Xiaomi one of the big stars of China is explosive growth in online retail and smartphones
is coming to Europe, and it’s doing so with a grand launch event in the Spanish capital of Madrid. For Xiaomi, this is just the latest stage in a long-term expansion plan that aims to transform the company from a self-described startup into a globally recognized brand. But for the mass of people in Europe, today’s event marks a transition: it turns the distant and exotic Chinese retailer into a real entity selling real products on our home continent. This is a pretty big deal from a company that’s as innovative with its retail strategies as it is with its device manufacturing.
Ahead of today’s announcement, I spoke with Wang Xiang, the senior VP responsible for Xiaomi’s international business, sales, marketing, and legal and IP strategy. He has been with the company since the summer of 2015, having previously served as the president of Qualcomm in China. “I was the person to work with Xiaomi from day one,” he tells me, “and I personally built the partnership between the two companies.” Day one for Xiaomi as a hardware company was way back in 2011 with the original Xiaomi Phone, and Wang and Xiaomi CEO Lei Jun have been partners or collaborators in some form ever since.
Another continued relationship for Xiaomi since its inception has been a loyal following of fans and users within Spain. “We have many, many customers in Spain, the UK, Germany, and Italy,” says Wang. “We don't even know where they buy the product.” One likely source is AliExpress.com, the online outlet channeling goods from the internal Chinese market overseas. Xiaomi, which typically relies only on digital marketing and word of mouth, sees the “very friendly and also very active” fan base it already enjoys in Spain as a good reason to make the country its first European market. Its event today paid tribute to two of Xiaomi’s most active fans in Spain, who’ve been following and supporting the company for seven years.
For Spaniards, the appeal of Xiaomi phones was originally catalyzed by the demand for cheap smartphones that WhatsApp’s popularity in the country created. People here use WhatsApp as much for business and administrative reasons as they do for private chats, and Xiaomi’s devices have always represented an affordable way to get connected. Wang confirms this when I ask him what he thinks Xiaomi’s biggest selling point will be: “Value for money, for everyone. We are making a premium product, but not selling it a premium price.”
Leading off with its marquee, bezel-phobic Mi Mix 2 device at €499 and the Android One “flagship” Mi A1, costing €229, Xiaomi is hoping to make inroads into the European phone market. Wang is wary about looking too far ahead, though: “In order to be focused, we want to make Spain successful first. And then we can think of other markets and countries. We want to learn from the customers about the taste of European people.” Conscious of Xiaomi’s limited resources, he prefers to do major expansion of this kind one country at a time. That’s the approach Xiaomi took with its entry into India three years ago, and it has paid off handsomely this year, as Xiaomi is now within only a few percentage points of the market leader Samsung (this summer’s IDC figures showed Xiaomi commanding 17 percent of the Indian phone market).
Having previously focused exclusively on online retail — which helped it keep operational costs low — Xiaomi has now adopted a hybrid “new retail” approach that sees it embrace physical stores as well. Wang notes that online smartphone purchases represent only 20 percent of the Chinese phone market. That proportion had previously peaked above 30 percent, but it’s the insatiable hunger for smartphones in more rural communities where shopping is done offline that is tilting the numbers back in favor of brick-and-mortar stores. To address that demand, Xiaomi now has 220 stores in malls across “tier 1” Chinese cities, and it plans to take that total past 1,000 within the next three years. There are another 130 official Xiaomi stores elsewhere around the world: nearly 20 in Russia, Indonesia has two (with plans for 10 in total), and so do Malaysia, Thailand, and Singapore. Dubai and Egypt are also on a list of Xiaomi markets that numbers 60 in total.
In Spain, Xiaomi’s online presence will be substantial. Opening sales tomorrow, November 8th, the company’s devices will be available to buy at mi.com/es as well as on Amazon.es and through an official Mi store on AliExpress.com. Media Markt, Phone House, and Carrefour will also be featuring Mi devices on their online outlets and through their physical retail channels. Xiaomi plans to open two authorized Mi stores in Madrid on November 11th, and every other retail partner will have Mi devices in stores on November 22nd. It is a comprehensive distribution strategy, and it’s backed by extensive planning for how to handle phone servicing via local partners and provide customer support phone lines. Xiaomi wants people to be able to buy and, if necessary, return and repair their Xiaomi devices as normally as they do with any other consumer brand.
Beside the two major smartphones, Xiaomi’s retail presence will be fleshed out with four of its so-called ecosystem products. These are the Mi Band 2, priced at €24.99, the Mi Electric Scooter, costing €349.99, the Mi Box Android set-top box, which is €74.99, and the Mi Action Camera 4K for €134.99. Those will be joined on retail shelves by Xiaomi’s full portfolio of accessories and peripherals like power banks and headphones.
As I walk around Madrid, the smartphone I see most prominently displayed at carrier stores and pushed via advertising posters is the Huawei Mate 10, a slightly less premium version of the Mate 10 Pro flagship from that other big Chinese brand. In a way, that device encapsulates the position of Spain within the European phone market: it’s a slightly less spendthrift place than its wealthier neighbors to the north, and so it provides more opportunity for smaller companies and more budget-friendly models to flourish. That opportunity is what Xiaomi is now seeking to exploit with its newly announced plans. The only thing missing from the company’s distribution strategy is placement in mobile carrier stores, though that might come with time; it took Huawei years to build up a reputation for itself as a reliable business partner.
To this point, Xiaomi has mostly been a foreign curiosity to most of us in the western world. One of a number of Chinese companies fancying itself to become “the Apple of China,” Xiaomi first rose to global notoriety by selling products that looked like utterly shameless Apple ripoffs. The company then famously hired Hugo Barra away from Google, who played an instrumental role in rehabilitating its brand image, vociferously defending its creative talent and refuting the “copycat” label. With Barra recently departed to work for Facebook in a more familiar Silicon Valley environment, questions about Xiaomi’s international strategy arose, and today’s Spanish launch provides many answers.
Wang Xiang is not a replacement for Hugo Barra. The two men “worked very closely together” for over a year, and from what I’ve learned here in Madrid, it was Wang that was always intended to steer Xiaomi’s internationalization efforts. That’s no bad thing, as Wang is partially to credit for this year’s outstanding resurgence in Xiaomi’s phone sales, which was the highlight of the latest Strategy Analytics market report, titled Xiaomi Soars as Global Smartphone Shipments Hit 393 Million in Q3 2017. His work on developing what the company calls a “new retail” model — a mix of online and offline sales channels, as represented by its approach to Spain today — has helped Xiaomi rediscover success at home and, on the evidence of its Indian experience, export it to foreign lands as well.
Wang and Xiaomi are loathe to look beyond the present expansion into Spain. “We don’t want to spread the resources too thin,” says the company executive. But knowing the boundless ambition of his boss Lei Jun, if Spain turns out to be anywhere as successful an expansion as India has already been for Xiaomi, we can expect this Chinese company to broaden out its European presence far beyond the Iberian peninsula.