July 22 (Bloomberg) -- In just four years, Xiaomi Corp. has evolved from startup to outselling Apple Inc. in China by offering inexpensive devices packed with high-end features. Now it’s targeting India.
After using social media to tap the Chinese diaspora in markets including Singapore, Xiaomi teamed with Flipkart.com to sell its Mi3 phone starting today for 13,999 rupees ($232). The phones sold out in 30 minutes, Flipkart said while declining to comment on the number of units sold.
The push into India is part of Chief Executive Officer Lei Jun’s drive to deliver a fivefold boost in sales to 100 million units next year and challenge Samsung Electronics Co. and Apple globally. Beijing-based Xiaomi is entering a market where Samsung and Indian makers account for 60 percent of sales, wireless carriers don’t subsidize the costs of devices, and the pool of Chinese speakers familiar with its products is smaller.
“No one knows Xiaomi in India,” said Katyayan Gupta, a technology analyst at Forrester Research Inc. in New Delhi. “I don’t even know their phones. They’ll have a lot of education to do. It will help them to tie up with a trusted brand in India.”
The partnership with India’s biggest e-commerce operator is a break from Xiaomi’s usual strategy of selling phones solely through its own website. About 100,000 people registered to buy the Mi3, Flipkart said in an e-mail.
$10 Billion Valuation
Xiaomi is starting sales in 10 new markets including Brazil and Russia. While the company started its own websites in Singapore and Taiwan, India has proved more difficult because its infrastructure for delivering packages and collecting payments is underdeveloped.
“Building an e-commerce effort in India is a lofty effort, not something we would be able to do quickly,” Hugo Barra, vice president of Xiaomi, said in a phone interview.
Xiaomi also is partnering with local e-commerce operators for its expansion to the Philippines and Indonesia, Barra said.
The Mi3, which sells for less than a third of the price for an iPhone 5s, still sports high-end specifications with a full high-definition screen, 13-megapixel camera and a Qualcomm Inc. Snapdragon processor.
Even as it focuses on new markets, Xiaomi is stepping up competition with Apple and Samsung at home with the Mi4, featuring a 5-inch high-definition screen. The Mi4 starts at 1,999 yuan ($322) for the version with 16 gigabytes of memory, Lei said at a press conference in Beijing today.
Xiaomi will sell the phone through its website and carrier China Unicom (Hong Kong) Ltd. beginning July 29.
Xiaomi’s success in selling smartphones in China, where it was No. 3 in the first quarter according to researcher Canalys, has seen its valuation surge. Xiaomi said last August that a fundraising round valued it at $10 billion.
Xiaomi, now the No. 6 producer globally, has no plans for an initial public offering within five years, Lei said in September. The company shipped about 10 million smartphones in the first quarter, according to IDC.
Xiaomi’s strategy may help it gain exposure in India’s smartphone market, which is growing faster than China’s. About 250 million smartphones will be sold in India this year, according to Brad Rees, chief executive officer of Mediacells, a London-based marketing company.
Samsung accounted for 35 percent of India’s smartphone sales in the March quarter, while homegrown brands Micromax Informatics Ltd. had 15 percent and Karbonn Mobiles held 10 percent, according to researcher IDC.
Nearly 80 percent of smartphones purchased in India cost less than $200, according to IDC. Cost matters in India as the phones are bought upfront, unlike in the U.S. where they are typically sold with a service contract.
Flipkart’s experience with smartphones was a key reason behind Xiaomi’s decision, according to Barra.
The Indian company partnered with Motorola Mobility to exclusively sell the Moto smartphone series in India, with 1 million of the phones sold in five months, Flipkart Chief Executive Officer Sachin Bansal said.
“Motorola is a known brand, people here know what Motorola is, so buying those devices online would be easier,” said Anshul Gupta, an analyst with Gartner Inc. “Initially, it’s going to be a challenge for Xiaomi.”
The company hired Manu Jain, the co-founder of clothing e-commerce site Jabong, to run the India operations, and it plans to increase workers at the business to about 20, including staff to run two service centers, by the end of the year.
Xiaomi will contract other companies for a further 34 service centers and hire software developers to build applications focused on Indian users. Barra declined to say how much the company is investing in India.
After starting with the Mi3, Xiaomi will offer the Redmi 1S at 6,999 rupees and the Redmi note for 9,999 rupees, according to its Indian website. Even at those prices, Xiaomi will have its work cut out to win sales in the world’s second-most populous nation.
“Xiaomi is really a new company, people are not aware of the brand, so there will be some hesitation,” Gartner’s Gupta said. “This is a very competitive market.”
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