Xiaomi is a brand that many Chinese companies want to emulate. It has utilised China’s army of engineers and manufacturing nouse to produce decent products at low prices. But unlike most local brands, it has delivered great marketing to sell those products.
By 2014 – less than four years after launching, Xiaomi had become the top-selling brand in China’s hyper-competitive and enormous smartphone market. It had beaten shrewd foreign brands such as Samsung and Apple and impressive local operators such as Huawei and Lenovo.
Xiaomi’s rise was a showcase for the power of China’s Internet users. Virtually all of its marketing and sales were Internet-based, led by online flash sales. On Single’s Day in 2014, Xiaomi sold more than ¥1 billion ($163 million) of goods by lunchtime, contributing to the company’s mouth-watering growth rates of 185% that year.
After selling 61 million smartphones in 2014, Xiaomi set its sights on 100 million devices for 2015. Although sales grew a respectable 15% to 70 million phones last year, it appeared Xiaomi’s flash sale gags had lost their novelty factor with China’s consumers. Even in the fast-growing Indian market, ideally suited to value devices such as Xiaomi, Apple has overtaken the company for shipments – a kick in the guts for the company which had pinned its hopes on other emerging markets to fuel much of its continued growth.
The fading of Xiaomi’s mojo comes down to three main things: 1. Chinese marketers are great imitators, meaning Xiaomi has less of a point of difference and hasn’t innovated its marketing fast enough; 2. Chinese consumers are trading up to premium products across many segments, including smartphones. While China’s smartphone market grew just 2% last year, handsets over $500 grew 45%. 74% of Xiaomi’s 2015 revenue came from smartphones costing less than $200; and 3. Lack of an offline retail presence.
Although China’s rising ecommerce sector hogs the headlines for leading China’s consumption growth, it is still very dependent on complementary offline channels. Likewise, physical stores are very reliant on digital. That’s why China’s smartest online companies such as Alibaba, Tencent and Baidu are investing heavily in integrating offline assets. Chinese consumers often like to see, touch and try products in the real world, even before buying them online. It helps them build a relationship with the brand, particularly in higher-end categories. Adidas is a good example – their online sales are booming, yet they recently announced plans to open 3,000 new outlets in China by 2020.
Xiaomi recognises the need to have a physical retail presence, which is why it plans to open 300 new stores in China to complement its online strategy.
The Chinese consumer’s purchase journey has many touch points, and understanding the most effective online and offline contacts will bring the greatest chance of success in China. China Skinny can assist with that.
For our Australia-based readers in the tourism industry, China Skinny’s Mark Tanner will be presenting at Tourism Australia’s Destination Australia Conference 2016 on March 17 in Sydney. If you are at the event, please pop over and introduce yourself. Click here for more information. Go to Page 2 to see this week’s China news and highlights.