Xiaomi recently celebrated its 10th anniversary. So we decided to conduct research in order to find out why this company is so popular among others.
First of all, before discovering the reasons for Xiaomi’s fast growth, let’s talk about Xiaomi’s history. Xiaomi was founded in June 2010. It was a collaboration among partners, including Qualcomm and Temasek holdings. The latter is an investment firm owned by the Singaporean government.
Xiaomi’s founder is Lei Jun, a serial entrepreneur and angel investor. Currently, he serves as Xiaomi’s chairman and CEO. Xiaomi is the world’s 4th most valuable technology start-up after receiving US$1.1 billion funding from investors. It made Xiaomi’s valuation more than US$46 billion. It ranked 468th on Fortune Global 500 list for 2019. In addition, in 2020 Xiaomi’s smartphone shipments reached 147 million units ranking fourth globally since 2018. Moreover, the company has been listed on the Hong Kong Stock Exchange since 2018.
The company’s first product was the Xiaomi Mi 1, which was released in August 2011. It was based on MIUI – its own version of Google’s Android system. Later, Xiaomi released several smartphones based on the MIUI and other tech-related products such as smart TVs, smart pedometers, smart action cameras, smart blood pressure meters, etc.
Key success factors of Xiaomi’s growth
Quality / Price
One of the main factors that helped Xiaomi become popular was actually its brand name they wanted to make. The first smartphones that they sold were too cheap and they used only social media and other forums for advertising. They also had quality comparable with other famous companies. But the prices were sometimes even 50% lower, though MIUI was quite good and still it gets good reviews. On the other hand, MIUI kept many consumers rebuy Xiaomi devices because of its frequent updates and support. So, the first factor that we mention is its quality/price ratio, and also the brand, which now offers tons of different products.
Mi Fans
The second factor is the Mi community. Like Apple and Samsung fans, Xiaomi also has a consumer base that really loves the company’s products. As a matter of fact, these “Mi Fans” often attend Xiaomi’s product launches in China. Although these fans aren’t just limited to China. We mean Xiaomi regularly showcases its most important products in other countries as well.
Hugo Barra as a factor of Xiaomi’s growth
Hugo Barra is from Brazil and he represents the face of the company to English-speaking media. His past success with Google as Android’s vice president carries huge weight for Xiaomi in the smartphone world.
With Barra’s extensive contacts and carrier relationships accumulated during his time at Google, Hugo Barra helped Xiaomi succeed in the increasingly competitive smartphone market.
Ecosystem-centric sales strategy
As we mentioned above, Xiaomi is not just a smartphone manufacturer. It also sells smart home products. Xiaomi is definitely more than this. They also began to focus on what they intended to do in the first place. It is to build a vast mobile ecosystem. This is not surprising anymore, because Xiaomi is also widely regarded as “Chinese Apple”. Yes, Xiaomi is like Apple in some ways, as it makes its own high-quality hardware and software. It also has a very loyal fanbase. Moreover, Xiaomi has definitely innovated in how it sells its devices too — from their online channel to their Mi Home Stores just like Apple did with its Apple Stores. Xiaomi introduced several categories under its MIUI Smart Life. It includes Mi Health, Mi Go, Mi Home, Mi Game, etc. Thus, this is another factor of Xiaomi’s growth.
Read also: Xiaomi Officially Launches A New LOGO!
At the same time, Xiaomi has invested largely in 5G and AIoT execution (Artificial Intelligence Internet of Things). So, they produce products that are able to interact well with phones and smartwatches. And although most of their revenue still comes from smartphone sales, Xiaomi believes that this will all change in the coming future.
Profit margin
It is also worth mentioning that in 2018 Xiaomi explained why their products are cost-effective. The company announced that it will forever limit its net profit margin of hardware sales to a maximum of 5% and return the extra profits to users. “At this point, I would like to pledge to our existing and potential users: starting in 2018, Xiaomi’s hardware businesses’ overall net profit margin will not exceed 5% per year. If the net margin exceeds 5%, we will return the excess to our users.”- Lei Jun.
Later in 2019, he said that the company has a gross profit margin of just 8-9%. He believes that the devices will become expensive as the industry is moving towards 5G technology. Further, he adds that compared to others, Xiaomi’s price-performance ratio will be better. “I think the gross profit margin of 8% -9% is very low and since our sales model is based on e-commerce sales, the pricing that the end customer ends up paying will buy will be very cheap. The most important thing is that our own gross profit is very low, and the middle channel is very short. So, the final price in the retail market remains very attractive to the buyers.”