(Chinese Version)

As the saying goes, joy puts heart into a man. In the case of Xiaomi, however, joy puts not just heart into it, but also bravery (or rather bravado).

As Xiaomi’s smartphone sales volume bounced back from a negative growth of 36 per cent in 2016 and increased by 56 per cent in 2017 compared with the year before, Xiaomi’s goal has also been changed from “Be Happy” to “Back to Top One Within Ten Quarters”, according to Mr. Lei’s speech at the 2017 Annual Meeting of Xiaomi. However, I don’t find the goal attainable, personally.

How so? Following are some of my doubts against Xiaomi’s goal:

Doubt One: How to maintain high growth at a high base?

Indeed, Xiaomi has done a great job in the Chinese smartphone market in 2017. IDC’s statistics suggest that growth rate of Xiaomi’s smartphone sales volume reached a record high of 32.6 per cent throughout the year, and 96.9 per cent in Q4, compared with the same period last year.

However, it’s worth noticing that part of the reason these figures are so high is that Xiaomi started from a very low base. When the sales volume base is huge enough, growth rate will inevitably drop. This is also why sales volume growth rate of other leading smartphone makers, such as Samsung, Apple, Huawei, OPPO, and vivo, etc., is often quite low.

Take OPPO for an example, its sales volume growth rate reached 122.2 per cent in 2016, yet only 2.7 per cent in 2017. Yet, the reason OPPO’s sales growth reached that high in 2016 is that its smartphone sales volume was only around 35.3 million in 2015; the reason its sales growth reached that low in 207 is that its smartphone sales volume already reached as high as 78.4 million in 2016.

Likewise, the high growth rate (32.6 per cent) of Xiaomi’s smartphone sales volume is the result of a low smartphone sales volume base in 2016 (41.5 million).

Here comes the question: after registering a smartphone sales volume of 55 million and growth rate of 32.6 per cent in 2017, will Xiaomi be able to maintain a high year-on-year growth rate in the next ten quarters?

From my perspective, however, it’s no easy thing to do so. As a matter of fact, the ring growth rate of Xiaomi’s smartphone sales volume has already slowed down in Q3 and Q4 of 2017.

Doubt Two: How to maintain growth in an unfavorable market condition

When the nest is overturned, no egg stays unbroken. In fact, the shipment volume of smartphone makers often has largely to do with the market trends. When the market is prospering, smartphone makers’ business thrives; when the market is shrinking, smartphone makers will also suffer.

At present, the main features of the Chinese smartphone market can be summarized into two aspects: 1) the entire market is already quite saturated, or even in recession; 2) the market is getting increasingly centralized.

According to Canalys, the Chinese smartphone market has already entered the period of negative growth. The total shipment volume in the Chinese smartphone market reached 459 million in 2017, a decrease of 4 per cent compared with 2016. However, the recession is expected to continue in 2018. Statistics from the Ministry of Industry and Information Technology suggest that shipment volume in the Chinese smartphone market in January 2018 decreased by 16.6 per cent year-on-year and reached 39.064 million.

Therefore, it’s quite a challenge for Xiaomi to maintain steady development against such market trends. As the Chinese smartphone market is getting increasingly centralized, major smartphone makers such as Huawei, OPPO, vivo, Xiaomi and Apple have grabbed around 80 per cent share of the market. Therefore, consumers’ choices are basically limited to these major brands. However, they did so because they all meet the needs of different groups of customers, or excel at certain points, such as product, quality, innovation, channel, supply chain, service, brand, etc.

So how can Xiaomi, currently the fourth major smartphone maker in the domestic market, surpass Huawei, OPPO and vivo within three months?

Doubt Three: How to catch up with the top three smartphone makers in terms of offline marketing capability?

“In this battle, we’ve got to stay firm at the frontline, fight at every province, every city, every town and every village. We’ve got to stay alert, fight for every inch of land and fight to the last,” Lei said at the annual meeting.

In other words, to fight against Huawei, OPPO, and vivo, Xiaomi is set to focus its attention more on lower-level channels, such as villages and third-tier cities.

However, it’s no easy to catch up with the top three smartphone makers in terms of the marketing and distribution capability and achieve this goal within ten months.

When reviewing Xiaomi’s sudden downturn in 2016, I concluded that the lack of offline channels. Although Xiaomi has been improving its weakness, building up its offline marketing capability through opening Mi Stores and Mi Outlets in major cities and even towns, and making some progress, it’s still insufficient to fight against Huawei, OPPO and vivo.

In fact, Huawei, OPPO and vivo are known for their potent offline marketing capability. For example, OPPO has over 300,000 offline outlets in cities and towns across China, vivo also has more than 250,000 offline outlets spreading across China while Huawei came up with the “One Thousand Town Strategic Construction Plan” as early as 2016.

Yet, Xiaomi’s offline marketing capability is still quite limited and much lower than that of the top three.

Last note

These three doubts are basically the reason why I don’t think Xiaomi could easily achieve its new goal. Nevertheless, it’s a good thing to keep a dream, realistic or not, just in case.

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The article is published with authorization from the author @Ling Zhang, please note source and hyperlink when reproduce.]  

   Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.