Xiaomi’s channel-less strategy is paying dividends as the smartphone manufacturer continues to disrupt Indonesia’s rapidly growing market with competitive price-to-spec rations.
According to IDC, Indonesia recorded the highest smartphone shipments ever recorded during the second quarter of 2018, growing 22 per cent quarter over quarter and 18 per cent over the same period last year, largely attributed to a surge in Xiaomi’s shipments.
Although falling by five per cent since the Q217, Samsung still holds the biggest market share amongst all smartphone manufacturers in Indonesia, standing at 27 per cent.
However, the biggest surprise has been the growth of Xiaomi across Indonesia, growing from just three per cent in Q217 to 25 per cent market share in Q218, second only to Samsung.
Furthermore, unlike its counterparts, Xiaomi has adopted a growth strategy that leverages an internet-centric approach, conducting regular flash sales through ecommerce partners, mobile gaming, and continuous support to its fanbase community.
This approach has resulted in Xiaomi building rapid brand recognition through word of mouth and social media mentions.
“Xiaomi, which faced various growth challenges in the past, has emerged to be the dark horse in the Indonesian smartphone market, becoming the second largest player after Samsung,” said Risky Febrian, market analyst at IDC Indonesia.
“As opposed to OPPO and vivo's strategy, Xiaomi, despite its minimal marketing campaigns and thin margins for channel partners, was able to supply handsets with competitive price-to-spec ratios to the market, giving end users more value for their money.
"With this strategy, Xiaomi gradually caught up and gained significant mindshare and market share."
Rather than a threat to the channel, there are lessons and opportunities not just for Xiaomi’s competitors but for partners within the wider ecosystem as well.
While there is certainly a market for Xiaomi product offerings, the channel should be asking how they add value, especially in supplementary services because while the vendor has seen remarkable short-term growth, it is yet to be seen how such an approach will be sustainable over the medium to long-term.
This is where the channel has an opportunity to shine, with mature competitors like Samsung understanding this all too well.
“IDC expects Xiaomi will continue in this direction to attempt to win the top spot in Indonesia,” said Febrian. “In the coming quarters, other players will be forced to revisit their pricing strategies to compete effectively, and local brands are expected to be hit the hardest by Xiaomi’s disruptive gameplay.
"That said, several challenges remain for Xiaomi to wrestle with, such as supply constraints and gray shipments of its popular models, both of which will negatively impact its local pricing strategies and market demand."
In the past, OPPO and vivo made strides in the local scene with their aggressive marketing campaigns and lucrative profit margins to their channel partners.
This caused a disruption in the market, directly driving up the market share of mid-range (US$200<US$400) smartphones as consumers who were seeking to upgrade their smartphones were enticed by these ‘loud’ brands.