A small Chinese smartphone brand is using its bigger brother’s tricks to beat it on Indian turf.
Realme, which began as an Oppo sub-brand in May 2018, was promptly spun off into a standalone entity. Between June and August 2019, the Shenzhen-based firm posted a phenomenal 600% year-over-year growth in India. In the quarter ended September 2019, the number of its buyers in the subcontinent grew by a whopping 400% from a year ago, recent data from International Data Corporation (IDC) show.
Though Realme only accounts for 3% of the total smartphone market in the country, compared to Xiaomi’s 27%, its strategy apes the market leader’s closely, experts say.
“Realme’s success is a perfect story of a new brand trying to take on a giant (Read Xiaomi) at its own game,” Navkendar Singh, a Gurugram-based research director with IDC India, told Quartz.
Unlike other Chinese players like Vivo and Oppo, which are very offline-focused with investments in channel marketing and offline distribution, Realme focused on online from the start. “Realme began as a direct competitor to Xiaomi in all respects, majorly via online, similar price points and segments of Rs7,000 to Rs20,000 ($98 to $280)—which is where Xiaomi dominates and has been immensely successful in giving latest specifications at very affordable price points,” Singh noted.
Like Xiaomi, Realme sold phones solely through an online channel for a year to cut overheads.
Beijing-based Xiaomi led in the online channel with a market share of 40% in the third quarter (July-September period) of financial year 2019, with four out of the five top models sold being from Xiaomi, IDC data show. While Realme is still small fish, it’s performing exceedingly well. The vendor’s online share stood at an all-time high of 26.5% during this period, a significant jump from 16.5% in the previous quarter.
This trend will likely continue as internet and smartphone adoption thrives and as e-commerce continues to evolve in India, experts say.
“The growth and maturity of online channels from serving more zip codes than ever, coupled with greater customer service, attractive promotions from discounts to cashback to EMI, and exchange offers will be pivotal in driving smartphone sales during this festive season and also taking a large share from the offline channels,” said Anshika Jain, research analyst of Counterpoint Research.
Funnily enough, the avenue for growth—the internet—is also a battleground for the two brands. The top bosses at Xiaomi and Realme have even exchanged words about their rivalry. In April this year, Xiaomi’s Manu Jain tweeted that the Realme 3 Pro featured an older processor than the one used in Xiaomi’s Redmi Note 7 Pro. Madhav Sheth, CEO of Realme India, hit back at Xiaomi for being “afraid.”
The online warfare aside, Realme is neck-and-neck with Xiaomi across many features, the CMR Mobile Industry Consumer Insight (MICI) study, which surveyed 4,000 smartphone owners across eight Indian cities, found.
The Shenzhen-based manufacturer leads marginally when it comes to looks, design, and feel, as well as locating service centres easily, whereas Xiaomi trumps Realme in battery life.
In order to gauge consumer experience, the CMR MICI Survey asked them if any of the problems they faced with their devices had led them to visit the service centre. Around 3% said they made such visits first within six months of a smartphone purchase. Realme had the lowest return rate.
“Smartphone brands which are responsive to consumer needs and focus more holistically on all aspects of consumer experience, including after-sales service, stand to gain in a hyper-competitive smartphone market environment,” said Prabhu Ram, head of the industry intelligence group at CyberMedia Research. “Realme’s product quality performed the best among the major players in the industry which is impressive.”
While Xiaomi pips total sales for Realme by a mile, the younger brand is performing as well as the older one when you zoom in.
For instance, during cashback and coupons site CashKaro’s seven-day Diwali sale this October, four of the ten highest-selling mobile phones were Realme and four Redmi, the cheaper sub-brand of Xiaomi. Moreover, Realme leveraged a series of Diwali sales between Sept. 30 and Oct. 31—four of them—during which it sold 5.2 million units to become the top-selling phone brand on Flipkart.
“Realme uses viral media and social marketing campaigns to target younger consumers like students,” said Neil Mawston, executive director of wireless device strategies at Strategy Analytics. Yugal Joshi, vice-president at Texas-based consultancy Everest Group, adds that in addition to digital marketing, Realme “seems to target the young crowd and focus on colleges, events, cultural festivals, etc.”
Though there are concerted efforts, the big question is whether Realme has had some beginner’s luck or if it’s here for the long haul.
“Realme is racing to the bottom on smartphone pricing and we question whether its breakneck growth is sustainable,” Mawston said. “We think Realme is in danger of over-shipping and building too much inventory in India. Next year will be much harder for Realme.”