Xiaomi unveils ₹100 crore package for its revived retail ambition
Xiaomi is taking a leap of faith with its new initiative in retail, an industry that was jolted by the Covid-19 pandemic. The retail move aims to bring new entrepreneurs, including the first-timers, onboard with Xiaomi. The company has also set aside a ₹100 crore support package for the next two years as it aims to double the number of retail touchpoints and exclusive offline stores.
Xiaomi is hoping that the initiative will help generate more than 10,000 employment opportunities in the country. To help the new retailers, the company will provide skill development through a “Mi Retail Academy”. The virtual training will be available in all major Indian languages. Xiaomi will assist in the shop beautification, setting up an IT infrastructure, and a “buddy” subsidy, among other support.
As said earlier, the retail industry has faced an unprecedented situation due to the Covid-19 pandemic and related lockdowns. The industry is now crawling back to normalcy as restrictions are now far more relaxed than one year ago. Since the onset of the pandemic, there is also renewed focus on helping retailers fast adapt to the changing environment. We have also seen the emergence of models such as offline-to-online, pivoted by the likes of Reliance, Amazon, and Flipkart.
Xiaomi’s move to expand physical stores in such circumstances is a bit unique. Xiaomi Global VP Manu Kumar Jain explains the rationale behind the new effort.
“There is a significant number of audiences in India who are extremely comfortable with buying from a nearby shop despite everything. The reason is quite simple. They are used to buying from these stores, and there is a huge amount of trust. There is also, my guess, some sort of an informal credit system. For this audience, we would want to expand our retail network even further. We have realised that while e-commerce has grown a lot, there is still a large offline market of up to 60%. There is a large number of customers who are comfortable going to a nearby shop and buys. If you look at our retail business, it is still significantly smaller as compared to anyone else. If you look at any other big brand, they will have 50,000-60,000 or even in lakhs of retail touchpoints, compared to Xiaomi’s. To make shopping comfortable for all those 60% customers (offline), we would want to double down our offline efforts,” Jain said in an interview with HT Tech.
Xiaomi currently has more than 15,000 retail touchpoints. About 3,000 of these touchpoints are Mi Stores, which are exclusive retail stores. The company is now aiming to double the touchpoints to over 30,000 in the next one year. It also aims to double the number of exclusive Mi Stores from 3,000 to 6,000 over the next two years.
That said, Xiaomi’s increased retail presence will also mean the company will address the problem of disparity between online and offline. The offline retailers have long opposed lower prices on the e-commerce platforms as well as exclusive launches, among other issues. Even established players such as Samsung have faced such problems.
On the issue, Jain explained, “We try to have an almost equal parity across a broad set of channels. If you look at it from the distribution perspective, almost 50% of our sales come from online, and the other 50% comes from offline. If you look at the entire market, 40% is online, and there we have a 40-45% market share. In the 60% offline, we have an 18-20% share. We are one of the few brands which are no longer launching exclusive products across any channel. Every new product is sold through mi.com, Mi Home, Mi Studio, partner online and offline partners, and retail chains like Reliance and Croma. So, we would want to ensure that we maintain this parity between online and offline. Of course, there have been times when we have faced a shortage, such as last year due to the Covid-19. Aside from those rare circumstances, we would want equal parity and same product across both online and offline channels.”
Jain also expressed optimism the Covid-19 will go away someday, maybe not in the immediate future. And then, people would want to go and buy from physical stores. This is why Xiaomi wants to expand physical reach across the country, he added.