EXPORT IMPORT DATA

Date : 08-Apr-2015
Subject : Xiaomi ropes in Amazon, Snapdeal; ends exclusive tie-up with Flipkart

Chinese phone maker Xiaomi ended its exclusive partnership with Flipkart and joined hands with new online partners Amazon and Snapdeal to sell its products in India, continuing its moves aimed at widening its distribution channel, with analysts saying that its online-only strategy has reached a saturation point, as indicated by its dipping import numbers.

This latest move comes on the back of the company's decision to tap brick-and-mortar retailer The Mobile Store to sell its devices, a global first for the Chinese company which indicates the existing reach limitations of the online-only channel. Import data from Cybex Exim Solutions available with ET showed that monthly imports for the company, popularly called the Apple of China, have consistently fallen over the past few months -- from 334,000 units in December 2014 to 140,000 units till March-end 2015, with overall sales over 1.86 million units till date.

Manu Jain, head of India operations at Xiaomi, didn't comment on the import data but countered analysts' notions that falling online numbers led to the company's offline move.

"Online is much smaller today, but it is growing really fast. This is just like China when e-commerce started off there," he said. "This trend (buying online) will only increase in the coming years. I am a big believer of online as the benefits are multiple," Jain added.

Analysts, however, say that while some of the import dip could be due to seasonality, Xiaomi has realised that its online-only strategy will get them only so far, and if it wants to tap a greater market share and grow presence, it needs to rely more on the offline model, one which it hasn't tapped anywhere in the world so far.

IDC's senior analyst Karan Thakkar said that falling import numbers could be reflective of lower registrations for the brand, triggered by competition from the likes of Lenovo, Yureka and even Huawei operating in the same online space which was relatively less competitive when Xiaomi started out in India.

"Online-only is a great strategy to enter a new geography and test the waters and at the same time helps in controlling the pricing of a product by doing away with the margins of retailers or distributors. However, only one distribution strategy (online) might not work to expand volumes in India," said Hong Kong-based Counterpoint Research senior analyst Tarun Pathak.

"In such a case, one will be targeting only 15% (Internet users in India) and rest 85% will be out of reach," he added.

Xiaomi has cornered 3-4% share of the flourishing Indian smartphone market within six months of its first flash sale in July on Flipkart.com. Players like Motorola, Xioami, Jolla and a plethora of others are among those which today sell just online, which helps save costs.

But this approach has limitations to growth.

"Xiaomi is forced to, and will go offline. There are still a large number of customers who want to touch and feel, and only then buy. More importantly, there are some people who are not comfortable buying from online stores," said MD Subhash Chandra, Managing Director of South India-based retail chain Sangeetha Mobiles.
The handset maker recently tied up with Bharti Airtel to sell Red Mi Note 4G through the carrier's 133 stores in areas where Airtel offers 4G services, a strategy that it follows in China with local carriers there.

"In China and others markets, we sell 20-30% though offline, primarily led by operators, while the remaining sales happen online and through mi.com. We want to do that in India too," Xiaomi's Jain said.

The former Jabong co-founder admitted that India was different as people bought handsets from retailers as against buying from operators, a norm in overseas markets. This was largely owing to India being a 95% pre-paid market as opposed to overseas where most consumers are on post-paid plans.

Xiaomi is looking at scaling up the number of brick-and-mortar stores with The Mobile Store across the country, which is limited to Delhi NCR as of now, even as it continues to create its own retail store online. However, the number of smartphones which will go offline will be smaller compared to the quantities for its e-commerce partners.


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