The 1% problem
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.

Meanwhile, the company has forgone its tradition of revealing how many smartphones it sold the previous year and Jun admitted that Xiaomi has been in transition after growing “too fast”, reported.

“Xiaomi started the trend of selling its phones online and other vendors soon followed suit and created their own online brand. After vendors witnessed OPPO’s success with its R9, they also started riding on the trend of hiring celebrity endorsers to represent their brand and appeal more to the young crowd,” said Xiaohan Tay, senior market analyst, Client Devices Research, IDC Asia Pacific.

Oppo has roped in Bollywood stars Hrithik Roshan and Sonam Kapoor, Vivo has Ranveer Singh and OnePlus has Big B (Amitabh Bachchan) himself. These companies have also gained significant market share (they now are at fourth and fifth position respectively) over the past year, which means we’ll mostly see Chinese rivals go head to head for glory in the Indian market this year. #KhabarLive

SHARE
Previous articleAre IPL 2018 ‘Betting Apps’ Illegal In Hyderabad?
Next articleCountdown Started For Panchayat Elections In Telangana
A senior journalist having 25 years of experience in national and international publications and media houses across the globe in various positions. A multi-lingual personality with desk multi-tasking skills. He belongs to Hyderabad in India. Ahssanuddin's work is driven by his desire to create clarity, connection, and a shared sense of purpose through the power of the written word. His background as an writer informs his approach to writing. Years of analyzing text and building news means that adapting to a reporting voice, tone, and unique needs comes as second nature.