Xiaomi is climbing the price ladder with the Mi 10 in India — here’s why - Android

Opinion post by

Dhruv Bhutani

It’s been a while since Xiaomi introduced a truly high-end phone in India. In fact, the company’s last flagship phone in the country before the recently released Mi 10 was the Mi Mix 2. Launched in 2017, just three years into its entry into India, the phone did nothing to bolster the company’s market share in the then Samsung dominated premium segment. Definite numbers are hard to find, but given how it has taken Xiaomi another three years to attempt a high-end foray in India alludes to how badly the phone did in the country.

That didn’t deter the brand’s wider ambitions in the region, of course, as Xiaomi doubled down on its entry-level push. Today, Xiaomi enjoys a 30% share of India’s smartphone market according to market research firm Canalys. This was achieved on the back of its affordable mid-range hardware. Growth has, however, slowed down. From 9.5 million units shipped in Q1 2019 to 10.3 million in Q1 2020, Xiaomi managed to just about hold on to its market share in Q1 2020. Increasing competition from the likes of Realme, challenging market conditions with COVID-19 means that shipments will slow down even further. The razor-thin margins are getting even thinner.

Related: The best phones under 30,000 rupees in India

With brands like Vivo and Realme challenging Xiaomi’s dominance in the sub-$250 (~Rs 19,000) market, it has become imperative for Xiaomi to move up the price ladder to increase profitability. With the launch of the Mi 10 in India, there is a lot of conversation questioning whether Xiaomi has the brand cachet to pull off a Rs. 50,000 (~$650) phone in the country.

Will the Mi 10 be yet another one-hit-wonder in India, or can it signal the start of Xiaomi’s long journey towards staking a claim in the premium smartphone segment? Let’s discuss.

Sub-brands are an effective tool to avoid brand dilution

Xiaomi’s growth in India is, in many ways, synonymous with the wider growth of the mobile industry in the country. When Xiaomi introduced its products in India way back in 2014, the average selling price of a smartphone was just $138 and the market was in a transitory phase from feature phones to smart devices.

Smartphone shipments have grown from 17 million in 2014 to over 158 million in 2019, the premium segment is growing.

From 17 million smartphone shipments in 2014 to 158 million in 2019, Xiaomi has piggybacked on the rapid proliferation of smartphones in India and has consistently been the top-performing player in the affordable devices segment. In fact, Xiaomi’s Redmi phones are so popular that the branding became synonymous with the company itself. It was imperative for the brand to spin it off the series into a sub-brand to avoid diluting the brand identity of its premium portfolio. In early 2019, Xiaomi made it official and Redmi became its own identity to compete in the affordable mid-range segment.

Meanwhile, the company experimented with the affordable flagship segment and found success with the Poco sub-brand. The Poco F1 was a popular product that made obvious compromises in design, display quality, and other key areas to hit a performance and price target. It was designed to appeal to a demographic that cares about performance over everything else and succeeded at it.  Earlier this year, Xiaomi spun off Poco into its own entity and launched the Poco X2 which made moves in the sub-$200 segment. Sporting an unheard of (in the segment) 120Hz display and improved build quality, it helped Poco gain a 2% share of shipment volumes in Q1 2020.

Related: Pocophone F1 redux: Still the best value for money?

Xiaomi’s re-entry into the high-end space has been a long time coming and it is obvious that the company has been preparing to rejig internal divisions to ensure minimal brand overlap. Between Redmi taking care of the affordable, mid-range segment and Poco catering to the performance-first market, for once Xiaomi has a shot at gunning for the premium segment with an all-encompassing, no-compromises product under the flagship Mi brand.

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Climbing the price ladder

The elephant in the room is, of course, profitability and the razor-thin margins afforded by cut-throat competition and value-priced hardware. Add to that Xiaomi’s “promise” to restrict profit margins to a scant 5%, and it becomes significantly harder to make money off of budget smartphones. On-device advertisements can only go so far.

The only solution is to tag along with the rising upwards mobility in India’s smartphone space. After all, 5 percent of a $500 product is significantly more than that of a $100 smartphone.

OnePlus is a classic example of a brand that has successfully managed to climb up the price ladder with each successive generation all while maintaining its ethos of being an “affordable” flagship. For a brand that started at a mere $3oo or Rs. 21,000 in India with the OnePlus, the company has successfully managed to scale up to devices that fall just short of the $1,000 mark or Rs. 60,000 in India. It has taken a few years and despite a few misses along the way, but the consistent delivery, messaging, and, of course, the quality of the product has ensured that OnePlus is considered a credible option despite gravitating to a price point that is almost three times higher.

Now Xiaomi wants to do the same — but that’s easier said than done.

16/05/2020 05:00 AM

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