Internet mobile phones enter the knockout round, Xiaomi and others face deep distribution challenges

"What is the most powerful weapon I have? Internet thinking." At an annual meeting of entrepreneurs last week, Lei Jun , chairman of Xiaomi, reiterated the importance of Internet thinking and joked, "Huawei's good mobile phone business is also Xiaomi's contribution."

But in the eyes of outsiders, Xiaomi is becoming more and more "Huawei".

According to foreign media reports, Xiaomi will equip a mobile phone product that will be released soon with its self-developed Pinecone processor, which means that Xiaomi will become the second Chinese smartphone company after Huawei to have the ability to independently develop processors.

In fact, since the beginning of 2016, with the gradual disappearance of the e-commerce dividend, the traditional Internet mobile phone model has begun to decline. Behind the clamor of price marketing is the dual pressure from the channel market and the supply chain.

"As market competition becomes increasingly fierce, simple price wars will hardly attract consumers' attention in this fierce market in the future." Yan Zhanmeng, research director of Counterpoint, told reporters that some domestic mobile phone manufacturers are paying more and more attention to the control of the entire mobile phone supply chain, and blindly pursuing price wars and marketing wars is short-sighted behavior.

In the view of analysts, the 1.0 era of Internet mobile phones driven by marketing will come to an end, and will enter the 2.0 era centered on user experience. Previously, Honor President Zhao Ming also publicly stated that Internet mobile phones still have a bright future, and the development dividends of Internet mobile phones have actually not been discovered yet. How should Internet mobile phones play in the second half? Perhaps what is needed is the manufacturer's all-round integration capabilities.

It is difficult to conquer the world with a single Internet thinking

Lei Jun admitted in his speech that Xiaomi is now at the bottom and was a bit confused in 2016.

This confusion may come from changes in the market competition environment.

According to reports from third parties such as IDC, Xiaomi was overtaken by Huawei, OPPO, and vivo in terms of total smartphone shipments last year. Taking the second quarter of 2016 as an example, IDC data shows that Xiaomi's sales of 10.5 million units in the quarter plummeted 38% from 17.1 million units in the same period last year. In this year, the collapse of brands such as Dakele cast a shadow on mobile phone brands under this model.

"There are several reasons for this. The market is becoming saturated. More players are joining, such as LeTV and 360, which have brought a lot of money and resources to the already crowded so-called Internet mobile phone market. The result is that capital has become more cautious, and mobile phone manufacturers in their growth stage have found it difficult to obtain investment and their capital chain has been broken," said Wang Yanhui, secretary-general of the Mobile Phone Alliance, to reporters.

In addition, he believes that the rapid rise of OPPO and vivo has also had a huge impact on the online market.

This impact is particularly evident in the context of consumption upgrading. While hundreds of brands are joining the Internet mobile phone marketing army, the form of listing mobile phone configurations and simply comparing running scores directly causes users' cognitive confusion. "The actual experience of the product is declining, which has caused the Internet mobile phone to encounter a bottleneck in further expanding its market share today, and users have returned to offline choices." Wang Yanhui said.

It can be seen that even though Huawei started by competing with Xiaomi, its Internet strategy is also "changing lanes".

"The core of the current problem of Internet phones is the serious single reliance on marketing-driven. Manufacturers should no longer simply pursue so-called high cost performance, but should meet consumption upgrades with high-quality, high-tech products and make up for shortcomings in offline channels and supply chain capabilities." Zhao Ming said that the fundamental reason why the development curve of most Internet phones is steep is the lack of evolution. Once model dependence and path dependence are formed, they will naturally be confined. However, Honor is optimistic about the future of Internet phones and will always take quality and innovation as the foundation of Honor.

Facing the challenge of “deep distribution”

"Xiaomi has been rushing ahead too fast in the past and has overdrawn its growth potential in advance. It needs to slow down, adjust and make up for its shortcomings." Lei Jun mentioned in his speech at the annual meeting that the challenges Xiaomi has experienced in the past year are unforgettable for him.

In fact, the core of the Internet model is to use direct sales on the Internet to revolutionize traditional channels, and coupled with low advertising costs, it has been able to explode in the market.

"But this methodology will be unsustainable if it does not change." A senior person from the channel told the reporter that while Internet mobile phone companies are talking about Internet thinking, OPPO and vivo are using their huge agents to penetrate from first-tier to fifth- and sixth-tier markets through stores, service centers, and experience centers. Coupled with full coverage and flooding advertising bombardment, they have a huge influence on consumers.

"Especially in the fourth-tier markets where Internet phones are difficult to reach, the urban market with a population of 350 million is often the decisive market for consumer goods. Maybe when you are surfing the Internet, you want to find a cost-effective Internet phone, but when you go back offline and pass by the mobile phone store near your home, you just want to buy OPPO." The above-mentioned person said that the mediocre performance of Internet phones is actually because "deep distribution" has won over "Internet direct sales."

Of course, "Xiaomi" has also realized this and has been actively developing offline channels since 2016. Although the consumer request rate is very high, the channels are not very willing to distribute and sell due to thin profits.

Another source of pressure may come from the supply chain.

Supply chain control has always been a major concern for mobile phone manufacturers, especially those that make Internet phones. In 2016, even though Xiaomi had already reached a certain scale, it still suffered from a four-month shortage. Hammer, which was once a popular brand, also had multiple supply chain problems, which made its founder Luo Yonghao lose his temper.

For this reason, many of the Internet mobile phone manufacturers that once valued "light" assets in 2016 were "recruiting" to fill the gaps in the supply chain. 360, LeTV, Hammer and other Internet mobile phone manufacturers have strengthened the introduction of supply chain management talents and penetrated the industry chain to the upstream. Xiaomi's layout of "Songguo" is also for this reason.

But the complexity of the supply chain goes far beyond that. "Photography, chips, new materials, new processes, etc. all require a single point of breakthrough." Zhao Ming told the reporter of China Business Network that comprehensive innovation at the system level, hardware level, or software level is a factor that determines how far manufacturers can go in the future.

Honor, which was once regarded as a "rival" to Xiaomi, has actually changed since 2016. Just after the 2017 Spring Festival, Zhao Ming clearly stated in an industry open letter that Honor, as a representative of Internet phones, will "accelerate" Internet phones and lead Internet phones into the second half. It is reported that the flagship model V9 will be priced at more than 3,500 yuan.

Wang Yanhui told reporters that Internet mobile phone manufacturers have set the price of their products at more than 3,000 yuan, which has directly shattered people's traditional perception of Internet mobile phones. The brand output of innovation and quality is also gradually moving away from the past promotional method that emphasized the cost-effectiveness of the Internet.

"The Internet has not changed the nature of things. Tofu is still tofu. It doesn't matter whether Huawei is an Internet company or not. It doesn't matter whether Huawei's spirit is the Internet spirit or not. The most important thing is whether this spirit can ensure the survival of the company." As Huawei founder Ren Zhengfei said, perhaps for Internet mobile phone manufacturers at this time, it is no longer important who has Internet thinking. Now is the moment of the second half of life and death.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.