Tomorrow, Xiaomi’s Redmi 1S will go on sale for the first time in India. The plan is to sell 40,000 units in the flash sale on Flipkart, but well over 200,000 people have already registered for it, Manu Jain, Xiaomi’s India head, told Tech in Asia.
40,000 is not a small number to sell on the first day of sales but eager Mi fans on Xiaomi India’s Facebook page have already started posting their disappointment over the huge gap between the demand and supply.
Mi 3 on hold
India is a very price-conscious market, and understandably, people have been waiting for the disruptive Chinese phone-maker to feed their appetite for value-for-money gadgets. That has put Xiaomi in an unusual predicament.
Last week, Xiaomi sold 20,000 Mi 3 phones in two seconds. It was the sixth such flash sale and about 200,000 people had queued up online for the phone. The disappointed fans who didn’t get the phone were soon complaining on Mi 3 forums online. Soon after, Xiaomi put Mi 3 sales on hold, and Flipkart closed pre-registrations for it.
According to Manu Jain, this suspension was to concentrate on Redmi 1S sales. “Over the next few weeks, we will focus on Redmi 1S, and Mi 3 won’t be available. We will take the final call after a few weeks, once we have more visibility and data points,” Jain told us.
Xiaomi vice president Hugo Barra is in India currently with Jain. At the Redmi 1S launch event in Bangalore, they admitted that the overwhelming reception in India took the hot Chinese phone-maker by surprise. “Over 90,000 Mi 3 were sold in five flash sales since the launch on July 23, well over what the company expected to sell in three months,” Barra said.
Xiaomi forecasts the demand three months in advance, and its suppliers in China work along that cycle. So it’s no surprise that the company is struggling to meet the unexpected demand in India. Suspending Mi 3 sales for the time being is the only way out to tide over the device scarcity.
The catch-22 Xiaomi faces in India
Xiaomi runs on an unusual business model. Its phones are sold almost at cost price. In India, Mi 3 is priced at INR 13,999 (US$231), and Redmi 1s at INR 5,999 (US$99). The company spends nothing on ads. An ad-driven market traditionally, smartphone makers in India – from home-grown Micromax to Samsung, Motorola, and the latest Alcatel – have been spending heavily on marketing and advertising to launch new devices. In sharp contrast, Xiaomi counts on word of mouth, social media, and tech bloggers to create buzz and sell its phones.
Almost as soon as Xiaomi India opened its Facebook page, however, its posts went viral. People who had never heard of the company a few months ago rushed to register for the Mi 3 as soon as its top-of-the-line features and price-point were announced. That’s India for you.
But when Xiaomi enters a news market, instead of a blitzkerg, it tests the waters in small increments. That’s part of its long-term strategy. “We are not looking to make profits out of selling our phones. Our phones are just the starting point. We will make our money in the long run from an ecosystem around our devices. Like Amazon who built Kindle, Fire Phone, and invested in technology to boost its core ecommerce. Similarly, our phones are just a means to an end, and not the end,” Barra explained. In fact, Xiaomi thinks of itself as an ecommerce company.
Xiaomi also believes in taking advantage of Moore’s law. Just as the Intel founder had predicted that the cost of computing power would halve every 18 months, Barra had explained during Xiaomi’s Mi 3 launch in India that its aggressive pricing takes into account the lower cost of producing the phone a year or so down the line. So the Xiaomi strategy is built around a combination of decreasing cost of production along with increasing revenues from surrounding services accessed through the phone.
This strategy faces a challenge in India because of the uniqueness of the market. There is a huge hunger for smartphones here, and consumers have become alert and savvy to spot a good buy. And they are long past the days of a monopolistic government telephone service making them wait in line, sometimes for years, before they can get a phone. So the Xiaomi way of selling relatively small numbers of phones in flash sales has created both a buzz and a backlash.
Thousands of fans, who registered in vain for the Mi 3, protested virtually like spurned lovers. Since the first sales, their relationship with Xiaomi has been oscillating dangerously between love and hate. A little less buzz, probably, would’ve been better.
It’s a classic catch-22: Xiaomi can’t ramp up its volumes prematurely. At the same time, hungry fans will not tolerate periodic low-volume flash sales. The perfect meeting point is probably still some way off.
The company will take time to build up its profit-making arms in India. It has already announced a research and development center, indicating the long-term view it takes of the Indian market, which Barra has described as being the most important for Xiaomi after China.
Madder rush for Redmi 1S?
Tomorrow therefore is another red letter day for the Chinese phone-maker.
In India, the real action is in the budget smartphone arena where Redmi 1S will enter the fray. With the Mi 3 track record, there’s more than enough awareness about the brand as the one which raised the bar for smartly-priced smartphones. “Redmi 1S is the perfect phone for your mother or grandparents. This one is for those who are looking to make the transition from feature phones to smartphones,” Barra said. That’s the majority in India, where smartphone adoption is just taking off.
With the under-US$100 Redmi 1s, Xiaomi is dangling the perfect carrot before them. Check out its specs:
- 4.7-inch 1280 x 720 IPS touchscreen
- Android Jelly Bean 4.3 with MIUI
- 1.6 GHz quad-core Qualcomm Snapdragon 400 processor with Cortex-A7 core
- 8MP main camera, 1.3MP webcam
- 1GB RAM, 8GB flash memory, 64GB microSD card support
- Dual SIM slots
- 3G, 2G, Wi-Fi, Bluetooth, GPS/AGPS
- 2000mAh battery
- 137mm x 69mm x 9.9mm dimensions
- 158gm weight
Currently, no other smartphone-maker gives these specifications for this price. Learning from its experience with Mi 3, Xiaomi has doubled the number of Redmi 1S on sale tomorrow. But that too is far from enough as there is a madder rush for the cheaper device. How this plays out will be keenly followed not only by Xiaomi and its fans, but also worried competitors.
See: Is India Xiaomi’s hottest market after China?
The post Why Xiaomi faces a catch-22 situation in India, and what it is doing about it appeared first on Tech in Asia.
Why Xiaomi faces a catch-22 situation in India, and what it is doing about it
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