A Call from China

By December 2014, Xiaomi, the Chinese startup that had surpassed Apple and Samsung to become the No 1 vendor in the world’s largest market for smartphones, had sold a million phones in India. How did it go from nothing to a million, carving itself a 4 per cent share of the smartphone pie within five months of entering the Indian market? “There is no secret sauce,” says Xiaomi’s India operations head Manu Jain, paraphrasing Po the animated panda. We meet in a small room, one of three or four occupied by 25 Xiaomi India staffers on the eighth floor of a suburban tech park in Bangalore. They will shortly move to a new office nearby, a 20,000-sq ft facility that is set to witness a lot of action this year, including India-specific research and development, the launch of a sleek new flagship phone and a smart TV among other things, investments in local technology startups to build an Internet-of-Things ecosystem, and getting the Xiaomi India e-commerce platform up and running. This is no longer some Chinese interloper thriving on the odd bit of populism, but a brand that is hatching one of the most daring plots in the personal technology space in India. “In a startup, you know where you are and where you need to be, but the path changes all the time. It is never a straight line,” Jain says. His own path is strewn with gadgets these days. Instead of a watch, Jain wears a black silicon band, a fitness and activity tracker that is expected to hit the Indian market at under Rs 1,000 later this year. He is also testing the Mi Note, a phablet beauty with curved Gorilla Glass that was unveiled in China early this year for about half the price of its closest competitor, the iPhone 6. “I got three personal requests from important people in India who wanted to own the Mi Note. I have had to ask all sorts of personal favours to get them the phone,” Jain says.

Until two years ago, Jain was in the same boat as many of us in search of a good Android phone. We rarely looked beyond the top TV brands—Samsung, LG and Sony, or, if we were really strapped for cash, Micromax—and hoped the almost imperceptible upgrades to the design and the hardware were worth our money. A budget smartphone was still an oxy- moron. “I am a power user and I run a lot of apps. Because I wanted the latest in speed and features, I had to buy expensive phones,” Jain says. “It was not that I was buying a big brand for its perceived status.” He now heads the India operations of a company that has acquired cult status the world over for disrupting the high-margin smartphone landscape. In mid-2014, as Xiaomi prepared to take its first gingerly steps into India, Jain took several steps backwards. A former McKinsey associate who also co-founded Jabong, an e-commerce clothing portal, he had to unlearn everything he knew about doing business. From advising clients on their marketing outlay and running a company with hundreds of employees, it was an unlikely passage to a rarefied world where profits were wafer-thin and staff pared down to the minimum. There would be no advertising at Xiaomi except word-of-mouth and a whole lot of tweeting. The product, it was hoped, would speak for itself, turning fans into brand ambassadors. The strategy, or lack of one, worked for Xiaomi.

In a market already flooded with affordable smartphones from homegrown companies like Micromax, Karbonn and Lava, Xiaomi positioned itself like a kung fu master with all the moves to cut through the noise and hit that perfect pitch. But it had no idea just how effective it would be. The online Mi 3 flash sale on 22 July last year offered the first tantalising whiff of things to come. The phone boasted a top- of-the-line spec sheet and displayed a rare fidelity to quality at just Rs 13,999. With 10,000 units on offer and over 100,000 registered users vying to buy them, the handsets flew off the shelves of Xiaomi’s e-commerce partner Flipkart within seconds, crashing the website. The Mi 3 became the best phone you could not have. Amidst accusations of creating artificial scarcity, Xiaomi apologised for grossly underestimating the demand, but the episode lent it an air of mystique and generated a flurry of interest in the media. Registrations for the next sale a week later again went through the roof. Those who managed to snag a handset, meanwhile, found themselves part of an exclusive clique of technology enthusiasts who could not stop raving about the MIUI, Xiaomi’s own user interface built on the Android platform.

As a practitioner of the precise science of booking IRCTC Tatkal tickets, I was among the first Indian owners of the Mi 3, to the envy of friends and family. They have since abetted the cause of other disruptive products like the OnePlus One, another Chinese contender that launched in India through Amazon in December 2014. Xiaomi played a catalytic role in the renovation of the smartphone industry last year, paving the way for price cuts, restoring user faith in newer brands, and challenging the sclerosis of colossal marketing budgets.

Its story, really, is that of a curio becoming something of a phenomenon. In August last year, just as the Mi 3 was becoming the Indian geek’s weapon of choice, Xiaomi unleashed another for the casual user: the Redmi 1S, a quad- core-powered phone with 1 GB of RAM at a very accessible price of Rs 5,999. The unremitting march of the Mi phones continued, despite a patent infringement lawsuit and concerns about privacy and after-sales service, with the Redmi Note 4G, the Redmi 2 and the Mi 4 coming in quick succession.

