After consolidating its position as the largest smartphone vendor in India, Xiaomi has its eyes set on ramping up its retail play by rolling out Mi Stores in 5000 locations in smaller town and villages by end of 2019. In the first wave of this expansion, the company opened 500 of these stores on October 29.
Xiaomi entered India in 2014 with a focus on online sales, but has slowly increased its offline presence. The company already has what it calls ‘Mi Home Stores’ similar to China in around 50 urban cities in India, where it offers a range of products. Then it has Mi Preferred partner stores in India’s major cities.
In some flagship Mi Home Stores, Xiaomi is already showcasing products which are yet to launch in India like the Ninebot scooter or its masks. However, with expansion in rural India, Xiaomi will face a completely new set of challenges. For starters, these stores will be smaller in size, around 300 square feet in average, according to Xiaomi India managing director Manu Kumar Jain.
In contrast, Mi Home Stores in urban cities and metros are bigger, averaging around 1250 square feet. Xiaomi also plans to offer other products like its Mi LED TVs, backpacks, accessories, air purifiers, and not just limit itself to smartphones. Exactly how much demand these products will generate in these areas remains unclear.
Then, there’s the price-sensitive nature of these markets, especially in rural India. But Jain is confident that their Mi Stores will prove to be profitable, both for the franchise partner and the brand.
Jain explained that running a nine-month pilot in Telangana, Karnataka, Andhra Pradesh and Tamil Nadu helped them gain some insights into these markets. According to Jain, the pilot proved many traditional assumptions about the rural market wrong.
“When we started the pilot, we thought we will sell only select SKUs from these particular stores. We believed that people will have limited demand, and there will be none for flagship products. We also believed that people will not buy TV, Air purifiers. That proved to be wrong,” Jain said.
Xiaomi says there is demand for its mid-premium Redmi Note 5 Pro and even smart televisions. “In these towns, there are no good quality TVs available even though the main mode of entertainment is television,” pointed out Jain.
The company also realised that offering newer products late to rural markets would not be the right approach. “We also did this in the beginning. This turned out to be a disaster. Our partners complained and said people want the latest phones. Thanks to social media everyone knows. So we will offer the latest models in these Mi Stores as well,” he said.
When it comes to these Mi Home Stores, Xiaomi will look for partners who either own a property or can rent one and are ‘passionate’ about selling their products. The idea will be to keep these stores at the very least in a taluka headquarters and maybe some even in villages so that distances are reduced for potential buyers.
While the partner will bear costs of the rent or the property along with any other construction work needed, Xiaomi will handle all branding related solutions in the store.
Xiaomi will manage the supply chain by expanding its distributor-base from the present five to 25. It will also focus on training partners on product and software. “We will focus on product, pricing and explaining to our partners how our products are better. But the biggest focus will be on the Mi TV. We have seen that people tend to understand specifications and price of smartphones. But with television, we have our own Patchwall OS, and not everyone is comfortable with it,” Jain said.
The company already claims the TV segment to be its fastest growing business.
India has become an important market for the Chinese technology major. The company swung back to profits in its annual third-quarter results for 2018, thanks to sales from India and Europe. In the Indian market, the Redmi series is what has helped drive volumes for the brand. But Xiaomi still struggles in the premium segment despite new offerings under the Poco brand.
According to research firm Canalys, the company shipped around 12 million phones in the third quarter in India, mostly via online sales of the Redmi series. Jain is hoping that the big push into offline retail will help bring in a 50-50 balance between offline and retail. Now, this is skewed in favour of online which has a 70 per cent share of the company’s sales.