Xiaomi's expansion to Africa comes with concessions
It’s going to be hard for the mobile phone-maker to succeed abroad the way it did at home.
Once the world’s most valuable startup, Xiaomi, the Chinese smartphone maker praised for cheap but ‘high-spec’ phones, is expanding sales to Nigeria, Kenya and South Africa in a bid to keep smartphone growth growing as its home market in mainland China slows down.
Driving Xiaomi’s ascent in China was as a capital-light business: no stores, no company-owned factories, little paid marketing.
The deal in Africa, with South Africa-based Mobile in Africa Limited, is much the opposite: a traditional approach with an increasingly commoditized product in smartphones. Xiaomi’s South African partner will lead imports, marketing and support for phones sales, the Wall Street Journal noted.
It’s unclear how Xiaomi will gain traction in markets like India, Brazil and now Africa, as it has said it wants to, if it follows the same model as local competitors.
In India this past quarter, for instance, Xiaomi’s sales experienced their first quarter-to-quarter decline after expanding there last year— almost a 46% tumble “due to fierce competition from Lenovo and Micromax’s Yu brands especially in the higher volume sub-$100 segment,” says Counterpoint Research. It doesn’t rank in India’s top five market share. And if anything, Xiaomi needs to be present in India than it does in those three African markets, all of which together have barely one-fifth of India’s population.
Xiaomi’s also hurting in its home market of mainland China, and that’s more than just a result of market saturation. IChinese competitors have stepped up their efforts to steal Xiaomi’s crown. Research firm Canalys said Huawei passed Xiaomi for the highest market share in the third quarter.
Source: Fortune Magazine 3 November 2015