A maverick, defines Merriam-Webster, is an individual who does not go along with a group or party. Of the over 4,70,000 words in the American dictionary, that is the one Manu Jain, the India head of Xiaomi, world’s fifth largest smartphone maker, chooses to define himself. “I am a maverick. I challenge status quo,” says the 36-year old, underlining the risk-taking streak in his nonconformist personality. “I have done exactly the opposite of what other mobile brands in India have been doing,” he claims.
Sample this: At a time when rivals were deeply entrenched in brick-and-mortar stores across the country, Jain shunned it. Xiaomi India, launched in July 2014, took the online route to sell products. “People labelled us crazy.
We didn’t care. We just wanted to experiment,” recalls Jain. When competitors were splurging millions of dollars on advertising and in hiring Bollywood biggies to market their products, Jain bet on word-of-mouth. “We never had the Khans, but we had our blockbuster fans,” he grins. While opponents aggressively pushed handsets to make money, Xiaomi took a different route. “We don’t make money from hardware. Monetising software is the trick,” says Jain, who is also the global vice-president of the company.
It’s a string of such unusual moves that has propelled Xiaomi to the top of the heap in a little over three years of setting foot in India. From a meagre 3% market share in 2015, the Chinese brand — billed as the Apple of China — leapfrogged to 23.5% in the third quarter of this year to share the top slot with Samsung. From shipping just 1,00,000 units in Q3 of 2014, Xiaomi has surged to 9.2 million units in the same quarter this year.
Now, Xiaomi stands a realistic chance of going ahead of the South Korean biggie that has been stagnating in India over the last few quarters. “I never chased numbers but always believed that we could be No. 1,” says Jain. (See interview, “Innovation for All is Our Philosophy”)
Aggressive pricing of smartphones, loaded with high-end features, has turned out to be one of the prime reasons Xiaomi is making it big in India. Take, for instance, its bestseller handset, Redmi Note 4. Powered by Qualcomm Snapdragon 625 processor and with 4 GB RAM, 64 GB of internal storage, a metal body and up to two days of battery life, Note 4 has been the top-selling smartphone brand for over 10 months now. Any comparable smartphone with 64 GB storage and 4GB RAM, say analysts, costs between Rs 18,000 and Rs 25,000. Redmi Note 4, on other hand, comes for Rs 13,000. “It just blew up the market,” recounts Jain, when the phone flew off Flipakart’s shelves at the flash sale earlier this year, crashing the site.
It must have brought back memories of the maiden flash sale of Mi 3 in July 2014, the month Xiaomi arrived in India. That was when he got a whiff of what was in store for the brand. “It was July 22 and the sale was about to start on Flipkart at 2 pm,” says Jain, who recalls every detail even three years on. He had decided to have only 10,000 units on sale. Reason: it was an obscure brand in India, and had not announced its entry with TV commercial, print advertisement or outdoor hoarding.
While rivals called the flash sale a cheap marketing gimmick, critics jumped the gun to predict its failure. Jain, understandably, was jittery. All he could bank on was the 10,000 fans on the company’s Facebook page in India. “My only aim in life was to sell 10,000 units,” he laughs. What happened at 2 pm startled Jain. Flipkart crashed. More than half a million people came online, and the server couldn’t take the pressure. “If we crashed Flipkart, it means we have arrived in India,” says a beaming Jain, who still teases Flipkart co-founders about that day when he made India’s largest e-commerce marketplace crash for the first time.
What happened next week, at the second flash sale on Flipkart in July, only reinstated Jain’s belief in the brand. Just two seconds after the sale started, 10,000 units disappeared. Jain thought the server had crashed again. This time Flipkart co-founder Sachin Bansal had good news: all the units were sold out. Jain was ecstatic. It was not a flash in the pan. “The flash sale was not a gimmick,” he says.
The critics were taken aback and rivals started aping the model. “But it didn’t work,” he says, adding that selling only online in the first year of its operations in India was a huge risk and a massive leap of faith. “It paid off,” says Jain. Xiaomi, says handset expert Faisal Kawoosa, didn’t look at online as just a selling channel.
