Xiaomi’s big bet on an Indian Internet revolution is starting to pay off.
The Chinese smartphone maker said it sold one million phones in India between July and September this year, its fastest pace of growth since entering the country’s smartphone market last year.
The sales are a significant rise compared with the three million phones the company said it sold in its first year of business in India.
Xiaomi aims to sell 80 to 100 million smartphones this year and has been valued by investors at $46 billion.
But increasing competition at home, from companies who mimic Xiaomi’s business model of selling high-end phones at low prices, will make it tough to meet its sales target. So the five-year-old startup is setting its hopes on growth in India.
The closely-held company needs to prove that it can export its business model to other countries to continue to justify its high valuation.Xiaomi found success in China by combining razor-thin profit margins on hardware with glitzy product launches that helped build its fanbase.
Xiaomi introduced its first model, the Mi 4i, outside China, at a launch in New Delhi in April. In August, it said it would begin assembling its entry-level Redmi 2 Prime in India.
Xiaomi’s recent success in India shows that its model can work there, said the company’s Vice President Hugo Barra. Since January, sales in the South Asian country increased 45% quarter-over-quarter, on average.
The firm’s Indian office is tweaking Xiaomi’s model of Internet flash sales, designed to boost demand and cut costs. During the company’s sale for the Hindu holiday Diwali, items were sold for as little as a rupee. “Some people bought a Mi TV for one rupee,” Mr. Barra said. One rupee is equal to $0.02. The heavily discounted deals meant that Xiaomi spent nothing on marketing. “This is an idea the India team came up with that you will see reused in other markets,” he said.
The company still faces challenges in India.
While Xiaomi says it sold three million phones in its first year in India, market leader Micromax Informatics Ltd. says it sells three million phones a month. While the Chinese company relies mostly on online sales to cut costs, the majority of Micromax’s sales are in brick-and-mortar retail outlets, where most Indians still shop.
It remains unclear how much India can help bolster Xiaomi’s balance sheet. While smartphone sales are booming in India, the market is still tiny.
Xiaomi’s Mr. Barra says the company will slowly add to its catalogue of products in India, which currently includes phones and a handful of accessories like headphones and a fitness tracker. In China, Xiaomi sells everything from water purifiers to power strips.
Next up could be the company’s line of Internet routers, Mr. Barra said, which includes a model with six terabytes of storage.
“We are looking at bringing the router family to India,” he said. But don’t expect the smart bathroom scale to show up in India right away, or even the company’s newest gadget: a cut-price Segway-like device.
“We carefully select things that will sell in India in good volumes. We have to be thoughtful and plan carefully.”