“When we called an impromptu fan meet-up in Bangalore for the first time in August 2014, I expected five to 10 fans to turn up. There were 50. It was one of our unforgettable moments,” says Hugo Barra, vice-president of global operations at Xiaomi. The MIUI India forum now has over 23,000 users, most of them in their early twenties and highly conversant in the latest technology. “Our fans have a say in what they want to see in our MIUI software, and even our hardware, and this sense of participation makes them feel valued,” Barra says. “Our products are a culmination of feedback we have received, in massive scale, and this is also why users love our products so much and how we have managed to grow so rapidly in India.”

With smartphone sales in India poised to cross 100 million units this year, this is a very important market for Xiaomi, which is valued at $45 billion after a round of funding in December. “India is key to our global expansion,” Barra says. In a year’s time, he says, Xiaomi India could well become an important hardware and software technology vendor, an internet services platform, an e-commerce business, and a major investor in the local startup ecosystem. But first, the brand must go mainstream. “We firmly intend to ramp up our supply to match demand so we can eventually move completely towards an open-sales model for all of our products,” Barra says. Xiaomi already sells the Mi 4, the Redmi Note 4G and its tablet the Mi Pad on Flipkart without requiring users to register. It has quietly taken up a warehouse on the southern fringes of Bangalore—its first in India—and also announced partnerships with two other leading etailers, Snapdeal and Amazon, to mark its fifth anniversary.

Last month, Xiaomi tied up with The Mobile Store to make Mi 4 and the Redmi Note 4G available across a network of about a thousand brick-and-mortar stores. Though Xiaomi continues to maintain that it does not have a marketing budget, The Mobile Store did advertise its offline launch across 55 stores in Delhi- NCR. “After the initial euphoria among fans, Xiaomi wants to dig deeper into the market. In India, most people still want to touch and feel a phone before buying it,” says Himanshu Chakrawarti, CEO of The Mobile Store. In China, about 30 per cent of Xiaomi’s sales happen through physical stores and the company con- tinues to sell its products primarily on its website. “Our stores will also function as service pick-up and drop centres for Xiaomi, so it is a win-win,” Chakrawarti says. So far, most people who walked in to one of his stores to experience a Mi phone have ended up buying it, he adds.

“We are not here to just sell phones,” says Manu Jain. “We are looking into what inspires the Indian user—whether it is a cricket theme released in time for the World Cup or customisations that can be built into the UI. In China, for instance, when you call a restaurant like McDonald’s, the menu pops up on the screen,” Jain says. He spends much of his time working with a team of developers in their early twenties who dream up India-specific content and help integrate it into MIUI.

As Indian smartphone users mature, they will look for value-adds on top of the Android experience, says Vishal Sehgal, co-founder and director, Lava Mobiles, which controls about 8 per cent of the Indian smartphone market. “Deep customisation is important to this segment, which is on its second or third smartphone,” Sehgal says. Lava is investing over Rs 100 crore in building Hive, a heavily-customised Android ROM with its own themes, launcher and widgets, that will power its premium Xolo range of smartphones.

The leader in Indian smartphones, Micromax, recently launched an online brand, Yu, in collaboration with Cyanogen, a Seattle-based venture-funded company that builds its own version of Android. The Xiaomi-style debut of Yureka on 13 January this year saw 10,000 units sell out in three seconds. “Customers are spoilt for choice after Xiaomi broke into the market,” says Gopinath Anand, a 20-year-old MIUI fan who disavows the Indian tendency to buy well-entrenched brands. “Today, most tech enthusiasts demand the freedom to run different ROMs on their phones. And they have a big say in shaping the success or failure of a phone—whether on forums and social media or through word of mouth.” Anand, a student of engineering from Hyderabad, has two smartphones, one of them a Mi 3. “I turned a fan only recently, after installing the over-the-air MIUI 6 update. This is exactly how an intuitive UI should be,” he says. For its loyal fans, Xiaomi is already narrowing the gap between product launches in China and India. The Redmi 2, announced in China in January, was released in India in March.

Xiaomi India refused to disclose incremental sales figures after it crossed the million mark towards the end of 2014. According to technology market research firm Cyber Media Research, while its shipments for October to December 2014 stood at a little over 900,000, they fell to about 600,000 in the first three months of 2015. The Indian smartphone market being seasonal, one cannot read much into these numbers, say analysts. “Xiaomi is entering phase two of its growth in India,” says Tarun Pathak, a senior telecom analyst at Counterpoint Market Research. Travelling in Jammu & Kashmir recently, Pathak was surprised to find that a majority of people had heard of Xiaomi, even if they did not know someone who had bought one of its phones. “The brand has made an impact. Now it has to scale up very fast,” says Pathak.

In an industry marked by ephemeral trends, the cachet of success and popularity has to be earned anew every day. As new players compete for India’s vast potential smartphone market—Chinese startup Meizu is the latest to express interest in the country—Xiaomi is scouting for locations to set up a manufacturing facility here. The best location, of course, is on top of the charts, right up there with the smartest phones in the market.

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