Why Xiaomi is Like IKEA?

Do you think you know a lot about Chinese Internet Market, or do you want to know something about Chinese Internet Market?

Let’s have a tricky question, “What do you think of Xiaomi?”

Nearly all startups I have meet in Silicon Valley, especially some guy did not get a good result in Chinese Market, they obviously do not have any ideas about this.

“ Xiaomi is A Online Store” The answer was told by Mr Leijun, Chairman of Xiaomi.Even Walt Mossberg could not get the point. So he asked a lot questions about Apple and Sumsang, When he interviewed Mr Lin Bin, VP of Xiaomi.

Obviously, Xiaomi made tons of hardware. However, the truth is, it’s online store. Here is some point.

1, When Xiaomi just came out, they paid a lot of attention on xiaomi.com. They hope people could buy good product from xiaomi.com. Not like the other hardware company only sell their own product on the web-store.

2, Xiaomi starts from making and selling smartphone and accessories. After then, they extend their area to Online Store, Smart Home; But these product were still produced by supply chains of xiaomi. Finally, when they start selling selfie stick at 2015, these products were bought from the other supplier. In the future, there would be more and more suppliers join xiaomi’s family.

3, Xiaomi have already been the third largest chinese online store.

However, business model of Xiaomi is very different from Amazon and eBay, even is very different from Alibaba and Jingdong. It even looks more like IKEA and Costco.

Let’s just look back to the history of Online business adventure in China.

taobao.com is online business 1.0, it offers a platform for selling and buying long-tail products. at that time, people want cheap product. taobao.com could made it.

Then, tmall.com and jd.com is online business 2.0, at that time, customer want product in good quality and brand.

Now, xiaomi.com is online business 3.0. they could design, manufacture, and selling the product, they know what people want and could fill the requirement of the customers.

So these kind of Business Model looks more like IKEA. They could touch the customers, and they all know what people want and want they are feel. They are not only buying product and reselling them, they add some special “herb” into design and manufacture step. This herb is their experience.

Besides, Xiaomi learn the Low-Price-Strategy from Costco. Amazon’s profit rate is 23%, but Costco only have 6.5%. So, Costco could sell more product in such cheap price. A few years ago, Xiaomi’s Chair man, Mr Lei Jun, often hung out in Costco with his friends. Maybe at that time, they began to start think this business model.

Now, you may understood what xiaomi have done and why they doing this . For example, Xiaomi release a lot accessary except smartphones, they doing this is not for strategic objective,they just want to extend the SKU.

Obviously, smartphone is still the most important part of Xiaomi. The goal of Xiaomi must be a big company who worth 100 billion dollars. So in order to get this goal, they need to have a good story to fight with Alibaba or Tencent. Specifically,they need take over 30% of Chinese market of smart phone, in this case, they could have enough power to against the GMV of alibaba or the Wechat of Tencent.

However, it looks like things are not going that well. Xiaomi do not sell that much smartphones like they expected. So, in this period, xiaomi would be not eager to get next round of investment. In contrast, xiaomi undertake such big pressure, this offer a great opportunity to both Chinese startups and global startups, especially for the high quality brand product and hardwares.

PS:

I, am a journalist who focus on everything about Chinese and Global Internet, I feel lots of report about Chinese Internet is not that “real” or “accurate”.

Therefore, I just hope I could reflect you guys a real and real-time Chinese Internet. To help you under stand Chinese Internet environment and market, meanwhile, to show you a real Chinese Internet startups survival condition.