Xiaomi, the smartphone and tech gadget manufacturer from China announced that they are expanding their reach to France and Italy the end of this month, after opening its first Mi Home store in Barcelona, Spain, late last year. The first Mi Home store is confirmed to be located in Milan and set to open on May 26, bringing more than 70 products carrying the Mi brand, from neck pillows and ballpoint pens to air purifiers and smartphones.
Xiaomi released its first smartphone in August 2011 and has rapidly gained market share in China to become China’s largest smartphone company in 2014. As of 2017 Xiaomi was the world’s 5th largest smartphone company. As of the start of Q2 of 2018, Xiaomi has now become the world’s 4th largest smartphone manufacturer.
Xiaomi has grown from a startup to a company with 15,000 employees and 100 billion yuan (US$16 billion) in sales in seven years. Initially, it relied on a business model that allows Xiaomi to sell hardware at zero or low profit margin, but monetize through complementary online services such as movies and shows, as well as games and other offerings. The hardware creates a platform for the company to sell services to their customers.
The model worked and caught a considerable number of fans, especially young tech-savvy workers in big cities, who appreciate Xiaomi’s affordable smartphones, tablets, laptops and online service. However, as smartphone and internet penetrated into China’s remote rural areas and small cities, Xiaomi’s exclusive reliance on online sales couldn’t quite compete with other mobile brands such as Vivo and Oppo, which heavily invested in partnership with retailers in those areas.
2016 was a tough year for Xiaomi with smartphone sales decline to a rumored 41 million, from a reported 70 million a year earlier. Xiaomi’s billionaire founder Lei Jun — sometimes called “the Steve Jobs of China” — blamed the slump on supply-chain problems associated with the company’s rapid growth. This forced Xiaomi to retreat from several overseas markets, including Brazil and Indonesia.
But Lei Jun was not going to give up that easy. With determination, they found their solution: create an ecosystem of some 100 startups as partners to provide Xiaomi with other internet-connected home and tech products that would draw customers to its stores.
Xiaomi Senior Vice President Wang Xiang, who used to run Qualcomm’s China business, explained how the ecosystem strategy drives traffic in an interview: “Buying a phone or TV is a low-frequency event. How many times do you need to go back to the store?” he said. “But what if you also need a Bluetooth speaker, an internet-enabled rice cooker, or the first affordable air purifier in China — and each one of those products is not only best-in-class, but costs less than the existing products in that category? Our ecosystem even gives customers unusual new products that they never knew existed. So they keep coming back to Xiaomi’s Mi Home Store to see what we’ve got.”
All its ecosystem products, from pillows to air purifiers, and from rice cookers to portable Bluetooth 4.0 speakers, aim to resolve similar price-to-performance “pain points” for customers. They find out what current products’ shortcomings, such as high retail price or low battery capacity, fund a startup to devote themselves to solve that problem. Their products are inexpensive, but not cheaply designed or manufactured. They’ve won more than 100 international design awards.
And the number proves its success. The first 10 months of 2017, Xiaomi has shipped 70 million smartphones, completing its shipment target for 2017. It also opened over 300 Mi Home stores across China to boost its offline sales and planned to have more than 2,000 by 2020. This month, Xiaomi filled to go public on the Hong Kong Stock Exchange and aims to raise $10 billion in IPO which is expected to be the world’s biggest IPO raise since 2014.