Xiaomi enters JD.com, can compromise reverse its decline?

Fan Bingbing and Li Chen announced their relationship on Weibo using two “we”s, which quickly caused a sensation in the entertainment industry and social networks. As a large number of companies took advantage of the relationship between Fan Bingbing and Li Chen to market, Xiaomi and JD.com also took the opportunity to expose their relationship.

When Xiaomi entered Tmall two years ago, there was a rumor on the Internet that JD.com was suppressing Xiaomi. The truth is that Xiaomi insisted on having its own channels, while JD.com’s attitude towards 3C products was self-operated, which is why Xiaomi did not enter JD.com. Now Xiaomi and JD.com have joined forces, and they still use JD.com’s self-operated operation mode. So why did Xiaomi compromise and why did it choose JD.com?

Why Xiaomi is facing a downturn

Xiaomi is facing a decline, and the reasons given are as follows: first, pressure from competitors; second, Xiaomi's overseas expansion is not going well. Are these views really true? Let's use a set of data to illustrate the problem.

According to the Q1 2015 global smartphone market report released by Communities Dominate Brands, Xiaomi ranked sixth in the world with sales of 15 million units and a market share of 4.4%. In contrast, Xiaomi's sales data in 2014 showed that the shipments from Q1 to Q4 were 11 million units, 15 million units, 18 million units and 17 million units respectively. If calculated according to this ratio, Xiaomi's sales in the four quarters of this year were approximately 15 million units, 20 million units, 24.5 million units and 23 million units, and the total sales were only 82.5 million units, which is still far from Lei Jun's goal of selling 100 million units in 2015, and this is still the most optimistic estimate.

There are many reasons for Lei Jun not to be optimistic. Since the launch of Xiaomi 4 in 2014, Xiaomi has sold about 50 million mobile phones. On the 29th, Lei Jun announced on Weibo that the sales of Xiaomi 4 exceeded 10 million. In other words, the Redmi series accounts for a large proportion of Xiaomi's total sales, and the sales of mid-to-high-end mobile phones are less than 20%. It is probably not Huawei and Lenovo that make Xiaomi feel threatened. Vivo ranks tenth in the world with 9.3 million sales, and OPPO's sales have exceeded 8 million units. Even Meizu's Meizu Blue Note has increased its sales by 45%. In the domestic mobile phone market, more and more brands are learning from Xiaomi. Even OPPO and vivo, which have been active in the offline market and regard themselves as high-end brands, have begun to try Xiaomi's explosive sales strategy. Xiaomi's Internet advantage is becoming increasingly weak.

Another issue that cannot be ignored is that China's smartphone shipments in the first quarter were 106 million units, a sharp drop of 12.7% from the previous quarter. Huawei, Lenovo, TCL and Xiaomi have all set annual sales targets of over 100 million units, and emerging mobile phone brands such as LeTV, ZUK and Qiku are ready to go. For Xiaomi, when market demand is limited or even falling, if a competitor buys one more phone, it means that Xiaomi is one step further away from its goal. To a certain extent, Xiaomi has been under pressure from its competitors.

According to media reports, although Xiaomi was sued by Ericsson for patent infringement in the Indian market, the launch of Xiaomi 4i and the hot sales of the Redmi series both reflect Xiaomi's success in the Indian market. According to IDC data, Xiaomi accounted for 4% of the Indian smartphone market share in the fourth quarter of 2014. Judging from the 62 million units shipped in the fourth quarter of the Indian market, Xiaomi's sales volume was around 2.4 million units, but for the domestic market, this number is just a drop in the bucket. Chinese manufacturers are taking root in India. Foxconn will invest $3.5 billion to build a mobile phone factory in India. OPPO has also begun to set up mobile phone production lines in India. Meizu, Dasheng and others have also begun to layout the Indian market. Faced with a patent shortcoming, Xiaomi is unlikely to compete with Huawei, Lenovo and others in the Indian market. This may be the source of Xiaomi's disadvantage in going overseas.

