The online shopping fest that is Single’s Day has come to an end, and Chinese merchants are posting record profits.
In the early hours of November 12, Lei Jun, the president of handset and smart device maker MI, announced that the company’s handsets were the top sellers on Alibaba’s Tmall during Single’s Day.
Twenty minutes later, Lei posted another Weibo announcement claiming MI handsets were also the top sellers on JD.com and Suning, two other Chinese online retailers.
MI’s remarkable achievement helped to prop up its poor business performance in 2015 and suspend rumors that the brand is becoming obsolete.
MI has faced such criticism since its founding in April 2010, when ex-CEO of Kingsoft and creator of Zhuoyue.com Lei Jun set out to make affordable, high-end phones. The company’s first Android-based handset, running its own MIUI interface, went on sale on August 16, 2011.
The company has struggled to prove itself since the initial media buzz died down.
It quickly released new smartphones and other products such as the Mi Note and RedMi line of products. It also stepped into other smart home industries to produce a MI TV set-top box and air purifier in 2013 and 2014.
The company has a significant Chinese market presence and a steady group of devoted customers. But the brand is definitely facing difficulties.
According to data from Baidu House, MI sold 340,000 smartphones on Tmall during 2013’s Single’s Day for 553 million yuan; it sold 1.16 million in 2014 for 1.56 billion; and this year it sold 1.03 million smartphones for 740 million yuan. The remaining profits came from sales of TVs and accessories.
If looking at sales volume alone, MI’s performance appears to be ideal. But the conclusion becomes different when comparing only 2014 and 2015: MI stopped developing.
Market research agency Canalys said in its latest report that Huawei displaced MI as the top smartphone seller in the Chinese market. All evidence suggests MI is hitting a bottleneck.
Unstable Fan Base
The success of MI owes a tremendous debt to the company’s marketing.
Vice president of MI Li Wanqiang said he was hired to get the most attention for the least cost.
To achieve this, he and and other MI employers registered lots of accounts in different discussion forums to start threads about MI products. The guerilla marketing tactic brought many users who it quickly turned into dedicated fans.
MI held its first MI Fan’s Day on April 6, 2011. Fan’s Day, now held on April 8 each year, offers MI fans heavy discounts on the company’s products. Li also developed an online forum to give MI users a chance to interact with staff.
Enlisting the fans to promote the brand helped the fledgling MI retain customers and expand its presence in the domestic market. But as time went on, the strategy proved less useful.
With so many smartphone makers entering the industry, relying on corporate culture is hardly enough to retain Chinese users who are more focused on quality, appearance and price.
Even diehard customers have little opinion about MI’s phones. “MI’s smartphones are not good at dissipating heat or responding quickly to touch,” one MI user surnamed Shen said. “The visual aesthetic is also lacking.”
Product quality is critical to any company, but it’s an area where MI has fallen behind other smartphone markers.
Changed Profit Pattern
MI’s distribution pattern used to be one of the brand’s distinguishing features. Customers could only purchase MI products on its website instead of in a real store. When a new MI smartphone was going to be released, customers needed to reserve the new smartphone on the MI website, and MI fans were given first dibs.
The strategy allowed MI to avoid the cost of hiring sales staff or buying floor space in stores. It also served customers’ vanity, because users who were lucky enough to get the latest MI phone enjoyed a feeling of exclusivity.
But few users have the patience to regularly purchase smartphones this way – especially when Huawei and Meizu are constantly available alternatives.
Fierce market competition has forced MI to change its model, and today it sells its phones on Tmall, JD.com, Suning and other e-commerce platforms. On September 12, MI opened its first brand store in Beijing. The flagship store charges more for MI phones than MI’s own website, and that’s a tough pill for MI fans to swallow.
In the current smartphone market, the only way a company can truly stand out is if it develops its own chips.
By the end of 2014, MI’s smartphones relied completely on chips from Qualcomm and MediaTek. The dependence greatly restricts MI’s operations.
An article on Baidu Baijia noted that the MI3 phone’s notorious delay was due to a delayed shipment of chips.
By the end of 2014, MI became determined to cooperate with Leadcore Technology to set up Pinecone Electronics and produce its own smartphone chips. Its first self-made chip is expected to come to the market next year.