Xiaomi’s sales blip is a cause for worry

Although Xiaomi scores well on its image, the overriding reason for purchasing a Xiaomi device is to get a good deal, far more than with any other brand. With its entry price points, it is more likely to be purchased by new smartphone owners than repeat buyers who are upgrading and generally spending more on their next handsets. 

Xiaomi has been extending its portfolio to cater for a wider audience and to attract customers wanting more premium products with models like the Mi Note and Mi Note Pro, but its top-selling models are still lower-end ones. Its share is, therefore, still dominant in the low-price tier (under Rmb 1,000) and losing out in the mid-tier (Rmb 1,000-2,999) where Huawei is growing on the back of its Mate 7 and P8 models. A reliance on sales at the low end is a problem for Xiaomi as there is much lower customer loyalty when choice is mainly about price. Part of the success of Huawei’s Mate 7 and P8 models has been due to a skew toward purchasing in physical stores and driven by recommendations from store assistants.

Xiaomi will need to continue to strengthen its brand to move away from being solely a manufacturer of low-end devices because, right now, it looks as though its customers who are ready to upgrade are using Xiaomi as a stepping stone to Apple. 

Xiaomi shuns calling itself a smartphone maker, claiming instead to be an “internet company” supplying a range of hardware products and online services all the way from TVs, air filters, battery packs, cameras, fitness trackers, scooters to cloud storage.

No matter the number of ‘peripheral products’ from Xiaomi, in the eyes of consumers it is still a smartphone brand. All these electronic products are mostly extensions of the mobile device. No doubt, from a product marketing aspect, Xiaomi has been very stimulating and surprising. In terms of being a brand representative of the way people live, unfortunately Xiaomi is missing the premium value of the brand. Saturation in the domestic smartphone market is believed to have created a tougher environment for Xiaomi, since the first tide of phone replacements and upgrades has passed, leading to estimates for annual shipments in the next few years to stabilise. 80 million units of sales for Xiaomi may just be its peak in the mainland market, while its overseas foray into the highly competitive Indian market has been made complicated because of patent issues.

Xiaomi’s problems are now amplified by the industry. Any growth will gradually slow down. Still, it is too early to conclude about Xiaomi versus Huawei, because in the internet era, every brand has nine lives.