Xiaomi, the rising star of the smartphone market, missed out on its sales targets for 2015 by quite a margin, leaving some to wonder if the Chinese brand’s innovative business strategy was beginning to hit its limits. To continue its push this year, Xiaomi is reportedly looking to double the number of smartphones that it sells through physical retail stores in China, according to an internal document.
Xiaomi had quickly claimed a significant market share in China and other emerging markets due to the low cost but decent specifications of its smartphones. This is possible due to the company’s focus on online sales, which allows Xiaomi to push costs down and keep tighter control over its stock levels. However, this business model has been imitated by many of its competitors and this increasing competition may go some way to explain why Xiaomi’s growth slowed for the first time ever in China during last year.
“Xiaomi is trying to expand offline rapidly … But mi.com is still the core business,” – anonymous insider
According to a person close to the company, Xiaomi is planning to up its retail presence by increasing the number of its “Mi Home” stores in China from 20 to 50 throughout the year. A more noticeable physical presence would certainly set Xiaomi apart from the field of low cost smartphone retailers and could help the brand edge into the very top tier of the market. Not to mention showcase the company’s growing range of accessories and other electronics products. However, this extra expense may alarm some analysts if sales continue to slow throughout 2016, given the reportedly slimmer than usual profit margins associated with Xiaomi’s business model.
Analysts estimate that roughly 40 percent of Xiaomi’s 70 million or so sales in 2015 came through offline stores, so we could be looking at 56 million retail sales in China alone this year, if the company can reach the ambitious reported target. Xiaomi is used to being one step ahead of the game, but now it looks like the company has to be the one to adapt to the competition.