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NEW DELHI/LUCKNOW: Xiaomi Corp is revamping its India strategy after misjudging consumer tastes in mobile phones, a costly blunder that allowed Samsung Electronics to vault the Chinese company to the top spot in the world’s second-largest device market.
While Xiaomi remained focused on selling handsets under 10,000 rupees ($120), Indian consumers were willing to pay for better-looking models with richer features.
South Korea’s Samsung launched products to meet those aspirations and offered innovative financing schemes that made them affordable for most.
Those moves helped Samsung wrest the lead from Xiaomi in India’s competitive smartphone market, with data from Hong Kong-based Counterpoint Research showing it had a 20% market share for the final quarter of 2022 compared to 18 % of the Chinese company. “The Indian market is witnessing a trend of ‘premiumisation’.
(But) Xiaomi was caught underprepared for the change with a portfolio rich in budget phones,” said Tarun Pathak, director of research at Counterpoint.
Xiaomi’s loosening of its grip on India’s 626 million smartphone users — second only to China — shows how companies that fail to cater to changing consumer preferences in a fast-growing economy with rising disposable incomes are being punished.
Most famously in India, Tata Motors’ 100,000 rupee ($1,200) Nano, billed as the world’s cheapest car, was shunned by consumers who associated the low price with poorer quality.
Indians’ push for more expensive mobile phones to consume videos and other content will also benefit social media app providers such as Meta and iPhone maker Apple Inc, which until now has a small market share in the country due to its single focus on high-end phones, priced from $605 to $2,304, according to its website.
According to Counterpoint, the market share of phones under $120 in India will fall to 26% in 2022 from 41% two years ago. And premium phones – priced above 30,000 ($360) – saw their share double to 11% over the same period.
Both Xiaomi and Samsung see India as a key growth market, with smartphones being the best-selling electronic devices. The Chinese company posted a total revenue of $4.8 billion in 2021-22 in India, while Samsung registered $10.3 billion in sales, of which $6.7 billion came from smartphones.
Government aid tried to revive the mobile manufacturing industry
However, Xiaomi is already facing heat in India due to the departures of at least five senior executives and increased government scrutiny amid frosty relations with neighboring China.
The company has had $674 million of its assets frozen by the country’s financial crimes agency over alleged illegal remittances to foreign entities, which Xiaomi denies.
A Reuters check of product listings on Xiaomi’s website showed a mismatch between consumer needs and the products the company offers. Xiaomi showed six smartphones priced above $360, compared to Samsung’s 16.
Under $120, Samsung had seven models, while Xiaomi listed 39 — most of which turned out to be out of stock.
And premium phones accounted for just 0%-1% of Xiaomi’s total phone shipments in India over the past two years, when Samsung’s higher-end phones more than doubled their share to 13%, Counterpoint data showed.
But Xiaomi, which has admitted to introducing “too many” models in the past, is revamping its product line to focus on premium smartphones.
In January, it launched the top-of-the-line Redmi Note 12 priced at over 30,000 rupees, and more recently the 79,999 rupee ($970) Xiaomi 13 Pro — its highest-priced phone in India.
The strategic shift seems to have paid dividends immediately, with the Redmi Note 12 reaching $61 million in sales within two weeks of its launch.
“We have put in place a streamlined and cleaner portfolio with a focused approach to building expertise in the premium segment, and the launch of our latest flagship, the Xiaomi 13 Pro, is a step in that direction,” said its India President Muralikrishnan B.
“We understand that we have a long way to go on this journey and that’s why we carry much stronger products.”
Phone loans
Samsung’s scheme, run with its financing partners, which it says offers “convenient and reliable” loans, has played a significant role in its recent success in India, helping to generate $1 billion in device sales last year.
A Samsung offer poster spotted by Reuters on a dusty street used by fruit vendors in Uttar Pradesh state says even those with no credit history, low credit scores or pay stubs can get a phone.
Sanjeev Kumar Verma, owner of a nearby multi-brand phone store, has benefited from the company’s loan scheme. Speaking to Reuters at his shop, where hundreds of phones line the shelves, Verma said he used to sell five Samsung phones every month but had now quadrupled that to 20, of which 18 were through the loan scheme.
Verma, and another smartphone retailer in Mumbai, said that unlike rivals, Samsung does not require proof of a local address, making it easier for migrant workers or those working outside their home state to get phones on loan.
Samsung did not comment on the sellers’ remarks.
Growth in premium phones is much greater in small towns than in big cities, Samsung’s mobile unit chief Raju Phulan told Reuters in February, adding that nearly half of consumers opting for its financing scheme were first-time buyers. loan.
Samsung says its financing app installed on smartphones can lock the device and block outgoing calls for missing loan payments.
Xiaomi also used the partnerships to offer loans, calling them a key growth driver for selling phones priced above 15,000 rupees ($183), and adding that it would explore more such offers.
Muralikrishnan said the company will also open more stores outside its current network of 20,000 retail partners and boost local sourcing of mobile phone parts, which is likely to reduce costs. Some industry analysts say the new strategy could help the Chinese company return to solid growth in India.
“Xiaomi has historically enjoyed strong brand equity, has a strong presence in online and offline channels, and could come back with a potentially strong mix of premium and value-for-money products,” said Prabhu Ram, head of industry intelligence at CyberMedia Research. .
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