Xiaomi bets big on offline as online sales saturate
Sumant Banerji April 25, 2019
For a company that began its journey as an "online only" brand and exploited it efficiently to quickly rise to the top, Chinese electronics major Xiaomi is now betting big on offline retail stores as the potential for growth in the online space for the company has saturated.
Xiaomi that sells its MI branded smartphones in India, and ended Korean behemoth Samsung's hold on the market at the top for the full calendar year in 2018, is planning to set up at least 3000-4000 new retail outlets by the end of this year. This would take its overall presence in the market to 10,000 stores.
The company operates a variety of retail concepts including large company-owned and operates store-Mi Home, franchise owned and operated stores and multi-branded Mi preferred partners. The firm is planning to add a new concept of smaller Mi Home stores called Mi Studios that unlike Mi home are owned by the franchise partners and are smaller in size. The company claims it has a 52 per cent share on all online smartphones sold in the country today and a 20 per cent share in the offline space.
"Two years back we realised that while one in every two smartphone buyer was lapping up a Mi phone, hardly anybody (less than 2 per cent) was buying our phones from retail outlets. At the same time, we also knew that the scope for growth in the online space was limited for us as holding on to the 50 per cent plus share itself is a difficult task. So offline was the way to go for us for growth," says Manu Jain, Managing Director, Xiaomi India.
In 2018, the company sold 41.1 million smartphones in India, a growth of nearly 60 per cent over 2017 that helped it overtake Samsung as the largest player in the market. As per IDC, Xiaomi had a market-share of 28.9 per cent in 2018 against 20.9 per cent in 2017, while Samsung had a 22.4 per cent share in 2018 down from 24.7 per cent in 2017. With an overall shipment of 142.3 million units during the year, a 14.5 per cent growth over 2017, India was the fastest growing smartphone market in the world.
Another research firm, Counterpoint Research, however, said the feature phone market in India grew faster than smartphones for the first time ever contrary to expectations that smartphones would eventually wipe out feature phones in the long run. The strong growth was on the back of the success of Reliance Jio's entry into the segment, which overtook Samsung in the category in 2018. Xiaomi does not offer any products in that segment and Jain said they had no intentions of doing so notwithstanding the strong growth in the category.
"We are an internet services company so we are not in the business of selling feature phones as we can't sell our services through them. About 10 crore people are using data on feature phones. The next possible step for them is to upgrade to a smartphone and that is where we come," he says.