In 2013, Xiaomi released the first Redmi phones, with a price-performance ratio that immediately attracted legions of consumers while squeezing out rival brands.
Six years later, where does Xiaomi stand?
On Tuesday, the company said on Weibo that sales of its Redmi Note 7 surpassed 20 million units in just seven months. Since January, Xiaomi has been treating Redmi as an independent brand. The company wants the Xiaomi brand to stand for mid-range and high-end products as well as new retail, while Redmi is positioned as a budget brand that offers value and increases sales though ecommerce marketplaces. On Xiaomi Mall (its own online store), Redmi phone prices start at RMB579 (US$82).
Xiaomi’s latest financial results, for the quarter ended June 30, signal a brand with issues to address. Q2 profit registered at RMB1.95 billion (US$276 million), down 86.7% year-on-year. Meanwhile, many consumers hold the impression that Redmi is a lower-quality brand with poor design in comparison to competitors and an undesirable user experience.
Xiaomi's ranking in our Asia's Top 1000 Brands consumer-perception survey, done in partnership with Nielsen, increased 29 spots from 128 in 2018—the smallest rise for the brand since 2015.
According to data from Canalys, Huawei now holds 34% of China’s smartphone market, while Xiaomi’s market share dropped 13 percentage points to 11.9%. Xiaomi’s internet of things (IoT) business, which focuses on smart speakers, TVs and wearable devices, also faces threats from the entry of higher-end smart screens from Huawei.
Xiaomi said in the financial statement that the number of monthly active users of its MI User Interface (phone and tablet firmware) rose about 35% year-on-year to 278.7 million in June 2019. However, its advertising revenue decreased 0.6% year-on-year to RMB2.5 billion (US$354 million), which the company said is due to a soft mainland China advertising market.
Apparently concerned about deteriorating user experience, Xiaomi reduced ad placements in the MI User Interface as well as other systems and apps, Bai Peng, general manager of Xiaomi Internet Business Department, told Chinese media outlet thepaper.cn in May. This may further impact Xiaomi’s advertising revenue in the long run.
However, Xiaomi has seen fast growth in India. As India's top smartphone seller, Xiaomi is reportedly moving to launch a consumer lending business in India, aiming for a piece of the booming financial-services sector. Xiaomi's new Mi Credit services in India, providing loans of up to 100,000 rupees at interest rates starting from 1.8%, is slated to debut in coming weeks, Reuters has reported.
This represents another crucial move in overseas markets after Xiaomi announced a brand new cross-border e-commerce platform called ShareSave, which targets users outside of the Chinese mainland in January this year.
We asked two experts for their opinions on the overall condition of Xiaomi's brand, and what it should do in the future.
As a leader for mass-market smartphones, Xiaomi outperforms competitors with products that offer extremely high value for money. Although this has been well appreciated by consumers, this brand positioning may limit Xiaomi’s long-term growth as consumers expect more and upgrade their devices.
Xiaomi probably had recognized this challenge years ago and therefore has tried upgrading the brand by launching more premium products from time to time. Yet it turned out to be very difficult, given the Xiaomi brand is doing so well with its current positioning.
From a business perspective, surely Xiaomi can achieve growth by extending its brand to new categories such as home appliances or expanding to emerging overseas markets such as India and Southeast Asia, where there are still whitespaces that Xiaomi can capitalise. However, it is imperative for Xiaomi to consider how the brand could sustain its growth in a longer term, for example, go beyond current positioning and charging a brand premium.
With the current positioning, Xiaomi is quite good at building the so-called product ecosystem and owns a big number of loyal consumers. Xiaomi has also done a good job in terms of marketing activation, from content to digital marketing and community building. However, there could be a long way to go if Xiaomi aims to build its brand into an icon in people’s lives, especially for high-end consumers whose needs are beyond value for money.
Xiaomi focuses on a product-differentiation strategy. Besides separating lower-end Redmi as an independent brand that strives for excellent cost performance, Xiaomi also rolled out Xiaomi CC, targeting fashionable women who love to edit their photos online.
Apart from price advantage, Xiaomi has a loyal fan base to leverage. Early this year, Xiaomi brought out a limited-edition Brown Bear Mi 9SE in partnership with Line Friends. The cute product quickly caught young women users. Initially, Xiaomi’s fans are a group of men who love technology, but women prove to be potential consumers for Xiaomi. The brand should continue this differentiation from its competition.
Xiaomi should channel more resources to brand upgrading. Given Xiaomi’s product ecosystem, from smartphones and home appliances to wearable devices, the company has the capacity to offer a complete smart living proposition. For example, based on its smart TVs, Xiaomi can create an entertainment system suitable for Chinese families.