July 22, 2015 by ...
Xiaomi is plagued by decreasing sales in China. This has been caused by fierce competition, saturation in the smartphone market and blatant piracy. All of these factors make it harder for Xiaomi to differentiate itself and increase market share.
In order to combat plunging sales, Xiaomi is looking overseas.
Their business model of hunger marketing scaled well in India. Xiaomi limits sales by creating a lottery of sorts in order to purchase. The lucky few who get online first can buy the phones. Those left out feel as if they have missed the boat. This creates a tremendous need in those who missed out.
Flash sales or ‘hunger marketing’ worked so well that Xiaomi sold millions of units in China and hundreds of thousands in India within minutes. This process led to hype and cred for Xiaomi which translated to a $45 billion valuation.
They tried to do the same in Brazil and essentially floundered. They did not sell millions nor even hundreds of thousands of units, but 20,000 over a two-day spread.
Hunger marketing not only flopped but riled Brazilians as well. Unaware of Xiaomi’s business model, the people from the land of beaches and beauty were miffed. They consider phones a commodity and easily purchased. Not being able to buy one hours after the ‘grand coming out party’ only reinforced a negative image of Chinese companies. Brazilians thought That Xiaomi had entered the market but lacked preparation.
Koreans don’t do Xiaomi either
Xiaomi did something similar in Korea and flopped as well. They did not sell phones out concerns for IP litigation, l but merely offered chargers and the like. Koreans weren’t buying it, literally.
In Brazil Xiaomi sold 20,000 phones and other accesories over a two-day span. In Korea they stumbled into that same number over two weeks.
Yeah, over a two week stretch, Xiaomi could only peddle 10,000 items. This low number is even more remarkable considering how cheap Xiaomi kit is.
Xiaomi model fails to scale
The problem with Xiaomi is that the model does not scale. Korea has top notch tech and low end wannabe gear is not on their bucket list. The same is true for the west as well.
Sure, people like a bargain, but that’s what outlet stores are for. When buying tech, they prefer to have something solid. Xiaomi’s tepid results in Korea, Brazil and select European countries proves this. Buying a charger on the cheap is no big deal, but phones are different. We don’t want to pitch them out after six or seven months.
The bottom line is that Xiaomi is stalling. Me-too players are attacking on all fronts and Xiaomi has nothing to counter that threat. Xiaomi should hurry and go IPO before the proof of their inability to scale sinks their valuation.