Xiaomi is rethinking its India strategy after it misjudged consumer tastes in mobile phones, allowing Samsung Electronics to topple the Chinese company in the world’s second-largest device market.
While Xiaomi has focused on selling mobile phones under 10,000 rupees ($120), Indian consumers have been willing to pay for better-looking models with much richer features. South Korea’s Samsung has launched products to meet these aspirations and introduced innovative financing schemes that make them affordable for the masses.
The moves have helped Samsung wrest the lead from Xiaomi in India’s competitive mobile phone market, which had a 20% market share in the last quarter of 2022, compared to the Chinese company’s 18%, according to Hong Kong-based Counterpoint Research.
“There is a trend of ‘premiumisation’ in the Indian market. (But) Xiaomi has been less prepared for the shift with its portfolio of budget phones,” said Tarun Pathak, director of research at Counterpoint.
Xiaomi’s loss of confidence among India’s 626 million smartphone users — the second largest after China — shows how companies that fail to respond to changing consumer preferences are punished in a fast-growing economy with growing disposable incomes.
Tata Motors’ 100,000 rupees (US$1,200) Nano, the most popular car in India, has been rejected by customers who have attributed the low price to poor quality.
Indians’ push for more expensive mobile phones to consume videos and other content will also benefit social media app providers like Meta and iPhone maker Apple Inc, which until now has little market share in the country as it focuses only on the high-end. The latest phones range in price from $605 to $2,304, according to its website.
According to Counterpoint, the market share of sub-$120 phones in India will fall from 41% two years ago to 26% in 2022. Premium phones priced above 30,000 ($360) doubled their share to 11% in the same period.
Both Xiaomi and Samsung see India as a key growth market, with smartphones being their best-selling electronic device. The Chinese company posted revenue of $4.8 billion in India in 2021-22, while Samsung recorded sales of $10.3 billion, of which $6.7 billion came from smartphones.
Xiaomi is already facing heat in India due to the departure of at least five senior executives and increased government scrutiny amid frosty relations with neighboring China. $674 million of the company’s finances have been frozen by the country’s financial crimes agency over allegations of illegal money transfers to foreign entities, which Xiaomi denies.
A Reuters review of the product listings on Xiaomi’s website revealed a mismatch between consumer needs and the company’s offerings. Xiaomi showed six smartphones priced above $360, compared to Samsung’s 16. Samsung had seven models under $120, while Xiaomi listed 39 — most of which appeared to be out of stock.
Counterpoint data shows that premium phones accounted for just 0%-1% of Xiaomi’s total phone sales in India, while Samsung’s high-end phones doubled their share to 13%.
But Xiaomi, which admitted to introducing “too many” models in the past, is revamping its product line to focus on premium smartphones.
It launched the Redmi Note 12 in January, the highest variant of which costs more than 30,000 rupees, and recently the Xiaomi 13 Pro at 79,999 rupees ($970) is the highest priced phone in India. The strategic shift seems to have paid immediate dividends, with sales of the Redmi Note 12 reaching $61 million within two weeks of its launch.
“We have created a simplified and clean portfolio with a vision to create an experience in the premium segment and the launch of our latest flagship Xiaomi 13 Pro is a step in that direction,” said its India President Muralikrishnan B.
“We understand we have a long way to go on this, so we’re bringing much stronger products.”
LOANS FOR PHONES
Samsung’s scheme, which works with financing partners that offer “convenient and secured” loans, has been instrumental in its recent success in India, helping it generate $1 billion in device sales last year.
A poster of Samsung’s offer, spotted by Reuters on a dusty street used by fruit vendors in Uttar Pradesh, says even people with no credit history, low credit scores or no salary can get the phone.
Sanjeev Kumar Verma, owner of a nearby multi-brand phone store, benefited from the company’s loan scheme. Speaking to Reuters at his store, where shelves are lined with hundreds of phones, Verma said he used to sell five Samsung phones every month but had now quadrupled that to 20, 18 of them through a loan scheme.
Verma and another Mumbai-based smartphone retailer said that unlike rivals, Samsung does not require local address verification, making it easier for migrants or those working outside their home state to buy phones on credit. Samsung did not comment on the sellers’ comments.
Raju Pullan, Samsung’s head of mobile in India, told Reuters in February that premium segment phone growth was much higher in small cities than in big cities, with about half of customers opting for its financing scheme being first-time loan seekers.
Samsung says a financing app installed on smartphones can lock the device and block outgoing calls for loan payments.
Xiaomi has also tapped partnerships to offer loans, citing them as a key growth driver for phones priced above 15,000 rupees ($183), and it is exploring more such offers.
Muralikrishnan said the company will also open more stores outside its current network of 20,000 retail partners and increase local sourcing of mobile phone parts, which could reduce costs.
Some industry experts say the new strategy could help the Chinese company return to sustainable growth in India.
“Xiaomi has historically had strong brand equity, strong online and offline channel presence and could potentially make a comeback with a strong premium and value-for-money product mix,” said Prabhu Ram, head of industry intelligence, CyberMedia Research. .
(Except for the headline, this story was not edited by NDTV staff and was published on a syndicated channel.)