Date
23 July 2019
Chinese smartphone maker Xioami can benefit from a self-owned delivery service arm, but it will need to weigh the cost factor carefully before pursuing any such plan. Photo: Reuters
Chinese smartphone maker Xioami can benefit from a self-owned delivery service arm, but it will need to weigh the cost factor carefully before pursuing any such plan. Photo: Reuters

Is Xiaomi preparing to set up a logistics unit?

As it prepares to mark the first anniversary of its Hong Kong stock market listing, China’s Xiaomi Corp is exploring new business opportunities in a bid to shore up its growth prospects. Among the plans could well be a logistics venture, judging from a trademark registration initiative.

Xiaomi has registered a new trademark that suggests the smartphone maker may be aiming to have its own logistics unit. According to media reports, which cited information from the Trademark Office of China’s National Intellectual Property Administration, Xiaomi could be eyeing a foray into courier and express delivery services in China.

The venture could operate under the Xiaomi Logistics banner, or perhaps Xiaomi Express or Mi Express, if it gets off the ground. The trademark was approved on June 21, as per the reports.

Xiaomi was quoted as saying that the move was only meant for brand protection purposes, yet there is chatter that the consumer tech firm may indeed be pursuing plans for an own logistics arm.

After initially selling only through online channels, Xiaomi has partnered with third-party couriers services to deliver its products, which poses its own set of problems.

By having its own express delivery service, Xioami can improve its supply and delivery chain, an area where the Beijing-based firm has been found wanting.  

The tech giant will be aware that operating an own logistics network will bring some challenges and won’t be an easy task. For one, there is the cost factor to consider as logistics is a capital and labor-intensive industry, requiring big investments on infrastructure and manpower.

Still, the plan may be worth considering as a self-owned logistics network can help Xiaomi improve the customer experience for online shoppers, through quick and efficient order fulfillment and delivery.

Xiaomi founder Lei Jun had in the past invested in a logistics firm, Rufengda, and made it the default delivery service provider for orders at the Xiaomi online store. However, Rufengda’s service quality failed to match the expectations of Xiaomi fans, who often complained about late delivery and other issues.

As Rufengda suffered financial difficulties, Xiaomi later began relying on other service providers to handle the order delivery.

A self-owned courier and express delivery service will offer a chance to Xiaomi to cut its dependence on third-party firms and also improve the delivery service quality.

As market competition heats up, the Chinese firm may be seeking to import some strategies it adopted in India. Xiaomi recently launched a “Next Day” delivery service in India, a country where it has become the No. 1 smartphone brand.

Xiaomi will begin offering “guaranteed next-day service” in more than 150 cities across India, with the service offered at very little cost for the consumers. The service is aimed at those who want quicker deliveries than that offered by regular online shopping channels. Orders placed before 3 pm will be delivered on the next day.

In China, Xiaomi can gain competitive advantage by leveraging its offline retail stores. The company can integrate the online shopping experience with offline retail stores by making the offline stores serve as online order pickup points.

Customers will need to visit a store to pick up their orders, an activity that will provide Xiaomi an additional opportunity to sell more products. Meanwhile, the company can deliver an improved shopping experience for the consumers, enhancing its brand image.

That said, Xiaomi will need to weigh the costs and benefits of setting up a delivery services arm carefully.

The logistics industry, as a whole, has been suffering margin pressures as costs keep rising while prices are kept low due to intense competition. Moreover, there is also a manpower problem to contend with, as not enough young people are willing to become frontline delivery staff due to long hours and tough work conditions.

Having an own logistics unit may help Xiaomi improve its customer service, but it may come at a price in terms of a dent on the group’s finances. Would the company be willing to take such risk?

– Contract us at [email protected]

RC

EJ Insight writer

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