Xiaomi has set a target of doubling everything, be it sales, production, service centers, and even marketing, but will not be as aggressive as its other Chinese rivals Oppo and Vivo, as it simply cannot do it.Speaking to ET's Gulveen Aulakh and Vikas SN, the company's vice president and India head Manu Kumar Jain said that the company will invest in areas that are critical to its growth and will focus on addressing key pain points, chief among them being making its phones available across all platforms including offline and recently launched Mi Homes. Edited excerpts:How many models will be launched this year?This year we're upgrading our Redmi series and Mi series. Redmi Note 3 became Redmi Note 4 which sold about 1 million units in 45 days. IDC numbers came out yesterday, this has become the No 1 phone both online and offline.We're still the No 2 brand online and offline and in online we're the No 1 brand with 40.6% market share. If you count No 2 to No 5 - Lenovo, Samsung, Motorola and Coolpad - is about 38% share combined. Last six and a half years, there used to be one brand- Samsung - who's one of the phones used to be No 1 quarter after quarter.For the last two series it's been J2, but Redmi Note 4 has managed to dislodge J2. So all our Redmi models have set some kind of record and we've launched the Redmi 4 yesterday, three storage versions which will be priced at Rs 6,999, Rs 8,999 and Rs 10,999, all having a fingerprint sensor. We will disrupt the affordable segment yet again.We will also upgrade the flagship Mi series, we're still evaluating whether which devices to get to India, not all devices are brought here.Has the focus now changed to getting entry level users on board rather than converting from existing smartphones to your brand, which has been the case?It's both. India market is different since it's not an upgrade only market, like China. It still has a huge share of featurephone users. So last year, of the 250 mn phones sold, 140 mn were featurephones. This year too, 120-130 mn will be sold, and the same number of smartphones will be sold. For at least four to five years, featurephones will continue to exist, but 80-90% of the market will convert to smartphones.What are the important priorities for Xiaomi this year? Looking to rout Samsung from the top spot?Too early to say (on Samsung). We have three priorities. First, we will double our warehouses, service centres, call centers, factory and production.Second, we're producing one phone per second but people complain of lack of product availability, so we're going to work hard to change that and Mi Home is one way of doing that.We don't plan to have less product than demand as a strategy, but with more production and Mi Homes, we hope to sort this out. We're ensuring that Mi Homes never go out of stock and if it's not there, an F-Code will be issued for buying from Mi.com or when the next lot of production comes in. Third is quality, so focus on service centers, logistics, faster delivery will be part of the initiative.Investments into India for 2017?We're doubling down our investments on everything. Last year we had two big warehouses of finished goods and spare parts we are already doubling it, as we speak we're inaugurating two more warehouses one for each.We had two call centres last year and this year we're planning to add one more, doubling the number of agents. In January this year we had 225 service centres by July we would have 500.We've already doubled the number of factories, and we're looking to either expand the capacity of the current factory or setup more factories. We're also doubling our marketing efforts, but not so much in investments.How would you compete with Oppo and Vivo and others in the offline market, a business that you want to grow?We have started working with distributors in 5 cities, added few retail chains in South India will be adding a few more national level retail change. We want to scale up these five cities to pan India level. We have 50 retailers working with us in Hyderabad and Bangalore we have 50 biggest standalone retailers working with us in Hyderabad and Bangalore, a few hundred in Delhi, in promoting and selling Xiaomi products.We're a small startup and we understand our weaknesses. We don't have the kind of muscle power and distribution like many others have. We have 8 people team while some others have 800 people are even more to sell one fourth of what we sell.We can't do this since it's against the philosophy of the company. If we were to do this we would be spending a lot of money on distribution and marketing which we don't want to do.We want to replicate what we have done in the online market, like what we've done with Amazon and Flipkart. We want to perfect the offline model, specially Mi Home, in terms of customer experience and profitable before scaling up.How do you expect to get the desired results, without spending on marketing like Oppo and Vivo intend to?I won't be surprised if they are spending Rs 2000 crore. Different companies have different philosophers and we are a pull brand.If we do what others are doing we won't have the knowledge to do it and the band with to do it because we don't have that many people and we won't have the kind of marketing resources.Even if we do we will have to increase our cost which means increasing the prices of the phone, that's against the philosophy of the company. We will instead do more social media, increase the number of Mi Fan chapters, and reach out to our customers directly.Is the offline push going to reflect in sales split this year?By end of this year which is December we will have 20 to 25% of our business coming from offline sales which right now is around 10 %.What is the revenue expectation from 2017-18? Any growth numbers you can share.Of course it will be more than $1 billion. In Q1 we grew 4x (volumes), from 1 million last year. From the Redmi 4 and Redmi 4A, we're expecting at least 8 million units this year, depending upon production and other factors.But growth in market share will stabilize because from a 40% share we cant go to 70%, because there will be factor of diminishing return. It won't be the same trajectory, but we'll have to figure out the things we need to do to keep the growth momentum going.What is Xiaomi's ecosystem product strategy for India market?We are seriously evaluating our ecosystem strategy for India. The reason why we don't have many of Xiaomi's ecosystem products in India is because the India business is much more younger and nascent stage as compared to China.Everything that we have in China is not suitable for India market. For instance, we have a water purifier but it doesn't have a water tank whereas in India market where you have power and water shortage, you need a water tank.We also have a smart rice cooker but we are not sure India is a right market or not since most of Indians households still use pressure cooker. Also, the whole smart feature in rice cooker will not work in India since you have to scan barcode in the rice packets but most of Indians don't buy packed rice.Hence, we will be launching few more ecosystem products this year and we will begin to design products specifically for the Indian markets.Since Hungama, no new investments have been announced, can you share some updates?We are definitely looking at many more startups to invest in the country. Between us and Shunwei Capital (Lei Jun's investment firm), we have already made multiple investments.But most of the companies that we are looking to invest in, are more in mobile software tech side that will help us strengthen our hardware and software ecosystem. For instance, Shunwei recently invested in gaming company Mech Mocha.Unfortunately, we are not actively considering any hardware investment in the country because we are not finding many good hardware startups here.How are you monetizing Internet services?We have already started monetizing many of our services in India. We have paid speed dial links on our browser.We also make money through some of the features integrated in our security center. The idea however is not to make huge amount of money from a service but to make small amount of money from a large amount of such services. It will take a few more years for these services to account for a significant part of India revenues.Why is Mi TV launch getting delayed?Mi TV is the toughest business among all our ecosystem products. You cannot use the current warehouses and you will have to build a very different warehouse which is geared for large appliances.Logistics have to be very different as well. We currently do air shipping for most of our products right now and it's practically not possible for TV products. So I have to build a separate supply chain for TV which will be dependent on road.TV also requires a different after sales service and a separate installation service. You will also need a separate content strategy which is very different from our phones.We don't make money in TV by selling hardware, we make money by selling content. While we have done something on content with Hungama but we really haven't done a big content integration as of now in India.There is a very large team in China that works on this. We have the biggest content library in China and we want to do something like this.We haven't ruled it out yet since TV is a very integral part of our business. I don't have timelines but hopefully we should be able to launch it sometime.
[Discussion] Xiaomi's Manu Kumar Jain on 2017 priorities, offline push & startup investments.
2017-05-17 01:49 PM