Xiaomi Goes Rural In India

Plans to Open 5,000 Stores by the End of 2019

This has been a good year for Xiaomi in India. The company became the largest smartphone brand in the country during the third quarter of 2018, beating Samsung and Vivo to take the top spot. Now the Chinese manufacturer is hoping to prop itself up with a massive retail presence spanning thousands of new physical stores. Xiaomi, which sells products ranging from smartphones to TVs in India, currently gets 70 percent of its revenue in the country from online sales, with the remaining revenue coming through offline channels such as its Mi Home and Mi Preferred Partner stores.

Xiaomi entered India in 2014 with e-commerce sales its initial target. It pioneered online viral marketing campaigns with its flash sales, but of late, Xiaomi has been slowly growing its physical presence to cater to a wider audience. To penetrate the Indian market, the company needs to have a good mix of online as well offline channels; an online-only strategy makes it impossible for people to experience its phones before buying, and many consumers in India want to get a feel for a device before committing to it. Xiaomi picked up on this and set up Mi Home stores in about 50 urban areas, as well as Mi Preferred Partner stores in major cities (see Xiaomi Plans Bricks-and-Mortar Expansion).

This month, Xiaomi announced that it’s taking its offline strategy further, beefing up its retail play by rolling out Mi Stores in a staggering 5,000 locations in tier-two and tier-three towns and villages by the end of 2019. It has been testing its products in rural areas of some states in southern India, such as Karnataka, which is home to Bangalore, the Silicon Valley of India. In October, it opened 500 retail locations in 470 villages in 14 states as part of the first wave of this expansion.

It’s interesting to note that last week, Xiaomi was awarded a Guinness World Record for opening the largest number of retail stores in India simultaneously.

Xiaomi is getting some help from another market disruptor, Reliance Jio, which has been giving Indian subscribers a taste of 4G connectivity. The mobile operator has introduced its own very low-cost 4G handset, the JioPhone, but Xiaomi believes that many users are keen to have a more-robust device and wants to be ready to meet a coming surge in rural demand. Xiaomi will be there with a solid retail experience to explain the products. According to Manu Jain, managing director of Xiaomi India, other brands present in rural areas don’t focus on the user experience and lack such an extensive range of products.

India has become a vital market for Xiaomi’s global dreams, providing it with massive volumes to build scale. The company swung back to profitability in the third quarter largely thanks to sales here (see CCS Insight Quarterly Market Analysis: Mobile Phones, 3Q18). Now Xiaomi sees a lot more potential in the country and recognizes that demand is very strong for its Redmi mid-premium smartphones as well as TVs, particularly in rural areas. As it brings more stores to the country, rivals will need to make their own investments in building relationships with consumers.