Case Study --- How Xiaomi outwitted Samsung to become market leader in Indian Market

First there were the European and American brands – Nokia, Ericsson, Alcatel and Motorola. They got outwitted by the Japanese brands like Sony and Panasonic. The Japanese were in turn outwitted by the Koreans --- Samsung and LG. And now it is the Chinese who are taking the pole position in Smartphone Mobile Handset Market --- with Xiaomi leading the charge.  

Samsung never had it so good with the demise of Nokia in 2013. The Finnish brand once held sway over the mobile handset market with almost 90% market share. But their disastrous decisions of relying on Symbian and Windows operating system earned them a huge disfavour among the customers. The market share of Symbian was 44% in 2009, 3% in 2012 and 0% in 2015. On the contrary, Samsung earned kudos by latching on to Google owned Android operating system that had a market share of 4% in 2009, 67% in 2012 and 62% in 2015 (Source of Data: IDC).  Samsung has also consistently held a market share of 20-30% between 2014 to 2017. The number of smartphones shipped in 2013 touched a figure of 1 billion, with Samsung alone having shipped one-third of them. In the third quarter of 2017, Samsung has been a market leader by shipping 83.3 million smartphones with a market share of 22.3%. Apple holds the second position with 46.7 million shipments and a market share of 12.5%.  

But the brand which has upset the applecart of Samsung in India is Xiaomi. This Chinese brand made a quiet debut in India in 2014 with two star employees --- Hugo Barra (ex-Vice President, Google) and Manu Jain (co-founder, Jabong) --- and a single brand called Mi3. There were no print ads, there were no television commercials, no hoardings, no promotions at dealer outlets --- just a plain and simple press release in all major newspapers and internet news sites on July 8th, 2014, which said that that Xiaomi, who was also known as the “Apple of China”, was launching the much popular Mi3 phone in India. The specifications were awesome --- it was offering a 5.00-inch 1080x1920 display powered by 2.3GHz processor with 2GB RAM and 13-megapixel rear camera. But the breath-taking feature of Xiaomi Mi3 was the price --- it was offering all these at a mere price of Rs 13,999/-.

They used an unusual marketing strategy called ‘Flash Sales’ through the e-retailer Flipkart. There was such a mad rush to buy the Mi3 that the website of Flipkart crashed on 15th July, 2014. The press reports said that Xiaomi had sold 5,000 units of Mi3 in 30 minutes and gone out-of-stock. The madness continued in the subsequent weeks. In Mid-August of 2014, Xiaomi sold 20,000 units of Mi3 in 30 seconds!!!

Since then, Xiaomi has been launching several value-for-money smartphone models like Redmi , Redmi Note, Mi MIX, Mi A1 and Redmi Y1 and creating one record after another.  Xiaomi earned over $1 billion in 2016 by selling their popular models like Mi, Redmi and Redmi Note mobile phone brands. In 2016, Xiaomi sold a million smartphones in 18 days in October during the celebrations of Diwali mainly because of the buzz created by Flipkart and Amazon around the brand. This year, in 2017, they broke the record and sold 4 million phones in one month during Diwali and festive season through Flipkart, Amazon and Mi.com.

 Samsung, in this period, had been rattled by the negative publicity generated due to malfunctioning and bursting of batteries in Samsung Galaxy S7 Note in 2016. The company reacted immediately and recalled over a million phones. But the problem was far from getting over. The batteries of the replacement phones also started catching fire and bursting. The company finally had to stop selling the Samsung Galaxy Note 7 phones and also tell the customers to stop using it. The damage was not only done to the Samsung Galaxy Note 7 brand but also to the parent brand of Samsung and the other Galaxy brands. 2016 was a nightmare year for Samsung Electronics.

In 2017, they reversed their fortunes with the release of Samsung Galaxy S8. They have retained the top position with a sale of 83.3 million smartphones with a market share of 22.3%. But Xiaomi has outsmarted them by doubling their shipments from 13.6 million in Q3 2016 to 27.6 million in Q3 2017. In India, they are tied at top place jointly with Samsung. Both Xiaomi and Samsung have 23.5% market share each in smartphone sales in India, followed by Lenovo-Motorola combine at 9%, Vivo at 8.5% and Oppo at 7.9% (Source of Data: IDC). Xiaomi has sold 9.2 million smartphones in Q3 2017 in India, registering a 300% growth on a yearly basis. Samsung, on the other hand, registered a 23% growth year-on-year and a 39% sequential growth, as per the IDC report.

Xiaomi is growing very aggressively in India with their latest models Mi A1, Mi MIX2 and Redmi Y1 getting great response from buyers. They have signed Katrina Kaif as the brand ambassador. They have bolstered their offline presence through a direct-to-retail approach and company owned stores called Mi Homes. They have also roped in ‘Big Bazaar’ to sell the Redmi 4 and Redmi Note 4 models. The offline sales contribute to 20% of Xiaomi’s total India sales, more than doubling from less than 10% share early this year.

Samsung has also been desperately trying to stem the rise of Xiaomi and grow its own brand. They had asked their dealers to stop stocking Xiaomi models and even stopped supplying its handsets to 200 retailers that entered into an agreement with Xiaomi to become preferred sellers for the Chinese brand’s phones.  Off late, they have started offering a 2-3% higher margin to retailers and increasing their credit period to 45 days from 30-35 days in order to push their brands. Samsung is also coming out with a new configuration and aggressive pricing of Galaxy J and Galaxy ON series of mobile phones to compete in the Rs 8,000 – Rs 15,000 range against Xiaomi.

At this moment, Xiaomi’s value-for-money strategy seems to be winning the game against Samsung’s dealer-incentive push strategy. Whether the Chinese or the Korean brand will have the last laugh is a matter of conjecture. But customers are certainly getting the best deals in this battle for supremacy in the smartphone mobile handset market.