Repeat Xiaomi (pronounced shiao-me) five times. The time you will take to accomplish this minor feat is approximately the time it took the Chinese maker of smartphones to sell out their second lot of Mi3 smartphones in India: about five seconds. Xiaomi has had two flash sales so far, on Flipkart, where Xiaomi phones are sold exclusively.
On July 22, Flipkart 's website crashed, unable to take the barrage of traffic as the phones went on sale for the first time in India. A week later, Flipkart hosted the second flash sale but it was over in a matter of seconds as the phones sold out.
That, in turn, left many prospective buyers fuming on social media and online forums. "Is anybody really getting the #Xiaomi Mi3 in the @Flipkart sale? Or is it a scam to increase the product's awareness?" tweeted Ronak Saigal. That tweet more or less summed up the frustration of thousands of users who had registered on Flipkart to buy the handset.
Hype Plus Value
Xiaomi says that it has been overwhelmed by the response. "For our last sale on July 29, more than 200,000 people had registered. Flipkart saw an unprecedented 250,000 users simultaneously accessing the Mi3 page shortly after the last sale opened on July 29," Manu Jain, head of India operations for Xiaomi, told ET Magazine. Jain says that over 20,000 Mi3 handsets have been sold so far in India.
To be sure, India isn't the first country in which Xiaomi phones are selling at this pace. In Malaysia, the Mi3 handsets disappeared in 17 minutes when they were launched in May. In early March, the Mi3 model was sold out in Singapore in 2 minutes. Its latest phone the Mi4, for instance, sold out in China in 37 seconds last week.
But the question back home persists: is this a wellcalibrated strategy to generate hype or did Xiaomi underestimate the demand in India? It's probably a mix of both, say industry watchers.
"The kind of hype and curiosity that has been generated because of the units selling out would have otherwise cost a huge marketing budget," says Sanchit Vir Gogia, chief analyst and CEO, Greyhound Research, who says the specs the Mi3 offers for its price (just under Rs 14,000) make it a great buy. Jain concedes that Xiaomi underestimated the response from potential buyers. "Yes, the demand has been significantly higher than our expectations.
We use our Facebook page, and other social media trends as a proxy for user demand. Since we had less than 10,000 followers when we launched in India, we are pleasantly surprised by the response," says Jain.
Analysts caution that having generated such hype the company will have to tread carefully in a large and crowded marketplace like India. "If you look beyond the hype, the company has sold just about 20,000 units so far. To capture even a 1% market share in India means selling 60,000 units per month," says Tarun Pathak, telecom analyst at CyberMedia Research.
That's where analysts believe the next sale, scheduled for August 5, is going to be crucial. "They will have to put a lot more units on sale," says Pathak. Xiaomi seems to be aware of the challenge it's facing. "We are ramping up the supply every week for our Mi fans. On August 5, 15,000 devices will be available for sale. We are also working closely with our partner Flipkart to improve the buying experience on the site," adds Jain.
Flipkart declined to detail how the site would improve its back-end infrastructure to ensure there was lesser consumer outrage with the next Xiaomi flash sale. But in an earlier press release, Flipkart co-founder Sachin Bansal had said that the Mi sales model was "a new concept for us at Flipkart and the Indian customers" and that the company was working towards improving customer experience. Existing players don't seem threatened by Xiaomi's tactics.
"India is a difficult market to operate in, where vendors have to spend time and money to bring a strong customer service backbone, "says Pardeep Jain, co-founder of Karbonn Mobile. "Indian consumers can be very prickly about poor phone-buying experiences and given the choice they have, you can't afford to mess up your initial entry," he adds.
Xiaomi is the talk of the telecom world, for now. The three-year-old company is now the world's fifth largest smartphone maker by market share. Xiaomi's rise has been fuelled by business innovations like selling its units below the bill of materials, selling directly to consumers through flash sales (thereby avoiding costly distribution channels) and dollops of hype. Xiaomi's success in India will be determined by whether it can match the hype with a robust supply chain and service network. That will determine if it's the next Samsung or just another smartphone player in a hyper-competitive market.
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