Xiaomi needs to pick up pace in a saturated smartphone market

Xiaomi appears to be making a killing by selling a number of smartphones and breaking sales records, but the consumer in India today has one too many choices.


It's a really odd scenario in India's smartphone market today. The consumer appears to have gone a bit crazy, we have a bunch of people, who shell out up to Rs 60,000 for flagships such as the Apple iPhone 6s or the latest flagships from Samsung. In the case of the iPhone 6s, it looks very similar to an iPhone 6. And will in all probability be the case when Apple launches the iPhone 7. Buying an Apple iPhone in India is a big deal compared to purchasing one in the US, and this is simply because of the taxes and duties that apply to the imported devices. So my question to Xiaomi is, why are you undervaluing your smartphones? When people are willing to buy it a higher price? Well, turns out, it's not exactly Xiaomi's fault that it's seeing slowed growth, but the market itself.

Xiaomi the startup

All said and done, Xiaomi is still a startup today. In fact, it's one of the biggest. Second only to Uber worldwide. Back in 2014, it sought $12 billion in revenue. When it gathered $1.1 billion and was evaluated at $45 billion, Russian billionaire Yuri Milner also predicted that it could soon be evaluated at $100 billion instead. And Milner seems like a pretty credible guy, who happens to know his stuff (he invested in Facebook back in 2009). Looking at Xiaomi's current state of affairs, it may seem like Milner was wrong, but the truth is Milner was in fact right.

The problem soon appeared to be Xiaomi who has failed to meet expectations from quarter to quarter. From making just smartphones, Xiaomi now offers a variety of products. These range from Segway scooters to rice-cookers. Even air purifiers and then it's the company's good old policy that applies to all of these once again. Deliver a premium product at a low price.

Cutting back to smartphones, Xiaomi's strategy seemed to work, and it looked like it could soon take over the globe. But calamity struck in the form of dropping smartphone sales and Xiaomi's strategy seems to be like a pirate ship in the middle ages, that's stuck in the doldrums. The latest Gartner reports made things evidently clear. Apple and Xiaomi are in trouble, being the only two manufacturers out of the top 5 who have seen a drop in market share from quarter to quarter.

How Huawei and Oppo turned things around

Huawei and Oppo seemed to be doing really well. Wonder what is keeping them alive in a saturated smartphone market?

Huawei has a double-barreled camera that proves it worth in R&D and Oppo now has an arsenal of technologies, that beat the pants off any smartphone maker out there! Soon enough Oppo could start selling its fingerprint readers and SuperfastVOOC charging to other manufacturers as well (in short it's headed the Samsung way). Huawei like the big chief Samsung, proudly uses its own chipsets in its flagship smartphones as well.

So with $1.1 billion in funding, and a $45 billion valuation what exactly did Xiaomi do since 2014? Well, technically it seemed like it was making ends meet. You can blame the markets all you want, but Xiaomi has done little to innovate in the smartphone space apart from bringing down the price tags of smartphones. While cutting down on marketing costs and selling your products online will allow you sell your products at a lower price, you cannot remain in the ranks of an assembled PC manufacturer all your life when your competitors are busy investing in R&D.

Oppo is a currently a shining example of how a company should use its resources. It making products that consumers love, and these are quality products that are priced just right (not too low and neither too high). Ever wondered why there has not been a Oppo flagship smartphone in years? Well, it could have gone followed everyone and built an affordable flagship and priced it to compete with the OnePlus 3 and the Xiaomi Mi 5. But why should it? Why would anyone it their right minds try and undervalue their own market?

 Xiaomi needs to pick up pace in a saturated smartphone market

“Features such as an anti-shake camera optimised for selfies, and rapid charge technology, helped Oppo carve a niche market for itself and boost sales in a highly competitive and commoditized smartphone market,” said Anshul Gupta, research director at Gartner.

We recently had a chat with Oppo's Sky VP, Oppo and he had a rather interesting explanation about his strategy. "As a brand, OPPO has focused on touching base with consumers across all platforms apart from offering them the best consumer experience be it camera, design, battery or after sales. We believe that our 360 degree approach to connect with consumers has been one of the driving factors of our success both globally and in India. China’s success (a market share of 16.2% in Q2 and an Y-o-Y growth of 124.1% as per IDC) can be attributed to the fruitful associations along with the high quality products and expansion of offline POS. As far as India is concerned, the acceptance and gradual appreciation has been achieved basis our well thought out marketing approach - Global Resources, Local Service. The team at OPPO has carefully studied the Indian market and consumer behaviour to understand the platforms we should be present at to connect best with the Indian consumers – Cricket, Bollywood and Television. Though we are still relatively new to India and understanding the market, we believe that emulating China’s success in India is not too far-fetched."

The new trend

Xiaomi appears to be making a killing by selling a number of smartphone and breaking sales records out here in India by offering the lowest prices. However, the consumer in India today has one too many choices. LeEco, offers good enough smartphones with a content package. Oppo has found a niche in the selfie smartphone market. And OnePlus has branded itself as the 'true flagship killer' (finally) this year. So where does Xiaomi stand? When there are one too many choices in a saturated smartphone market or segment, loyalty clearly does not come easy.

Back in 2014 the company had big dreams of going global, but those too have still remained in the pipeline thanks to Xiaomi's rather limited set of patents. In fact the company had a tiff with Ericsson not to long ago when it entered the Indian market on a similar issue. Xiaomi needs to come up with something fresh and new and shed that affordable pricing image. It needs a big change and that can only come with with own special camera modules, chipsets and more products. It's a trend that many smartphone manufacturers like Samsung, LG, Huawei and Oppo followed last year when they saw the sales dropping last year. Samsung now has its own chipset and its own display, and its very own camera module inside the S7 edge. LG too with the G5 started following a similar trend. The same goes for Huawei and finally Oppo.

Xiaomi picks up something interesting

Xiaomi Microsoft

The Chinese smartphone maker recently picked up something interesting recently by building a long term partnership with Microsoft. With that partnership it picked up a patent cross-licensing arrangement and a commitment by Xiaomi to install copies of Microsoft software, including Office and Skype, on its phones and tablets (it's always about give and take). "This deal might just give them enough of a patent trove to move to Western markets," said Sameer Singh, a UK-based analyst. "Their position in China has been under constant attack from even lower-end Android vendors, so moving overseas is now a necessity." reported Reuters.

There's still plenty of unexplored potential in India

While the smartphone space seems to be overcrowded and saturated with competitors, Xiaomi is still doing well with some of its budget smartphones. A shining example of this is Redmi 3s Prime. But with mobile sales already slowing down, we are not sure how things will turn out in terms of profits.

Xiaomi Mi Air Purifier Xiaomi Mi Water Purifier

Xiaomi does have one thing going for them and that would be the plethora of products that company has on sale in China only. These would include Mi TV, Mi Air Purifier, Mi Water Purifier, smart home appliances and electronics that have taken forever to make it into the Indian market which even in 2016 is deprived of quality of appliances.

Xiaomi Mi TV

While Manu Jain hinted, that Xiaomi's Air Purifier is coming soon, there is no sign of the Water Purifer and more importantly the Mi TV. Even LeEco, a recent entrant into the Indian market recently launched its lineup of TVs (and they come with a content backing as well) for the Indian market. This was a missed opportunity indeed and LeEco now appears to have taken the lead. What exactly is Xiaomi waiting for?

Xiaomi is headed for a slow down and they need to revamp things to keep the momentum going. Because as with all startups that rise to fame quickly, the fall is equally steep.


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