Xiaomi opens thousands of offline stores, but cannot escape its fate of sinking

Illustrations from Canva 

1,003 Xiaomi stores opened at the same time, covering 30 provinces and 270 cities and counties across the country. The huge scale of the store opening shows Xiaomi's determination to impact the offline market. At the same time, facing the competitive pressure from Apple, Huawei, OPPO, and Vivo, Xiaomi is gradually expanding its offline store distribution network while stabilizing its own product features, intending to expand a wider physical store territory. 

After Huawei failed in the foreign market due to the "blockade", Xiaomi seized the opportunity and returned to the top three in the world, allowing people to see Xiaomi's surging momentum again. However, Xiaomi still needs time and continuous innovation to return to the top in China. Market domination needs to be accelerated. Xiaomi's "thousand stores opened at the same time" has pioneered the new economy brand sales industry. However, Xiaomi's "thousand stores opened at the same time" is only the first step to open up the market. At present, OPPO has nearly 300,000 offline stores in China, and vivo has nearly 200,000 offline stores in China. Even if authorized stores are included, Xiaomi is far behind them. OPPO and vivo's various stores cover almost all cities and towns across the country, but their stores are mainly covered in major areas of third- and fourth-tier cities, while Xiaomi's stores are mainly distributed in first- and second-tier cities, mainly concentrated in business districts and places with relatively concentrated traffic. 

From the store coverage, we can see that OPPO and vivo offline stores have a wider audience, face a more comprehensive consumer group, and can better improve offline sales. Therefore, in order to dominate, Xiaomi must not only snatch the inherent consumer groups of OPPO and vivo, but also create its own market home.

At the same time, expanding the market share of stores is the key to Xiaomi's improvement of offline sales. Offline sales have always accounted for the vast majority of total mobile phone sales. Xiaomi's offline sales started relatively late, and the number of stores currently open is still relatively small. From the perspective of the proportion of users' purchasing channels, Xiaomi is at a disadvantage. Even if the proportion of users choosing online channels to purchase mobile phones in 2020 has increased by 4% compared to 2019, it has never been able to replace offline sales. Therefore, Xiaomi needs to speed up the construction of the offline market and use the advantages of offline sales to seize more market share. 

Determined to turn things around Since losing the top spot in 2016, Lei Jun has been looking for opportunities to turn things around, and in 2018 he promised to return to the top spot within ten quarters. In order to return to the top spot in China, Xiaomi started to reform its sales. Mi Home is the biggest breakthrough in sales channels. The combination of online and offline channels has broadened Xiaomi's sales channels and enabled it to better increase its market visibility. However, at the same time, Xiaomi's original core concept as an Internet company has gradually been assimilated by traditional mobile phone manufacturers. 

But assimilation is not a bad thing. On the one hand, it has helped Xiaomi gain a larger sales share, and on the other hand, it has allowed a wider user group to get familiar with this cost-effective mobile phone. Since the "explosion gate" incident in 2016, Samsung has gradually faded out of the Chinese market, leaving huge competitive space for domestic mobile phones. Xiaomi's competitors are mainly concentrated on Huawei, OPPO and vivo. At the same time, the suppression of Huawei by the United States has fueled Xiaomi's comeback. Since the "ban" by the United States last year, Huawei's mobile phone business has been almost out of water and food, but it is an undoubted opportunity for domestic mobile phone brands. Xiaomi took the lead in seizing this opportunity and continuously increased shipments to increase market share. In 2020, Xiaomi continued to gain momentum in China, and its growth performance was very impressive. 

As a leading domestic mobile phone brand, Huawei has long occupied the top position in the domestic market. In the past few years, Huawei's strong lead has made Xiaomi want to catch up, and it has conveyed this intention in various major press conferences, but it has never succeeded. However, this sudden change shows that Xiaomi is trying to accelerate its overtaking. 

Offline risks Before 2020, manufacturers were more concerned about costs, traffic, and location when it came to offline stores. 2020 was an extremely difficult year for mobile phone manufacturers. The sudden outbreak of the epidemic dealt a heavy blow to physical stores. Many stores were unable to bear the burden and closed down or even went bankrupt. Samsung, Apple, Huawei, etc. were also negatively affected to varying degrees. At the beginning of 2021, Lei Jun's "1,000 stores opened" still arrived as scheduled, which shows Xiaomi's determination, but more offline stores also mean more risks. 

First, the epidemic is spreading, so the entire industry is facing a greater risk of store closures. If the epidemic repeats last year's mistakes, more of Xiaomi's offline stores will have to be temporarily closed, and the corresponding closure costs will increase, and offline channel sales will be significantly affected. Second, Xiaomi has opened more stores in counties, which means it has directly entered the territory that originally belonged to OPPO and vivo. From the beginning of the store business, Xiaomi needs to face the competitive pressure from OPPO and vivo at all times. In addition, although Huawei was very unlucky last year, it has also been expanding the number of offline flagship stores. It has stated that it will open 10,000 offline stores.

Although the cost of opening a store is not low and faces the most direct competition, it has become a consensus to cover a wider area and more core areas through more offline stores. Under such circumstances, the competition faced by Xiaomi's offline stores will only become more intense. The fate of sinking Xiaomi's initial positioning was in the low-end and entered the public's field of vision under the banner of cost-effectiveness. However, in recent years, Xiaomi has been trying to break through its own solidified labels and move towards the high-end market. From the Xiaomi 10 at the beginning of last year to the Xiaomi 11 at the end of last year, Xiaomi has been trying to sell its cost-effective high-end phones to the public. 

However, the outside world has always been quite controversial about whether Xiaomi's impact on the high-end market will succeed or not. The main reason is still the brand positioning and user groups. Xiaomi has always been known for its cost-effectiveness, and most fans have relatively fixed consumption habits. For the high-end mobile phones launched by Xiaomi, the higher price has already blocked some of them from entering the door. It can be understood that the distribution of user groups is also the key to the positioning of the mobile phone brand's tone. According to data analysis, Xiaomi's user group is distributed in third-tier and lower-tier cities, accounting for as much as 50.97%. After the impact on the high-end market was controversial and faced resistance, Xiaomi's accelerated store openings seemed to have suddenly realized that its and its base camp are still in the sinking market, and there is still a market that Xiaomi can explore in the sinking market. 

Especially as Honor, Realme, and IQOO continue to play the same price-performance banner as Xiaomi, they have posed a huge threat to Xiaomi, so Xiaomi needs to return to consolidate its original market and has to continue to sink. But at the same time, it is undeniable that Xiaomi still has the ambition to impact the high-end market.

In addition to its own brand positioning issues, Xiaomi also needs to constantly switch between offense and defense in response to external pressure, and accelerating store openings may be an important signal that Xiaomi must pay close attention to both ends.