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Hugo Barra talks Xiaomi business model, international expansion and more - Exclusive
Editor’s note: This post is part of a three-piece profile on Xiaomi based on Bobby Situkangpoles’ interview with the company’s head of global expansion, Hugo Barra. The two other posts are:
“It’s about four million, no that’s not the direct translation … Can I get my phone back? … Ah, It’s 3.2 … I knew 4 million was too high!”
That was Hugo Barra, on stage, announcing the expected price of Xiaomi’s Mi3 in Indonesia, the way an Indonesian would. The fact that Barra was able to not only utter the pricing in Indonesian Rupiah but also appreciate the significance of 3.2 mil (around 290 USD) through the eyes of an Indonesian smartphone user struck me as a surprise. It was surprising because it shows a level of local awareness that I wouldn’t normally expect from anyone who has not stayed for at least a few months in the country, much less an exec from a foreign tech company.
Barra was in town to take the stage at Xiaomi’s event during last weekend’s Indonesia Cellular Show. Xiaomi’s own event was understandably low-key, as the plan was to introduce the brand to the local market instead of having a real launch.
After spending a few minutes fiddling and getting a little frustrated setting up the projector that the organizers had provided, he took to the stage and introduced his company, and its products to a hundred or so attendees. Throughout his presentation, Barra exuded the same — and sometimes more — enthusiasm he showed at Google I/O, back when we was announcing the original Nexus 7. When he showed a prototype of Xiaomi’s first tablet, the Mi Pad, you could clearly tell from the glee in his eyes that this was a man was taking intense pride in the fruits of his labor.
After the keynote and a quick Q&A session, he spent some time interacting with a crowd of Indonesian techies and Xiaomi fans. The genuine interest he showed as he listened to anything that the small mob had to say was another thing that made me realized I was dealing with a different breed of exec, one whose openness goes deeper than merely donning polo shirts.
Hugo Barra started his interview with Android Authority by talking in detail about Xiaomi’s business model, how e-commerce is in the company’s DNA, and how Xiaomi is now the third largest e-commerce company in China. That is a considerable achievement for a company that only sells its own products. According to Observer Intelligence, last year, the combined turnover of nine of China’s largest e-commerce stores was $91.7 billion dollars.
An online first company
Barra reiterated what Xiami’s CEO, Lei Jun, mentioned to Bloomberg earlier this year – that Xiaomi sees their phones as hardware+software delivery platforms, much like Amazon sees their Kindle devices. According to Barra, selling devices online has not only allowed Xiaomi to “sell (devices) at cost (by) making very little money on our hardware” but also reaching first a set of users that Barra thinks Xiaomi devices are perfectly tailored to. That means users who are “tech savvy and internet active,” people who reads tech blogs, fluent on specs, and care about bang for the buck.
Building an honest and open relationship with users through social channels
Xiaomi’s internet-first strategy does not stop on selling devices online. Communicating directly to users through social media is also an integral part of Xiaomi’s strategy. The company spends virtually zero on traditional advertising.
Barra believes in fostering an honest, open, and transparent relationship with Xiaomi users (that Xiaomi insists to address as MiFans): “We told them everything. We told them all the suppliers we’re working with, how long it takes to build stuff, or what we’re working on, and everyone appreciates that.”
He also pointed out how MiFans know that social media is where they can get in touch with the company. These fans know that whatever news there is about Xiaomi, they will always find it on the company’s social channels first. Since his business card also contains his WeChat nickname, we find it hard not to believe him.
The challenge in meeting demand
Of course, any discussion about Xiaomi’s business model wouldn’t be complete without also touching their selling in small batches policy.
When asked what he thinks about some people in the media that accused Xiaomi of using the approach to generate hype around their devices through the illusion of scarcity Barra strongly replied “those people are wrong because they don’t understand our business.”
He elaborated, “instead of bringing large quantities of products every few months, we bring small quantities of our products all the time. As soon as we get it, we sell it.”
He said that the approach allowed Xiaomi to be the only company in the world who is able to iterate on hardware as fast as it iterates on software. These iterations are based on community feedback sourced from the company’s social media presence and worldwide MIUI user communities.
Barra believes that the challenge of ramping up production to meet demand is a battle for everyone. “We’re constantly pushing our suppliers to move as quickly as possible, (but) it is hard because they themselves are trying to strike a trade-off because other customers want the same components,” he said.
In the exec’s opinion, people tend to point fingers at his company because Xiaomi employs a model that makes it obvious when supply doesn’t meet demand: “everything is in one place, so it is easy to point out when things are sold out; for others, it does not (look) as extreme.”
Flash sales and starting small
Regarding the complaints of disappointed consumers who couldn’t buy a Xiaomi phone through one of the regular flash sales, Barra is adamant that this is one of the important roles that Xiaomi’s social channels play. “Xiaomi fans know when the next flash sale will be and how many units we will offer through our social channels; if they can’t get it now, they know they can always try again next time,” he said. Barra believes that Internet users like this approach, as they can understand it and they are used to it.
In Malaysia and Singapore, Xiaomi chose to do their flash sales on Tuesdays at noon. For new markets like Indonesia, Barra mentioned that Xiaomi will consider local consumer behaviors and customs in deciding the right time to conduct flash sales.
However, Barra is also keen to make it clear that, in order to properly learn a new market, Xiaomi will always start small. He said the company started with 3000 to 6000 units in Singapore. For larger markets, like India and Indonesia, those numbers will obviously be adjusted, but Xiaomi will always start small.
Hopeful Indian and Indonesian MiFans, consider yourselves warned.