Why did Xiaomi choose to compromise with JD.com?

After Mi 3, Xiaomi has obviously accelerated the pace of product releases. Mi 4 and Mi Note were released only half a year apart, and a series of mid- and low-end products such as Redmi 2, Redmi 2A, and Redmi Note followed one after another. Lei Jun's sales of 100 million units and his slogan of surpassing Apple within ten years are by no means a simple marketing need. Xiaomi is making its next big move, so changing its sales strategy has become a necessary decision.

Let's first look at the cooperation between JD.com and Xiaomi's competitors. On May 11, JD.com and Meizu signed an annual procurement agreement of 6 billion yuan. On May 19, JD.com and Coolpad signed an annual strategic cooperation agreement of 6.5 billion yuan. On May 26, Huawei Honor and JD.com signed a strategic cooperation agreement of 10 billion yuan. The data given in the "2014 Home Appliance Online Shopping Analysis Report" is that in 2014, JD.com's sales accounted for 59.8% of the overall home appliance online shopping market. JD.com's advantage in the 3C market is already obvious, which may be the main reason why mobile phone manufacturers have signed contracts with JD.com one after another. Lei Jun has repeatedly claimed that Xiaomi is the third largest shopping website in China. In the past, Xiaomi's main sales channels were concentrated on its own official website. When JD.com's traffic was considerable, Xiaomi's best choice was to put aside past grudges.

The cooperation between Xiaomi and JD.com took place before the 618 promotion, and Xiaomi has been ranked first in Tmall's Double Eleven event for two consecutive years. Whether it will or is willing to continue this miracle on JD.com is still a big variable. The first is the difference in the operation methods of JD.com and Tmall. Xiaomi controls the channels in its own hands on Tmall, and sales depend on its own operation capabilities. JD.com has adopted a self-operated form for 3C products, providing users with an integrated shopping experience, and has always been ahead of its peers in logistics and distribution. But for Xiaomi, the amount of sales depends on JD.com's attitude. After all, JD.com has signed huge sales agreements with Meizu, Dasheng, Honor, etc., and it is impossible for Xiaomi to give Xiaomi a green light all the way. In other words, whether Xiaomi can recover its sales decline has given a certain decision-making power to JD.com. If the two parties cooperate happily, JD.com may become Xiaomi's biggest shade tree.

JD.com's second temptation to Xiaomi is the social communication after joining hands with Tencent. JD.com has been the first-level shopping portal of WeChat for a year. Although the industry has repeatedly questioned that WeChat and mobile QQ have not driven the growth of JD.com's mobile orders, Tencent's micro-JD.com's contribution to communication is already evident. JD.com has reported that in the past year, JD.com has used WeChat to conduct 56 social marketing activities, attracting a total of 375 million people to participate and interact. The most direct effect of this communication is the increase in the number of JD.com users in third- and fourth-tier cities. According to a survey report released by Analysys in May, 41% of JD.com WeChat shoppers come from third- and fourth-tier cities, while 25% of JD.com's overall mobile online shopping platform users come from third- and fourth-tier cities.

Internet mobile phone brands have a history of four years since Xiaomi, but the audience of online channels is still concentrated in first- and second-tier cities, and third- and fourth-tier cities and below have become the market for scalpers. On the contrary, JD.com is becoming more and more well-known in third- and fourth-tier cities, and the launch of JD.com's county-level service centers has also accelerated its penetration into the 4-6 tier markets. Redmi, as the main force of Xiaomi's mobile phone sales, has its main consumer groups concentrated in the third- and fourth-tier markets, but is restricted by logistics and promotion. After JD.com has opened up the third- and fourth-tier and rural channels, Xiaomi will be the most direct beneficiary.

Under the pressure of sales, Xiaomi's sales strategy will inevitably be more flexible. Meizu already has a precedent of cooperation with Suning, JD.com, D.Phone, etc. Compromising with JD.com may only be Xiaomi's first step.

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.