Many companies would get complacent if they’d achieved the sort of success Chinese smartphone maker Xiaomi has had in India. Consider this—since entering India in July 2014, it has grown to control 29% of the Indian smartphone market, boasts of 75-80 million users, and accounts for the bulk (57%) of online smartphone sales. Xiaomi has also ramped up its production capabilities—seven manufacturing locations churning out three phones per second. And a new product launch every month.
But Xiaomi isn’t even close to taking its foot off the pedal. Because it’s seen what has happened to the companies who have. Nokia, Samsung, Micromax. All played the fickle market share game and fell victim to its fleeting fortunes.
Xiaomi knows this history, and refuses to repeat it. It can see a resurgent Samsung and upstart Realme gaining ground in its rearview mirror. And while Xiaomi may not have to surrender its crown just yet, it is already feeling the heat. In under a year, Realme has become the fourth largest smartphone brand in India, commanding 7% of the market. Faisal Kawoosa, founder of technology consulting firm techARC, estimates that at least half of the 6 million smartphones Realme sold in the last one year were bought by Xiaomi users changing brands.
Yes, Xiaomi has shown quarter-on-quarter growth. According to data from Counterpoint Research, it went from 27% market share in the final quarter of 2018 to 29% in the first quarter of 2019. However, year-on-year, Xiaomi’s market share dropped—it was 31% in the first quarter of 2018. In fact, two research analysts The Ken spoke to said that Xiaomi won’t be able to maintain the breakneck growth it has enjoyed for the last four years.
And even if Xiaomi remains the alpha as far as smartphone market share goes, this likely won’t be enough for it. Xiaomi’s biggest strength is its pricing, and while this has helped it conquer the price-sensitive Indian market, it has its drawbacks. While it made Rs 23,061 crore ($3.3 billion) in revenue for the year ended March 2018, it made only Rs 293 crore ($42.11 million) in profit. Historically, it has operated on really small margins, with founder Lei Jun saying that Xiaomi will never go beyond a 5% profit margin on its devices.
With razor thin margins on hardware and no guarantee that its market share dominance will last, or even for how long, Xiaomi needs to protect itself. For its first five years in India, Xiaomi approached the market like it was running a 100-metre race. Now, it understands that to remain successful, it needs to change its approach. This isn’t a sprint, it’s a triathlon. Xiaomi seems to have the first two legs under control—devices and retail, where it is ramping up its offline presence.