Xiaomi’s Failing Business Model-‘No Money, No Money’

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June 9, 2015 by ...

Many are calling Xiaomi ‘the next Apple’. This would be true if Apple had made its mark by mimicking the competition relentlessly. If this were true, then we’d not be enjoying snartphones, touch screens, laptops which are not industrial strength ugly, and our ears would be glued to Sony Walkman’s.

But of course none of this is true and of course Xiaomi is no Apple. Hell, they are not as innovative as Oppo, but there you have it.

Now that we have established what Xiaomi isn’t, let’s consider what it is- a low cost reseller of private label tech goods which it rebrands and sells. Think Sams Club as a similar business model.

Xiaomi makes nothing

Simply put, Xiaomi makes nothing. They are essentially a wholesaler of goods which are very very faithful replicas of world class products. They produce nothing. 

But Apple does the same!

So what? Apple produces nothing either,’ you say.

‘You are correct, ‘ quoth I. 

But then I pat the soft spot on the top of your skull and explain that while it is true Apple does not manufacture things, they do design them. And in design there is value. People pay for things which are appealing, useful and unique. 

Reviewing this post and/or blog, one is reminded that Xiaomi does neither. Not only do they not produce their kit, but don’t create it either. Their design team is a couple of interns equipped with Photoshop (pirated of course) and an old HP 386 pc. Their job description reads:

-find pics of cool stuff

-copy it to hard drive

-add a ‘Mi’ to it

-submit to executive staff

Xiaomi makes nothing and Apple creates more wealth than Russia

This brings me to my point, Xiaomi’s business model is broken. While they do some great things, ie leverage the net, create a huge and loyal fan base, generate excitement, but they fail to make money

In the first quarter of this year Apple made more profit than Xiaomi made in sales. This is logical because people will pay millions for a Van Gogh, but a pittance for its replica. Xiaomi’s inability to create puts it in the ‘pittance’ category, as seen in its pricing.

Xiaomi is #1 in Chinese smartphone sales and #2 in global wearables. Their profits however, suck. This problem will persist till Xiaomi invests in doing anything which smacks of originality. 

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