Xiaomi unveiled the Mi 4i in New Delhi on Thursday, the first major product announcement that the Chinese company has made outside its home country. Picking the Indian capital as the venue for an important milestone in the five-year-old company's journey was no accident. Barely three quarters after it first entered India, Xiaomi has established itself as the fifth-biggest smartphone vendor in the country, making India its biggest overseas market in the process.
What makes this feat impressive is the fact that Xiaomi managed to do this despite the fact that, until recently, its phones were only available online — this, in a country where less than 20 percent of the population has internet access.
In India, offline sales channels still dominate the market. However, setting up an offline sales network in India can be tricky. Unlike the US, where you need to make sure a handful of major retailers stock your products and you are pretty much covered, in India the majority of retail is still unorganized. There are middlemen that help simplify things by giving companies a simpler way to get their products to multiple retailers in a region, but every extra layer in between the manufacturer and the consumer means less profit for the company and / or a higher price for the consumer to pay.
India isn't an easy market to break into
In February of last year, Motorola was the first company to experiment with an online-only sales model. The company decided to skip the middlemen and get into an exclusive tie-up with Flipkart, India's largest e-commerce store. Motorola’s success selling the Moto X, Moto G, and Moto E online helped to pave the way for Xiaomi and other players to follow.
The first phone that Xiaomi launched in India was the Mi 3. When the phone came to India last July, Xiaomi had just unveiled the Mi 4 in China, but that didn’t stop the Mi 3 from becoming an instant hit. The company was selling smartphones as fast as it could import them from China, experiencing similar success with subsequent launches like the Redmi 1S and the Redmi Note.
How did a relatively unknown brand from China make such an impact in India?
So how did a relatively unknown brand from China make such an impact in India without spending any significant amount of money on marketing or roping in Bollywood superstars to endorse its products? The answer is simple: pricing.
Unlike in the US and most other developed markets, mobile operators in India do not subsidize smartphones. In fact, buying a SIM card and buying a mobile phone are, in most cases, completely independent transactions, though some mobile operators will happily sell you a phone as well. This means that an overwhelming majority of phones sold in the country are unlocked, contract-free, and, as a result, available only when you pay their full price.
In markets like India, it is not uncommon for people to spend a couple months' worth of salary to buy a phone, so you can understand why price is a more sensitive subject. So when Xiaomi introduced the Mi 3 in India, with specifications comparable to the likes of the Samsung Galaxy S5, LG G3, and Sony Xperia Z3, but at a price tag that was nearly one-third of its more illustrious rivals, it's no surprise that it was an instant hit in the country, despite the fact Xiaomi was pretty much an unknown name as far as the Indian consumers were concerned.
While Xiaomi itself has not spent any money on direct marketing, teaming up with Flipkart not only gave it access to a large platform and its marketing dollars, it also imbued Xiaomi with an implicit trust — the idea being that if it’s good enough for Flipkart to promote, it must be good, period. That’s something that most Chinese brands entering the country usually struggle with. Companies like Huawei have spent large sums of money on celebrity endorsements and other marketing activities, but Xiaomi has been able to surpass them all.
Hugo Barra, a well-known face at Google before he joined Xiaomi back in 2013 to become its official brand ambassador outside of China, has played a big part in the company's rise as well. During his public appearances, Barra comes across as extremely approachable and is always happy to answer questions — a refreshing change from most executives in India. With Google arguably being the most admired tech company in India, Barra's connection with Mountain View doesn't hurt his image either.
Hugo Barra played a huge part in Xiaomi's rise
Toward the end of January, Xiaomi launched the Mi 4 in India, carrying a price tag that was nearly 50 percent higher than its predecessor. While the first sale went well, demand for the smartphone seemed to slow down from the second week onward, as we stopped seeing the "Sold out in X seconds" proclamations on Twitter that had become a weekly trend with other products.
The Mi 4 was the first real bump in the road for Xiaomi in India, and one can't help but feel that the price, more than any factor, was the real reason behind this. When Mi 3 first came to India, it was totally unique in terms of its value proposition, and it took everyone by surprise. As it happens, consumers got used to this pretty quickly, and "great specifications at an affordable price" became Xiaomi's thing. Clearly, the Mi 4 failed to live up to this sentiment.
At the recent launch of Xiaomi Redmi 2 in New Delhi, someone actually posed this exact question about the $100 device: "Yes, the device is a great value, but where's the Mi 3-like 'wow factor' in terms of pricing?" Even the usually unflappable Hugo Barra had no answer to that.
Until today, that is, when Xiaomi unveiled the Mi 4i, which it hopes will "wow" the Indian consumer once again. Based on what we've seen of the device — and most importantly of the price tag — I wouldn't bet against India falling in love with another Mi.