Dressed in jeans and a black T-shirt, a young man walks across a stage in a packed room. He speaks of a revolution, of an unprecedented technological leap. He holds a rectangular device that fits in the palm of one hand: it’s not an iPhone and the speaker is not Steve Jobs. It is Lei Jun, founder of Xiaomi, the brand originally from Beijing (China) that in March of this year presented its first electric vehicles to the world. However, when someone hears the word Xiaomi, they don’t exactly think of the motor sector. The first image is that of a smart phone within reach of most pockets. Fifteen years ago this Asian technology company set itself an ambitious goal: to become one of the largest manufacturers of smartphones in the world. To achieve this they have had to overcome the innovative spirit of Apple, the versatility of Samsung and the ferocity of Huawei’s prices.
In a decade and a half, Xiaomi has taken the crown of the third most important mobile manufacturer in the world. Reaching the podium, however, has not been easy. The brand set itself the colossal challenge of building a mobile phone with low prices without the reputation of poor quality that then plagued Chinese merchandise. To oust the competition, they decided to be disruptive with prices: they would barely make the terminals more expensive, selling each device with almost no profit margin. “This planning worked very well in its beginnings in China, where the terminals in the segment that Xiaomi entered to compete in were poor in terms of quality and specifications,” explains Francisco Jeronimo, vice president of equipment at IDC. “It was like offering the quality of a Mercedes, but at half the price.”
However, to avoid digging a financial hole and have minimal profitability, they accompanied this strategy with a decision that remained intact for many years: they would not have a physical store, they would sell directly from their website and they would completely dispense with advertising in the world. real. They decided to take advantage of the virality of social networks to communicate to customers about offers and new launches. “They used very low-cost distribution channels,” explains Handel Jones, director of the consulting firm IBS. The plan worked. When the brand launched its first smartphone on the Chinese market in 2011, the Xiaomi M1, it sold like hotcakes: 150,000 units in 12 minutes.
“They decided to compete in this low-price segment because they knew that the main business would come from the ecosystem,” adds Jeronimo. The brand had in mind to sign alliances with different manufacturers to bring to the windows a wide range of products with the Xiaomi seal, from a smart blender to an electric scooter: “They knew that their customers would not only buy cell phones, but also these devices that they could connect to the ecosystem smart from Xiaomi”. Been Wood, chief analyst at CCS Insight, adds that “apart from targeting high sales volume, the company also focused on having efficient supply chain management to keep component costs low.”
That 2013, the brand began international expansion led by Hugo Barra, a former Google executive who had been key to the launch of the Android operating system in the United States. The strategy was, in theory, simple: land in countries with large, price-sensitive populations. They started with India, a market with more than 1 billion potential buyers, the second largest after China.
However, the battle would not be so easy to fight. Xiaomi began to observe the shadow of its competitors in the low-price market that it thought it had conquered. Jeronimo explains that Apple realized that it was going to be difficult to continue growing in its premium segment, so they began selling older versions of the iPhone at lower prices: “This put Xiaomi in a very complicated position. The ecosystem that Apple had created by connecting mobile phones and computers was much stronger than the one that Xiaomi was pursuing with its portfolio of smart appliances.”
However, Lei Jun’s company was not going to sit idly by. In 2013 she responded with the announcement of the Redmi sub-brand and five years later Poco. The initial approach with these launches was to create cutting-edge terminals—that competed with the high-end of Apple and Samsung—in power and design, but maintaining the low price strategy. It worked. In four years, Xiaomi became India’s best-selling brand, with 25% of the market share, according to the analysis firm Counterpart Research. “Not in our wildest dreams did we think we could achieve so much in such a short time,” Manu Jain, global vice president of Xiaomi in India, shared then in an interview on CNN. “Xiaomi made people understand that to have a quality product, it is not necessary to pay a lot of money. “We broke that myth,” he stated then.
Wood contextualizes that Xiaomi managed to develop “solid marketing campaigns” thanks to sales flash, which consisted of offering a very limited number of devices at very attractive prices, creating a feeling of scarcity that boosted demand and brand awareness. This strategy, colloquially known as “hunger marketing”, allowed, for example, the Pocophone F1, the first terminal designed by the Poco brand, to become the best-selling smartphone online in 2018 in India.
It’s Latin America, the plan was different, but just as effective. Xiaomi allied itself with teleoperators that, in 2019, represented 64% of mobile shipments to the region. Thanks to this, it was able to grow organically each quarter, according to Damian Leyva-Cortés, from the technology analysis firm Canalys. During those years, Xiaomi also signed an alliance with América Móvil, the largest operator in the region, which allowed the mobile brand to have meteoric growth of up to 6,500%, as was the case in Colombia.
The arrival of the smartphone was a respite for millions of people of all ages who until then had to deal with the high prices of Samsung and iPhone, which in many cases doubled the amount of a minimum wage. The first mobile phone that Xiaomi put on the shelves in Colombia and Mexico cost around 140 euros, while the iPhone 6, popular at the time, could reach 800.
In Europe the situation was not very different. In several countries on the Old Continent, the brand was crowned the best-selling brand within a few years of arriving. According to Jeronimo, the strategy of opening physical stores was an important catalyst for popularity. “Having a physical place in the most important places in Europe was crucial for customers to understand that Xiaomi was not a cheap mobile brand,” he clarifies. In 2023, according to Counterpoint Research, Xiaomi had achieved a market share of 28.45% in Spain, surpassing Apple with 27% and Samsung with 22.59%.
A geopolitical push
Xiaomi has had to battle practically since its inception with another competitor with a Chinese seal such as Huawei (Shenzhen). The company founded in 1987, with a powerful muscle in the telecommunications sector, decided to land in the territory of smartphone manufacturers and became a fervent competitor of Xiaomi for almost the entire time they coexisted in the affordable price segment. .
Since 2019, however, the scene has darkened for those from Shenzhen. Donald Trump’s Government decided to veto the purchase of the company’s equipment. The blockage left Huawei without access to Android updates and the Google ecosystem, such as the YouTube platform or Gmail. The decision was a debacle for its business in most markets. Linghao Bao, an analyst at policy research firm Trivium China, explains that “the communications giant went from being the world’s second-largest smartphone maker, after Samsung, to being essentially dead.” Huawei went from having close to a fifth of the global market share in 2019 to just 4% in 2021. Xiaomi, on the other hand, rose to 14% that year.
Xiaomi escaped a possible veto during Joe Biden’s government. However, the Chinese company does not officially sell phones in the United States yet; only through Amazon and resellers of other e-commerce sites. Wood believes that a key factor for Xiaomi to dethrone Apple and Samsung is the ability to sell devices in the US market. “Although this seems unlikely in the short term.” In any case, it is now impossible to ignore the company with the orange logo, whose name in Chinese metaphorizes that “a grain of rice can be as big as a mountain.”
Follow all the information Economy and Business in Facebook and xor in our weekly newsletter
#Xiaomi #success #mobile #phones #sell #electric #cars
