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WHAT IS XIAOMI?
Xiaomi, “SHOWerMee” is only four years old, but the biggest smartphone seller in China, has a $45 billion valuation from private investors, making it the most valuable startup in the world. The business model, according to Xioami,CEO, Lei Jun, is “sell smartphones at cost, or close to it, and will make money through the ecosystem of services”. They sold 65 million phones in 2014 but the vexing issue is in determining exactly what those “services” are? The easy answer includes traditional Internet services like those offered by Google, including an app store and an Amazon like online portals. I think of it as Devices with Product Design. A kind of Dyson for the Internet of Things (IoT) Connected World.
Understanding Xiaomi’s fans is critical to understanding the company. Xiaomi devices are very popular among the younger population in China, especially school and college students and young adults who have just entered the workforce and still live with their parents. What is more interesting though are the plans Xiaomi has for this demographic when they get a home of their own? They will need to buy TVs, Appliances, Gadgets and just about everything for their new house. And many of these products will be built by 3rd parties that Xiaomi invests in.
SELLING THE XIAOMI LIFESTYLE
So Xiaomi are not so much selling smartphones as they are selling a lifestyle, and the key to that lifestyle is MiUI, Xiaomi’s software layer, the “User Interface”, that ties all of the products together. In fact, you could argue that Xiaomi is actually the first “Internet of Things” company. Xiaomi is taking notes from /Apples strategy deck, vertically integrating the whole solution, from the sales of http://www.mi.com/en/, stores, the Mi4 flagship phone, IoT appliances down to naturing the loyal fan base primed to outfit their homes for the very first time.
XIAOMI’S AMBITION. CHINA and BEYOND.
In the long run, the impact of Xiaomi may be more significant than the returns the company ends up making its investors. There are a few big Chinese companies, even some that have gone international like Alibaba and Huwaii, but there has never been a big Chinese consumer brand that has resonated beyond China, in part because few have resonated within China.
In fact, there is more than what meets the eye when it comes to the age of Xiaomi’s fans. Older Chinese – the over-30s that under-index on Xiaomi ownership – have traditionally looked down on their own country’s brands, assuming them cheap and second-rate. This is the population to which Apple – and all of the Western luxury companies – are selling to with great success. There is a younger generation, though, the Xiaomi generation, that has grown up in a country that has been growing by near double digits every year they have been alive. To their minds of course China is a global power with global brands. Xiaomi is tapping into that nationalistic bent, and the red star on their mascot’s hat couldn’t be less subtle.
1. The vertical strategy and younger demographic also explains Xiaomi’s international expansion. Very BRIC + MINT; India – the world’s 2nd largest population – is already well underway, and Indonesia – the 4th largest – just kicked off and Brazil (5th) is happening soon.
2. After 20 years of low cost manufacting China, Xaomi, Aliaba y Huwaii are now competeting with Occidental brands. The core manufacturing skills are already in place. By focusing engineering and entrpenueur nous, Mexico could follow a path simular to China and start to offer high value Mexican consumer products that can compete in the global marketplace.
3. Finally, here is the takeaway for Mexico. When technology changes, the consumer power and economics of existing ecosystems is up for grabs. Buy targeting a younger demographic with a lower cost product and providing a path to grow with the brand, Xiamoi has shown how to manage adoption on a truly global scale.
Mabe or Elektra anybody?