Xiaomi revamps its strategy, turns toward EV showrooms

Chinese smartphone maker Xiaomi Corp is revamping its playbook in China by opening thousands of new stores to spur domestic sales growth.

Xiaomi is also trying to provide a channel for its plans to sell electric vehicles.

Xiaomi opened its 10,000th store on Oct. 30, fulfilling a promise to double its offline store count, and set a fresh target to open 30,000 shops over the next two to three years.

While Xiaomi has successfully expanded overseas, it lags behind larger rivals such as privately-owned Oppo and Vivo in its home market because of its weak offline presence. About 70% of all smartphones in China are purchased offline, while Xiaomi gets 30% of its sales offline.

Xiaomi’s new stores also offer its suite of internet-connected home appliances and cameras which have fatter margins than phones – analysts say about 15% fatter – and set it apart from its rivals.

Looking ahead, Xiaomi hopes its new stores will become showrooms for its electric cars, which company founder Lei Jun has said will be his last major entrepreneurial project. The company aims to mass produce cars by 2024.

Xiaomi has pursued an online sales model because it helps keep prices low without networks of offline distributors.

This strategy has helped the company grow rapidly from its birth in 2010. It overtook Apple Inc in the second quarter to become the world’s No. 2 smartphone maker, according to market research firm Canalys.

However in its home market, the world’s biggest, it has slipped in the rankings from first in 2015 to fourth in the third quarter, lagging behind Vivo, Oppo, and Huawei spin-off Honor.

As its domestic market share has struggled to keep pace, so have its store openings. Xiaomi opened its first stores in China in 2015 but it is far behind Oppo and Vivo, both owned by BBK Electronics. Shang says those two rivals now have about 200,000 stores in China.

This year, to increase its store count, Xiaomi altered its offline distribution model to lure in more franchise partners. While it owns some of its stores, it eventually aims for a majority to be franchisees, particularly in rural areas.

Under this new plan, for certain stores Xiaomi only classifies a device as “sold” when a consumer purchases it rather than when it is shipped to middlemen. This lowers inventory risk for the stores and shifts the burden of unsold inventory back to the manufacturer.

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