Chinese handset maker Xiaomi announced its foray into the Indian market with its flagship smartphone Mi3. The company sold close to 90,000 units of the Mi3 in six flash sales in little more than a month. As the company gears up to launch its affordable smartphone, the Redmi 1S, Manu Jain, India Operations Head at Xiaomi, speaks with Business Today on its plans for the Indian market. Edited excerpts:
Q. How many smartphones do you plan to bring into India this year?
A. We started with the Mi3. Now we are launching Redmi 1S. A few weeks from now we will be launching the Redmi Note. Then in this calendar year, we will be bringing two more devices - Mi4, and an Mi tab. We might also introduce the Mi Band. I am personally interested in bringing the Mi TV too, which is a 49-inch LED 4k resolution TV at an extremely amazing price. But for that to happen we need to have content partnership, logistics to bring these bigger items in India and service. Once these things are worked on, we will be more than happy to launch Mi TV 2 in India. There is no specific timeline to this but if doesn't happen this year, than definitely next year.
Q. Will Xiaomi launch the Mi4 in India around Diwali?
A. This is unlikely as the Indian device is different from the China device because the 4T LTE bands are different and have different norms for different countries. So the SKU [stock keeping unit] which is for India is being worked up on. Once it is stable, we will test it out. Then we would start certification processor and launch it. Practically, it looks difficult to launch Mi4 around Diwali.
Q. With all this hype, you came with a very limited number of units to India. Is India is only a test market for you?
A. No, the very fact that Hugo Barra [Xiaomi's global vice president] spends his 50 per cent of the time in India tells you the importance India has for Xiaomi. It's a new market for us. We are also learning.
Whenever we enter a market, we look at the digital trend. We looked at the number of Facebook followers, which were less than 15,000 on July 15. For us to expect that there will be a few hundred thousand people coming to register was unimaginable. So, we were pleasantly surprised and shocked.
Most of these devices are made specifically for India. They have India-specific label, charger and software. The lead time is not one week. It takes six to eight weeks for order as the factories are manufacturing for multiple geographies with different regulations and specifications. I need to place an order well in advance and changing it at the last minute is very difficult.
When we launched the Mi3 we thought the volumes will be very small. We have wrapped it up as quickly as possible. Flash sales help us in estimating the demand from our consumers.
Q. How much market share that you are eyeing to capture in India by the end of this financial year?
A. Xiaomi is a decently big company that does not have a target or number of units being sold or market share. We look at market share in retrospect but not targets. We have road maps and plans. As an individual, I have that someone will give me a target and I will have to chase it. However, Xiaomi always have targets for inputs and not market share or the number of handsets sold. We are miniscule with 90,000 units sold in India.
Q. Do you still plan to continue with the flash sale for Redmi 1S, which is priced at Rs 5,999? How many units you plan to bring in?
A. The Redmi 1S will go on sale on September 2 as the registrations started Tuesday. But we had enough time to plan for the Redmi 1S launch and it will be much smoother and better. On every Tuesday at 2 PM the flash sale will go live for the Redmi 1S.
Q. Does this mean that the Mi3 will not be sold through flash sales now?
A. For the next couple of weeks, we will sell Redmi 1S followed by Redmi Note. After a few weeks, we will bring back the Mi3 Flash sale. Hopefully, by that time the stock and demand issues will be resolved.
Q. Do you plan to follow the same distribution strategy for all your upcoming launches too?
A. Yes. There might be one or two changes. We might think of start selling though our own website Mi.com. We would, at some point of time, could be three months, six months or longer, like to sell the devices from our own website.
Q. At the moment, your devices are imported by Flipkart. Once you start selling the phones on your website, how will this arrangement work? Will you import the devices?
A. Honestly, at this moment, I don't know anything about it. I think it is too early for us. At this moment, all our time and energy is being spent on getting these devices to India, testing, certification, etc.
Q. Are you looking at the offline retail channel too?
A. We save a lot of cost by selling our products through the online channel. The total cost that somebody spends in a distribution channel is close to 20-30 per cent, which is a waste as it is passed on to the customer with an increased price. All this cost is not setting in my balance sheet, which makes me bring devices at such aggressive price point.
Q. What about Xiaomi's marketing plans?
A. We are planning to focus a lot on Indianised content through contests, promotions but these are not paid. Like other brands who pay Facebook the money to promote their page, we won't pay money. You will not see a banner ad of Xiaomi on any digital platform, TV ad or print ad.
If someone comes to us and offer us to run our ad for free, we will love to do it but not pay anything for it. We believe that the marketing cost, at one day, will have to increase the cost of the device to accommodate it.
What people don't realise is that when they see a TV ad and buy a product, they actually pay for the TV ad. Companies don't do charity. They pay millions of dollars for that ad. And somehow they will have to recover it.
Q. Many customers complained about the SIM slot on the Xiaomi smartphone. Do you think Indian smartphone users are not smart to handle it? What is your service support?
A. We saw that people were facing issues. I interacted with customers, checked Facebook logs, calls at service centres. We corrected this by uploading a video on our Facebook page. This was solved to a large extent by educating the customer on how to operate the SIM slot. We are also planning to ship two microSIM to mini SIM adapters for the customers of Redmi 1S.
Also, customers walking in our 36 service centres with SIM tray complaints can collect a SIM card adapter for free. Two of them, one in Bangalore and one in Delhi, are our own exclusive centres. Rest are multibrand.
Q. Are these exclusive service centres company owned?
A. No, these are managed and trained by us but owned by a third party. We don't own them as this is a franchise model. We have two at the moment and plan to have four more centres up and running in next one to two months. These will come up in Gurgaon, Hyderabad, Mumbai and Chennai. We will further expand this number.
Q. With no real investment from Xiaomi as the products are imported by Flipkart, there isn't any investment in marketing and you have franchise and multibrand service centres. Doesn't it make Xiaomi look like a fly-by-night operator? How to do you plan to win the consumer confidence?
A. We are basically providing a device which is significantly much higher on the specifications for the amount we are charging. We are already offering a great value for money device with a great experience. However, we plan to set up an 'Mi Home', a big experience area. It is like three-in-one - people can come in and play with our products such as Mi TV, Mi Pad, Mi phones; it will be a service centre where products can be repaired and lastly, it will also be an entertainment centre with a cafe and lounge where people can come and relax.
Q. When and where will be the first Mi Home experience centre launched?
A. The first Mi Home experience centre will come up in Bangalore, where we have our office, in next six months.