A Chinese Mobile Brand Rattles the Globe
Smartphone Maker Xiaomi Tries to Replicate Deep-Discount Model Abroad
By Paul Mozur
Updated Dec. 17, 2013 7:28 p.m. ET
Hugo Barra left Google for Xiaomi, which was founded in 2010 and sells high-end phones at a steep discount. Agence France-Presse/Getty Images
BEIJING—Xiaomi Inc., the startup that has rattled China's smartphone market with its fast-selling handsets, is looking to tap its international fan base for help as it tries to expand abroad, according to its new American executive.
Xiaomi Global Vice President Hugo Barra, the former Google Inc. official who joined the Chinese company in October, said the smartphone maker—which in recent months began selling phones in Hong Kong and Taiwan—will likely next begin sales in Southeast Asia, though he didn't give a time frame.
Xiaomi plans to make use of its fans in other markets to popularize its phones and overcome language and border barriers, Mr. Barra said. "We have fans everywhere," Mr. Barra said in an interview, his first with foreign media in China. "We're on a mission. We want to have an impact in the world."
Started in 2010 by Chinese entrepreneur Lei Jun, closely held Xiaomi sells high-end phones for prices close to cost. Its flagship Mi 3 phone costs $326, less than half the price of top models from Apple Inc. and Samsung Electronics Co. Xiaomi, which is worth $10 billion according to its most recent round of fundraising, expects to sell about 20 million handsets in 2013.
Xiaomi's operating platform—currently available in English and Chinese—can be downloaded onto computers world-wide, enabling tech enthusiasts to experience Xiaomi's interface without owning one of its phones.
To cultivate a fan base, Xiaomi gives its users and fans direct input into what features and updates it adds to its operating platform, which runs on top of Google's Android operating system. It updates its software weekly, free of charge.
The model has won the company more than five million registered users on its Chinese forum and more than 100,000 on its English forum, according to Mr. Barra.
He said Xiaomi has forums in 21 countries outside China, Taiwan and Hong Kong. Its dedicated users report bugs, offer suggestions for new features and translate its software into other local languages available in unofficial versions.
Mr. Barra said the process is a powerful tool to attract users. Followers in other countries "are also the first people that are going to purchase a Xiaomi product when it's available in their country and get the word out and be brand ambassadors," he said.
Analyst have wondered whether Xiaomi's crowdsourcing of input will be as effective outside China, where the company is relatively unknown. In recent months it began selling handsets in Hong Kong and Taiwan—new markets, but where its Chinese-language services already have a ready audience.
"They will probably not be able to have as many Xiaomi fans as they do in Taiwan and China, so the hope is just being cheap" will attract customers, said Forrester analyst Bryan Wang.
Mr. Barra said that the company will likely follow the model it took to expand into Taiwan, which he says was in many ways "experimental." First the company began shipping phones that were ordered on its Taiwan website directly to the country. Then it established a distribution center and hosted an event at which around 400 users spent time with executives, offering software suggestions, singing karaoke and playing games. A number of fans from the company's forum helped to organize the event.
"We experiment very aggressively and we're going to be constantly looking for ways to scale aggressively," he said. Xiaomi wouldn't elaborate on sales figures in Taiwan, or longer-term sales targets abroad.
Mr. Barra said the company was looking at Southeast Asia next due to the region's large population, relative proximity to China, and the likely draw in those markets of cheaper smartphones with features that compare to those of higher-end phones made by companies like Samsung.
Mr. Wang, of Forrester, said Xiaomi will likely have to tweak its business model abroad, charging more for phones to make the margins to support the outlays it will take to expand into those countries. Currently, the company maintains low margins on the phones it sells with the idea that it can eventually make money off its millions of users by selling accessories and services like content, games or applications.
Mr. Barra admitted it could be hard to push abroad, but also said he believed the model that has led to the company's push was applicable beyond China.
"That concept of 'I don't need to see a billboard of your product, just sell it to me for a little bit less' is very powerful, and people get it," he said.
—Yang Jie contributed to this article. |
