On Jul. 22, 2014, Xiaomi decided to sell its Mi 3 model on Flipkart, the Indian e-commerce website.
Some 100,000 people signed up to buy the phone and Flipkart just couldn’t handle the rush.
Soon, this became the norm for the fast-growing Chinese smartphone company. The entire stock of Xiaomi’s smartphones was getting sold out in seconds.
Even Xiaomi was caught off guard. “When we came here, we were planning to sell a few thousand phones, and we were concerned if that target might be met. In the first two weeks alone, we sold 20,000 phones,” Hugo Barra, Xiaomi’s vice president of international operations, told Quartz in an interview last year.
That’s exactly the sort of momentum that Xiaomi hopes to capitalise on in 2015—and that now it will also cease to be just a phone company in India.
From the beginning
So far, Xiaomi’s had a good run in the subcontinent, but not without its challenges—some of them uniquely Indian.
The firm, set up by serial entrepreneur Jun Lei, started selling its handsets in China in 2011. It took just three years for it to become the world’s third largest smartphone manufacturer. Today, it is also the world’s most valuable startup with a total funding of $1.4 billion.
In many ways, this Chinese upstart is different from a traditional phone company. It doesn’t have any presence in traditional retail channels and communicates with customers solely through social media and online forums, barely spending any money on marketing. That allows Xiaomi to keep the price of smartphones low, while offering devices rich in features.
In 2012, it sold 7.19 million smartphones and raked in $2.08 billion (Rs12,828 crore) in revenues. Two years later, in 2014, it sold 61 million smartphones, with revenues of $12 billion (Rs74,052 crore).
In Nov. 2013, the company got another shot in the arm when it hired one of Google’s top Android executives, Hugo Barra, to lead its international expansion. The next year, they launched in India—now already Xiaomi’s largest market outside China.
“They (Xiaomi) were pitching two things at the same time,” said Tarun Pathak, an analyst with Counterpoint Research. “We have a great hardware and we are giving you at one-third the price.”
Within just six months of arriving, it had already sold around one million handsets in India. ”What is most amazing that we were able to do it without any marketing,” said Manu Jain, head of Xiaomi India.
Part of it has to do with India’s insatiable appetite for smartphones. There are an estimated 117 million smartphone users in the country, and India is set to become the world’s second largest smartphone market after China by 2016.
As it stands, Xiaomi holds a tiny 1.5% of India’s smartphone market, according to CounterPoint Research. Samsung still dominates the market with a 24% share, followed by Micromax. So, there’s still a lot of headroom for growth.
Not an easy job
But it hasn’t been a year without problems either.
Even before Xiaomi started selling its handsets in India, the Indian Air Force had expressed concern since the smartphones relayed sensitive user data to its servers in Beijing and issued an advisory.
While that didn’t do much damage, Xiaomi’s India campaign found itself in deeper trouble after getting mired in a patent controversy with Ericsson.
The Delhi High Court banned Xiaomi from selling its handsets in India, although the restriction has now been partially lifted. The case will be heard on Feb. 5.
Alongside, Xiaomi’s novelty in India might also begin to fade as a wider section of smartphone consumers are introduced to the brand. ”Of course it will see growth in numbers but I see the kind of hype created around the brand going off (in 2015),” said Faisal Kawoosa, an analyst at Cyber Media research.
Jain disagrees. ”This year will change how people perceive Xiaomi India,” he said. “We are a tech company and an e-commerce company more than a smartphone company.”
Prices for both offerings haven’t been decided yet, but Xiaomi is already in talks with several content partners for Mi TV and expects to launch it by the second half of 2015.
The Chinese firm will be also partner with content aggregators to build its catalogue of movies, music, videos, apps and games for its Mi TV—and is looking to go beyond just Bollywood movies and music to reach a wider audience.
That’s a smart strategy, according to Pathak, even though wearables and smart TVs aren’t big in India yet.
“Internet of things will be a hot segment,” he said. “In India, it will take another one or two years for demand to pick up but it will give them a head start if they launch it soon.”
On Jan. 15, it announced the launch of two new flagship phones—Mi Note and Mi Note Pro. The Mi Note will be available by next week in Beijing, while Note Pro will be up for grabs by the end of March. In India, these handsets will be available in a few months after their launch in China.
“One of our focus is to reduce the time lag between (a) China launch and (an) India launch” to under two months, said Jain.
Xiaomi is also backing up its manpower in India. The company is already in the middle of shifting to a new 20,000-square-foot office space in Bangalore that’ll include its software engineering, after-sale services and business development departments.
In October 2014, it also hired Jai Mani, a former Google hand, to develop India-specific features for its phones. These include local language support for its operating systems and building features related to Bollywood and cricket to appeal Indian users.
While Xiaomi India’s R&D team is significantly smaller than its team in China where it employs 1,800 people, it could give the company a significant advantage over local manufacturers, who don’t have deep pockets to spend on research.
Also, Xiaomi is scouting for Indian startups and is looking to invest and partner with them to build products for their devices, Jain said. That’s a strategy the company has followed globally, investing in several startups including Misfits, a US-based wearables company; iQiyi, a Chinese online video platform; and Westhouse, an online game developer.
Not just online
Until Nov. 2014, Xiaomi had relied on the internet to sell and promote its products, until it partnered with Airtel to sell the Redmi Note 4G.
Now, the Chinese phone maker is looking to rapidly expand the network of its exclusive service centres in India, which Jain calls “Experience Centres.” In addition to providing after-sales services, customers will also be able to explore Xiaomi’s products.
There are currently five such exclusive service centres in India—one each in New Delhi, Mumbai, Bangalore, Kochi and Hyderabad. This year the company will open 100 such service centres throughout the country, including cities such as Jaipur, Chandigarh and Ranchi.
Xiaomi India also intends on spending a lot of time this year reading India’s corporate laws and regulations.
“We are understanding the legality for starting e-commerce operations,” Jain said.
The company is already in talks with multiple Indian partners for tie-ups to launch their portal, mi.com, since India still doesn’t allow foreign direct investment in e-commerce. But it isn’t entirely clear how Xiaomi plans to work around the regulations governing India’s e-commerce sector, analysts told Quartz.
And even after mi.com is launched, Flipkart will continue selling its handsets, Jain said.
Pulling the same off in India won’t be easy, but then Xiaomi’s making it a habit of doing so well that it’s even surprised itself.