It nurtured the medium through Mi Fan community and active engagement with fans on social media. “Jain let potential buyers and Xiaomi fans directly connect with him. It played positively for the brand,” says Kawoosa, principal analyst (telecoms), CyberMedia Research.
Mi Community, an official forum for Xiaomi to interact with users, has over 2.9 million registered users since its launch in June last year. The platform not only facilitates bonding with users, it also helps Xiaomi incorporate the feedback from users in its products. Take dual-SIM smartphone Redmi Y1 with a micro SD card. “Over 90% of Mi fans wanted such a feature,” says Jain, adding that users can access two WhatsApp accounts on all dual-SIM smartphones of the brand, the only company to offer such a feature. Jain says if Xiaomi had not managed to build a cult following in India, similar to what the brand did in parent country China, then it could not have reached where it is today.
Another crucial element that made Xiaomi strike gold in India — it crossed the billion-dollar mark in sales in India last year and claims to be profitable — was Jain’s swearing by the philosophy of less is more. “Do fewer things, but try to do them right,” he says, explaining how the brand stole a lead on rivals.
While Xiaomi launched only two phones in its first year, it had three models in 2015. In 2017, the company has launched eight phones so far. “Each phone is a bestseller,” claims Jain, adding that while others focused on having a wider portfolio, Xiaomi opted for a leaner and meaner look. “We never launched 40-50 phones like other brands. That really helped a lot,” he concedes.
The company prefers less not only in the number of products but also in the size of its operations.
For the first two months after joining Xiaomi, Jain neither had an office nor any team. Working from home and cafes made it daunting to convince potential business partners to come on board. Renting a six-seater room and transforming it into a tiny office in the third month didn’t make things easier. While visitors, shocked to see Jain serve tea and coffee personally, feared Xiaomi was a Ponzi scheme, Jain figured out a way to handle the perennial question on the size of his team. “I am the head, the tail and the one-man army,” he began to reply.
Cut to November 2017 and a lot has changed. Xiaomi has over 300 people on its rolls. The company has forayed into offline and is making inroads into the hinterland in what be its biggest opportunity and challenge.
What has not changed, says Jain, over three years is the nature of Xiaomi’s business model. Think of Xiaomi as a three layered company. First, it’s a technology company like Google or Facebook as it has its own operating system that is built over Android. Second, it’s a software and a hardware company making television, routers, shoes and fitness bands. And, last, it’s a retail company. “We don’t want to make money by selling phones. We want to monetise our software,” he says. Mi.com, the online selling platform of Xiaomi, is the eighth biggest e-commerce platform in the world, the third biggest in China and the fourth biggest in India. “It’s a unique business model, unparalleled in the world,” he adds.
What perhaps made the going easy for the fledgling startup is an aging leader: Samsung. From having a market share in the heady 30s till a few years back, Samsung has been slipping.
What has made matters worse for the South Korean company is that it is battling on two fronts: it is facing onslaught from a battery of Chinese players such as Vivo and Oppo at the lower and middle end of the market, and is getting knocked by Apple and OnePlus at the higher end. Samsung, says Pathak of Counterpoint Research, must come up with a different value proposition to regain the attention of consumers. Though it has an offline edge over Xiaomi, it’s going to be a very close race between the two.
Technology analyst Deepak Kumar agrees that Samsung faces a real threat from Xiaomi. It must act on multiple fronts to protect its turf, says the founder analyst at B&M Nxt. From devising new pricing strategies and strengthening channel partners to a repositioning to appeal to young buyers looking for value-for-money, Samsung needs to get its act together.
Meanwhile, Jain is getting ready with his new act: not behaving like an arrogant leader. “One needs to keep one’s feet on the ground, shun arrogance and stay away from overconfidence,” he says. Xiaomi, Jain maintains, will always act like a nimble startup: aggressive in execution, nimble in decision-making, and maverick in risk-taking.
Though it’s yet to be seen if the gambit pays off in the long run, for the time being, it’s been a great show, Xiaomi.