Xiaomi, a once red-hot Chinese hardware startup touted as the China’s answer to Apple, is encountering serious challenges from local competitors of Oppo, Vivo, and Huawei in the past year. It’s even been being moved from the first to the fifth spot in the market share list.
The reasons behind this disastrous drop were multi-faceted and involve issues from supply chain management to the lack of high-end products. However, the company’s online-focused marketing strategy is widely considered as a major reason.
Online marketing was a success, but it’s not one-size-fits-all
Born in 2010, Xiaomi positioned itself a brand with internet DNA and tried to engage customers with its geeky positioning. This is perfectly reflected in its slogan “Born for You, Burn for MI” (为发烧而生). In line with the positioning, Xiaomi leveraged corresponding online-focused marketing strategies, rejecting physical retail stores, traditional distribution channels, and conventional advertising as a way to keep lower product prices.
From online flash sales, social media promotion to creating a fanatic fan community, Xiaomi’s marketing moves proved to be a success in tapping China’s urban starter smartphone user base in its early stage of development with smartphones packed decent specs and affordable prices.
As the first regions to adopt smartphones, China tier-one and tier-two cities have gradually becoming saturated in recent years. Lower-tier cities and rural areas, where internet penetration is lower and traditional retailing still dominates, are taking bigger roles in driving smartphone market.
Market changes. Sticking to the old strategies, no matter how effective it was in the past, to tap a different market is obviously not a wise choice.
How will Xiaomi differentiate?
While Xiaomi is losing ground, its local competitors Oppo and Vivo are rising by adopting the exact tactics that Xiaomi once avoided. Now, Xiaomi is shifting to the offline-focused strategy that’s helped its rivals boom.
Xiaomi opened its first flagship retail stores in 2013. Back then, the move was largely a PR effort to build a more favorable company brand. Currently, there’s overall 47 Mi Homes in the country, including one in Hong Kong and one in Taiwan.
The firm’s obviously more serious about going offline this time. Company founder Lei Jun said the smartphone maker is going to add 200 brick-and-mortar Mi Home stores in 2017. A combined 1,000 such stores will be opened in the future three years.
In addition, the company started a pilot of a direct-to-retail model to eliminate distributors and other middlemen. Every individual retailer can order directly from the company on Xiaomi’s marketplace. The site shows that Xiaomi will offer training and incentive plans to individual merchants in the plan. Compared with opening physical stores, this is a less pricey way to reach to customers.