Xiaomi dials up offline retail as online growth lulls

Chinese electronics company Xiaomi is now largely focussing on offline retail as its market share in online smartphone sales has plateaued over the last two years at 50 per cent.

The company opened its 1,000th Mi Store in the country on Tuesday and plans to have over 10,000 combined retail outlets by the end of this year.

Offline contributes to 40 per cent of the company’s business currently and Xiaomi plans to take this to 50 per cent by this year.

“Two years ago, our offline market share was less than one per cent. If we want to continue our growth, it can no longer come from online because we already have a 50 per cent share,” said Manu Jain, Managing Director, Xiaomi India.

Xiaomi also announced the launch of Mi Studio, a new retail concept. Jain called it a “hybrid” concept or a “Mini Mi Home”, which are the company’s flagship retail outlets. “We understand that we cannot open too many Mi Home stores. The look and feel of the Mi Studio is very similar to Mi Home. The only difference is the size,” said Jain. Depending on how its two Mi Studios currently operational in Bengaluru and Mumbai perform, Xiaomi plans to add a few hundred of these. Jain added the company is working on bringing appliances such as water purifiers and washing machines to India. However, he did not elaborate on when these products would be introduced here.

According to Jain, Xiaomi places the upper cap on its profit margin on its hardware products at 5 per cent. “We do try and make money on our internet services,” said Jain, adding “We believe just the payment and other financial services could be an opportunity worth billions of dollars in India.”

He said that Xiaomi makes money through premium services and ad monetisation on its content services like Mi Music and Mi Video. “We are evaluating a common wall where you just pay once to Xiaomi and we will settle it with all content providers,” he said.

Lean distribution model

With a lean distribution model, Xiaomi keeps offline running costs low. “Mi Home stores are supplied directly by the company. (For) All other stores, we have only one level of distribution between us and the retail shop,” said Jain.

With its manufacturing capacity in India, Xiaomi can produce three phones every second and has produced 40 million phones last year, according to Jain. It also has one television manufacturing facility in the country.

However, he categorically stated that the company will not get into the feature phone space. “We can’t sell internet services through feature phones. About 10 crore people are using data on feature phones. The next possible step for them is to upgrade to a smartphone,” said Jain.

Xiaomi launched two new phones for the Indian market on Wednesday — the selfie-focussed Redmi Y3 and the Redmi 7. “Last year, we launched too many phones and that was a mistake. This year, we don’t want to do that,” Jain said.

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