Xiaomi: A department store disguised as a phone manufacturer

This Tuesday, Xiaomi released a number of new products at once. There is the long-rumored low-priced Xiaomi phone Redmi 2A, the goddess version Xiaomi Note that is ready to make money from women, and the 55-inch Xiaomi TV. These are all new models of old products. There is not much to say about further expanding the market through different positioning and different levels.

What’s interesting is that Xiaomi also released a weight scale and a non-smart Xiaomi power strip at the same time. If the weight scale is intelligent and can be interconnected with Xiaomi mobile phones, then the non-smart Xiaomi power strip has nothing to do with mobile phones at all.

No wonder some netizens joked that Xiaomi department store opened, and the joke on Weibo on April Fool's Day today was that Xiaomi ramen would give away an extra egg when it was launched, subverting Lanzhou ramen.

What exactly does Xiaomi want to do? Let's take a look.

1. Xiaomi’s main profit model

Xiaomi's rise was short-lived, starting with its mobile phone ROMs and then its high-end, low-priced Xiaomi phones becoming extremely popular.

While selling mobile phones, Xiaomi is also making various mobile phone accessories and making full use of Internet media for hype and publicity. Its unique Internet shopping and marketing have been a great success, and Xiaomi mobile phones have grown rapidly for several consecutive years.

In the past two years, Xiaomi has invested heavily in the upstream and downstream industrial chains to expand its territory. Hardware companies, cloud services, virtual operators, mobile payments... have formed a system. However, the core of Xiaomi is still mobile phones. Although it has expanded widely, it is still mobile phones that contribute the main profit to the finance. Xiaomi can tell investors about the system, but to show investors financial data, it must have sales revenue and profits.

Let’s review. Before Xiaomi entered the market, the mobile phone industry was already very mature, with a clear division of labor in the industrial chain, and design companies, suppliers, and OEM factories each performing their respective duties.

Xiaomi entered the market with a mature design and a UI that had been repeatedly modified through user experience. It outsourced manufacturing and did product definition, design, sales, and marketing all by itself. As a result, Xiaomi was able to offer high-quality products at prices far below the open market price, and by triggering a rush to buy at low prices, Xiaomi succeeded in one fell swoop.

Lang Xianping mentioned the 6+1 theory, which includes product design, raw material procurement, warehousing and transportation, order processing, wholesale operation, and retail. The “1” refers to product manufacturing, among which the profit of product manufacturing is the lowest.

Xiaomi's model is to control the high-profit part itself, pass part of the profit to consumers, and then inform consumers of its advantages through publicity, triggering a buying spree and ultimately subverting the industry.

This model can be applied to other products.

2. Xiaomi’s Expansion

Xiaomi's idea has been used in various of its products, but some products have been successful while others have failed.

A successful example is the Xiaomi power bank. Everyone needs it, the total price is low, Xiaomi brand certification, low-cost battery cell procurement, Xiaomi power bank sales are very good, the total sales volume exceeded 10 million.

An example of failure is the first Xiaomi router. Although from an innovation perspective, the technical content of the Xiaomi router is much higher than that of the Xiaomi mobile power bank, the router costs 699 yuan, which is far beyond the average price level of home routers, and the additional functions are not available to everyone, so it failed.

Similar examples include Xiaomi Tablet and Xiaomi TV. Xiaomi Tablet is closer to mobile phones and has better market performance than Xiaomi TV.

Judging from the results of Xiaomi's expansion, things that are positioned close to the mass consumption level are more likely to succeed, and small items with a lower total price are more likely to succeed.

3. Xiaomi Power Strip

The Xiaomi power strip is actually similar to the Xiaomi power supply. Everyone needs power strips, but the quality of products varies. Low-priced products are hard to trust, and branded products are expensive. Xiaomi entered this market by relying on its brand, offering a relatively low price compared to mainstream products, taking humanized design into consideration, using customized components to differentiate itself, and coupled with Xiaomi's publicity and marketing, it is very likely to be a hot seller.

We only need to open the company's homepage to see how big the gap is between Xiaomi's marketing and the publicity of traditional power strip manufacturers. The mobile phone industry has basically learned this set of tactics (in fact, Apple is the initiator), and other industries are still far behind. Xiaomi will naturally be invincible.

I believe that the reason why Xiaomi power strip did not choose intelligent control is because of the lessons learned from Xiaomi router. Intelligent control is good, but it will increase costs a lot, and the experience improvement it brings is limited. Users do not need to use mobile phone APP to control the power strip very often, so it is not worth paying hundreds of yuan for this.

It is wise for Xiaomi to go for non-intelligent products this time. The core of product development is to sell them and make money, rather than creating gimmicks to attract investment, at least this is the case for companies under Xiaomi.

4. Xiaomi Department Store

If we do not look at the entire Xiaomi system, but simply look at Xiaomi's profitable businesses, we will find Xiaomi's role.

In the traditional model, manufacturers design and produce products, sell them to wholesalers, and wholesalers sell them to retailers through agents. Manufacturers or agents at various levels have to advertise, do public relations, and promote products before the products finally reach consumers.

Under the Xiaomi model, the design is done by Xiaomi, and manufacturers produce and sell directly to Xiaomi. Xiaomi then takes on multiple roles as a wholesaler, retailer, and advertising company, selling products to consumers and making profits.

The department store we are talking about is actually just a retailer, while Xiaomi is also a design studio, wholesaler, advertising company, public relations company...

If this business model becomes popular, our whole world will be different. Xiaomi's comprehensive business model will cause many companies in the traditional industrial chain to lose their jobs, and at the same time force competitors in the chain to learn from Xiaomi and establish such a system.

In the smartphone market, Xiaomi forced Huawei to establish its own e-commerce platform, organize the Huawei Pollen Club, and create an independent Honor brand.

In other industries, Xiaomi's entry will also trigger changes. Not only product manufacturers, but also e-commerce companies such as Alibaba and JD.com in the industrial chain will also change.

For consumers, fewer intermediaries and more intense competition mean better product quality and lower prices. The emergence of Xiaomi phones has allowed us to buy cheaper phones, and the popularity of the Xiaomi model will allow us to gain more benefits.

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.