Improving smartphone technology and a broader slowdown in shipments is spurring Xiaomi to consider radical action regarding its device repair strategy, SVP Wang Xiang (pictured) explained.
“We are considering stopping repair services and just giving people a new phone,” Wang told Mobile World Live, noting such a move is becoming an option as the China-based vendor continues to improve the quality of its devices.
However, while the SVP said bringing the curtain down on repair services is the company’s “dream” he acknowledged Xiaomi cannot “move too soon as it could bankrupt the company.”
Xiaomi returned to growth in the early part of 2017, the result of adapting its business model after rapid international growth in its first five years of operation stretched its resources. Wang said the vendor underestimated the challenges of operating beyond its domestic market, where it had enjoyed success with an online sales model.
“Business in China was growing very fast and we thought it wasn’t very difficult to move into other markets. But our internal resources were not enough, so we focused on India and pulled out of other markets.” Research company Canalys recently revealed Xiaomi overtook Samsung to become the leading smartphone vendor in India during Q4 2017, with shipments of 8.2 million units compared with 7.3 million for Samsung.
Wang said the company is a top five player in 17 countries in all.
Today Xiaomi is back on the expansion trail, albeit at a more modest pace, launching its devices in Spain in the back half of 2017 and preparing a US launch in early 2019.
Such expansion appears increasingly necessary after smartphone shipments in China declined during 2017.
“China has never experienced that kind of decline and Q4 was pretty bad. But we’re still growing and closely monitoring the market. We’re number one in online sales,” Wang stated.
He said the company is more than a handset maker, claiming to be the largest IoT hardware supplier in the world with 85 million connected IoT devices globally.
Wang said the company is passionate about keeping costs down but still delivering a quality user experience. Its lowest priced model comes with 2GB of RAM and 16GB of internal memory, and is priced at CNY599 ($95): “We don’t go lower than that and don’t use cheap plastic. We do everything possible to reduce marketing expenses. In our first three years, we spent almost zero on traditional marketing. Now we’re spending some on marketing to reach mainstream consumers.”
Its online sales strategy also lowers distribution costs, which can represent 40 per cent of total costs. The vendor has avoided selling through operator channels as it doesn’t have the resources to customise models for a specific carrier or market.
While it now is working with Telcel in Latin America and Vodafone Group, Wang said device testing remains a challenge: “We don’t do user interface and preinstalled apps per carrier. We need an engineer to do that. And some of the requirements are not necessary which adds costs. There’s a compromise between cost and the real need.”
Perhaps worryingly for its future prospects, Wang said US operators are the most demanding in terms of having “very specific parameters, with a thick spec book. Our engineers don’t have the time to read it much less design for it.”