August 15, 2014 by ...
Xiaomi phones have been snapped up all over southeast Asia. These mini- me Apple clones are a favorite for their low price and decent specs. Demand is so great that within minutes if not seconds after product launches the handhelds are sold out.
At the same time serious security issues have been springing up. Is Xiaomi in ‘get the money and get out’ mode? Do they embrace the Chinese business idea that in a country of 1.4 billion people, customer retention is unnecessary. After all, even if they anger 1 billion of those people, they still have a USA plus Mexico sized market to deal with.
Another idea floating around China is that Xiaomi subsidizes its handheld units by covertly selling user data, or the Star N9500 business model.
China is so big, who needs repeat customers?
Here is a great post addressing this notion of customer retention in China. Essentially this model says that many Chinese firms would rather not deal with repeat customers as they are too much of a hassle anyway. They demand too much, linger too long, and follow up with them is a bitch.
Why bother meeting the needs of a cohort who has already given you its money? This model says. In fact, to them existing customers are a sinkhole, a cost. Each complaint requires the time and effort of a person who could be using that energy to fill new orders. Assuming that each customer will keep a phone for 1.5 years, this means Xiaomi can focus on 1.5 years of headaches, vis a vis existing clients, or merely forge ahead and ignore the old.
There seems to be an element of truth to this idea as far as Xiaomi is concerned. They drum up new business and yet dedicate little to no staff on marketing and customer retention. It is as if they plough us under with fantastic sales data so the quality and security concerns get shoved to the side.
Once again, they seem to be spending more time on obtaining new business than keeping existing clients happy.
Likewise, Xiaomi has been hit with security issues it has failed to properly address. Their phones still secretly send data to Beijing even after a patch was provided to fix this ‘glitch’. In keeping with the notion of taking the money and running, Xiaomi seems content with using data from ‘their’ phones irrespective of what their customers want or need.
This brings us to allegations that Chinese cell phone makers subsidize the price of handhelds by loading them with data snooping malware. This software surreptitiously confiscates user data and sells it. The Star N9500 was a prime example. This low priced unit was malware rich and sold like hotcakes till outed by a German tech firm for doing so.
Such a thing caught many in the west by surprise, but not so in China where consumers tend to be cynical of local goods. The communist party puts severe mandates on tech firms and data they must collect to help ‘preserve public order’. This includes data capture and key word searches. Anything which appears to have the potential to cause unrest, ie Beijing-speak for shedding the communist party in a bad light, must be deleted and the internet police informed.
This lack of data security in Chinese made tech goods is part of the draw in buying foreign, foreign kit is considered much safer.
No one knows how Xiaomi is using the data it is sending to Beijing, but it was important enough to take in the first place. Beyond that, it was important enough that even after being outed, Xiaomi is still snatching it.
This leads us to the issue of Xiaomi phones in Singapore receiving overseas telemarketing calls. If true, this corroborates Chinese fears that personal data is being sold to third parties and that loot is then plowed back into the firm which lowers the price of each phone.
Where does this leave us
One thing I learned while living in China and doing research here is to trust in the locals. Although they tend to be a little cynical for my taste, they truly understand the Chinese mindset. If they are quickly bailing on Xiaomi or questioning its integrity after only a few years, then who am I to disagree?
Based on what has been proven and Xiaomi’s lackadaisical attitude about security concerns, serious red flags abound.