“Xiaomi: Age of Expansion” Has Just Begun!

The hottest smartphone startup in the world has its eyes set on becoming the largest. That will take some doing but Xiaomi Inc. knows where it’s headed next and is expanding its wings beyond Asia, in the process cleverly positioning itself as the go to brand in countries that are likely to adopt its “great products for a give away price online-only” strategy. The keyphrase here is likely to adopt.

Xiaomi received huge media attention when it took to the stage in central Sao Paulo, Brazil, a few days ago. After establishing a firm base in China and India Xiaomi has entered a third potentially huge market – Brazil. Brazil isn’t a huge market for Xiaomi simply because it is an economy similar to India’s, instead the customer base in Brazil exhibits a buying behavior that is similar to that of India and China.

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The buying behavior of customers in all three economies is greatly influenced by price. And Xiaomi’s USP has so far been giving its customers the best value for money products.

The hype surrounding Xiaomi is legit. This 5 year old company is currently valued at $45 billion and is widely touted as the world’s most valuable tech startup. While they get a lot of international press, Xiaomi isn’t exactly an international brand yet. It is an Asian brand which has conquered two of the most powerful smartphone markets in the region and is now moving beyond familiar grounds.

Also, it helps that Xiaomi’s charismatic Vice President of International, Mr. Hugo Barra is from Brazil.

But when a company grows at this rate, skeptics, better known as market analysts, begin predicting the proverbial fall from grace because surely, you can’t succeed so fast without taking a few bumps on your way to success. Well, unfortunately for them, the skeptics have been wrong about Xiaomi all along because most of them don’t understand Xiaomi’s long term vision of revolutionizing cost effective high-tech product offerings and fast paced market sizing that helps them get instant traction in economies where value for money is the priority customer-satisfaction metric.

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What has prompted skeptics to question Xiaomi’s growth prospects are its current sales figures. Xiaomi has revealed that it sold 34.7 million units in the first half of the year (2015) which is slightly less than half of Xiaomi’s full year prediction of 80-100 million units. But is that reason enough to claim that Xiaomi’s growth has flatlined? No, it isn’t.

Companies don’t take their business to new markets just to test the waters when their sales flatline. There is more to Xiaomi’s expansion than the mere hope of growth. If one carefully observes Xiaomi’s sales and marketing strategies, it becomes clear that they plan well ahead of time and leave room for failure, but not total failure.

The four-pronged strategy

• Target regions where the practice of no-contract, full-price, unlocked smartphones is popular.
• Generate hype.
• Deliver on the hype with a great product offering.
• Leave the customers wanting for more.

This has been Xiaomi’s four-pronged strategy over the last 5 years that has helped them conquer highly saturated markets with consummate ease while also establishing a brand presence in countries where it is arguably most difficult to do so.

When it comes to sales strategy Xiaomi’s intent is pretty clear. The company is currently not interested in markets, such as the USA, where the practice of contract based smartphones is prevalent. This business model just doesn’t resonate with Xiaomi’s current USP – price. Countries such as India offer Xiaomi the perfect opportunity to create a loyal customer base by generating hype around its product. This hype generally focuses on creating a buzz around the idea that Xiaomi offers “a great product at an affordable price”.

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Xiaomi makes people register for its phones before they can buy it. So they know whether or not the hype hit home before sales even begin. And when you register for a product in advance and don’t get your hands on it because it sold out in seconds, you are a little mad, but you also want it all the more now. And in comes Xiaomi’s second and third lot of devices. Just to be clear, I see no evil here, just outstanding marketing gimmickry that doesn’t hurt anybody and leaves everybody feeling they are in a win-win situation, which they are. Customers, e-tailers, Xiaomi itself, everybody stands to benefit when Xiaomi gets its online-only strategy right.

This is why Xiaomi’s foray into Brazil is all the more exciting. Xiaomi has announced its first device for the Brazilian market, the Redmi 2 for 499 BRL. The company is also rumored to be entering markets such as Russia which is another price-oriented market.

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While all the buzz around Xiaomi’s smartphone prowess is great one must not forget that Xiaomi refers to itself as a consumer electronics company and not just as a smartphone company. And it is taking giant strides in consumer electronics by enabling innovation and funding scores of other companies. These investments will eventually help Xiaomi tap into the Internet enabled, connected smart-home devices. The company’s keen interest in the IoT side of consumer electronics shows that senior executives at Xiaomi, such as CEO Lei Jun and VP of International Hugo Barra, have the future at least in their peripheral vision, if not in clear sight.

There is no doubt that Xiaomi’s age of expansion has only just begun and as the company enters the Russian market and spreads its wings over South Asia we will get to see and hear a lot more Mi buzz than ever before.