Seated on the first floor of Chinese electronics company Xiaomi’s Bengaluru office, a team of more than 30 is busy at work. Parsing the websites of e-commerce platforms like Amazon and Flipkart for insights, liaising with the company’s team in China, and strategising for launches. Smartphones, the product category the company is synonymous with in India, are not their priority.
Instead, this team is tasked with rolling out Xiaomi’s next great hope in India—its ecosystem of smart products. From air purifiers and water filters to televisions and lights, Xiaomi wants to go from filling your pocket to covering your homes.
While this may seem like an oddity for a company that has grown to dominate India’s smartphone market in just over five years, its importance can’t be overstated. Affordable smartphones have delivered it market share, but their wafer-thin margins—one former Xiaomi executive pegs it at less than 4%—have kept it from profitability.
Xiaomi’s India business posted a loss of Rs 148 crore ($19.4 million) for the year ended March 2019 despite earning revenues of Rs 35,427 crore ($4.6 billion). Earning more from its phones isn’t really an option for Xiaomi—Indians are notoriously price-sensitive, while the mid-range smartphone segment it plays in is hyper-competitive. Besides, customers replace phones annually, at best, and choosing a new phone often comes down to features and price, rather than brand loyalty.
So, instead of changing its smartphone strategy, Xiaomi is shifting its focus to products with higher margins. Enter, Xiaomi’s smart internet of things internet of things Internet of Things Internet of Things is the concept of connecting any device to the internet and/or to other connected devices. This includes everything: from cellphones, televisions, wearable devices, lamps, coffee makers, washing machines, and so on. (IoT)-enabled offerings. The average margins on these products range from 20-35%, says the former company executive quoted above.
This move isn’t India specific, either. At the start of 2019, Xiaomi co-founder Lei Jun announced that the company planned to invest $1.48 billion in smart products over the coming five years. Jun reiterated this IoT focus when he visited India the same year. While Jun gave Xiaomi India managing director Manu Kumar Jain a free hand to decide what works and what doesn’t, the message was clear—smart products would be the way forward.
Indeed, Xiaomi has since forged ahead with this in mind. This 30-member team, led by Xiaomi India’s chief business officer, Raghu Reddy, has introduced a number of smart products from the company’s Chinese portfolio to India. These range from smart lighting solutions to air purifiers, TVs, and even water purifiers.