Date
17 September 2019
Xiaomi is investing 5 billion yuan to expand its offline retail network across China. Photo: Bloomberg
Xiaomi is investing 5 billion yuan to expand its offline retail network across China. Photo: Bloomberg

Xiaomi plans retail expansion to narrow gap on Huawei

Xiaomi Corp. (01810.HK) is trailing far behind Huawei Technologies in sales in both local and international markets. But now that Huawei is reeling from the US trade embargo, Xiaomi is given a chance to catch up or perhaps even surpass its key competitor.

Xiaomi announced in an internal meeting on Tuesday that it is investing 5 billion yuan (US$724.57 million) to expand its offline retail network across the nation.

The company has also set up a committee to supervise its China business after sales plunged 20 percent in the first quarter of the year, according to IDC data.

It said the money will be used for team training, incentive awards to partners and innovation in retail sales channels, among other purposes.

Meanwhile, Huawei is said to be preparing for a 40 to 60 percent drop in its international smartphone shipments after the administration of US President Donald Trump included the Chinese telecoms equipment giant in a trade blacklist that restricts it from buying goods and services from American high-tech suppliers.

This is a sharp decline, considering that Huawei saw a 50 percent growth in its smartphone shipments in the first quarter of 2019, in contrast to Xiaomi’s 10 percent decline during the period. Huawei is still the second-largest in smartphone sales, but it is said to be losing ground to market leader Samsung Electronics and third-ranked Apple Inc.

In view of the impact of the US embargo, Huawei is expected to step up sales in the home market to offset overseas setbacks.

So Huawei’s new focus could put it in a collision course with Xiaomi, which is also seeking to boost its domestic business.

Xiaomi co-founder and chief executive Lei Jun said part of the new budget will be used to raise commissions for retail stores to sell more of its phones.

Lei has also set ambitious targets, including riding on the 5G wave for growth. He said he wants Xiaomi to become the third largest player in the market and be ready to challenge the market leader in three years.

In the smartphone market, Xiaomi has decided to transform its Redmi brand into an independent brand to allow it to build its own market position.

The branding strategy is paying off. Redmi K20 Pro was the best-selling model during the June 18 shopping festival. Priced below 3,000 yuan, it is the cheapest smartphone running on the Qualcomm 855 mobile chip.

At the same time, Xiaomi is expanding its product offerings to diversify its revenue streams as the current Sino-US trade conflict is also likely to affect its smartphone business. In fact, it is now a market leader in flat panel TV and air-conditioner.

During the midyear shopping festival, the company said total sales amounted to 6.48 billion yuan. 

It sold 4.43 million units of artificial intelligence and Internet of Things equipment as well as 525,000 smartphones at JD.com, Tmall and Suning outlets.  According to data from JD.com, four out of 10 phone models sold on its website were from Xiaomi.

Xiaomi also sold more than 100,000 units of smart TV in the first nine minutes of the festival. Sales reached 200 million yuan at 10:48 a.m.

Market observers attribute Xiaomi’s impressive results during the shopping festival to the good execution of its “mobile+AIoT” strategy this year. This strategy includes the strategic repositioning of Redmi, the restructuring of the China business, and the establishment of a home appliance division.

Xiaomi hopes to build on these successes to strengthen its position in the home market and prepare itself for tougher battles in the international arena.

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CG

EJ Insight writer