Author/ Author of "Finance and Economics" Weekly An Ran
Editor/ Xu Zhitong
No mobile phone company has mentioned "high-end" so frequently as Lei Jun:
"If Xiaomi wants to become a great company and realize its dreams, it must break through the high-end."
"Small size high-end flagship, officially benchmarked against Apple."
"Steadily practicing the high-end road is exactly the issue that Xiaomi needs to focus on in the new decade."
On the evening of February 8, 2022, Xiaomi held the first important meeting of the Year of the Tiger - the high-end strategy seminar, and officially established the high-end strategy working group. Lei Jun shouted out a new slogan that attracted people's attention: Xiaomi products and experience should be fully benchmarked against the iPhone, and the market share of domestic high-end mobile phones should be won within three years.
However, there is always such a distance between ideal and reality. Since the official announcement of the impact on the high end in 2020, the more Xiaomi wants it, the more it can't get it. Whether it is the product itself or the market performance, there is no sign that Xiaomi has stood at the high end.
The capital markets have already given feedback. Today, Xiaomi Group's share price has returned below the issue price after a year and a half, closing at HK$16.82 on February 10. In the past year, Xiaomi's market value has evaporated by more than HK$400 billion.
2021 didn't go well
(Source: Visual China)
Xiaomi once had a good start in 2021.
Xiaomi, which shouts "high-end", has released a number of products intensively in 2021, including Xiaomi 11, which was released on New Year's Day, and Xiaomi 11 Pro and Xiaomi 11 Ultra in March, as well as the MIX Fold, a folding screen phone priced at up to 9999 yuan, and released the Xiaomi 12 series at the end of the year. The lowest price of these models is also more than 3,000 yuan, and the highest sells to nearly 10,000 yuan.
However, the market performance of these products has been uneven.
Fan Qi, a millet dealer in North China, revealed to Caijing Weekly that the overall performance of the Xiaomi 12 series was not as good as that of the Xiaomi 11 series. Previously, Lei Jun had a high evaluation of xiaomi 12, calling it a "new milestone for xiaomi high-end mobile phones".
Fan Qi recalled that when xiaomi 11 was on sale, a store could sell forty or fifty units a day, without the main push, all rushing to ask for goods. After the Xiaomi Mi 12 went on sale, Fan Qi did not feel the obvious rush atmosphere, and Xiaomi has deliberately reduced the pricing of the Xiaomi Mi 12 series.
In Fan Qi's view, this has something to do with the poor performance of the previous generation of flagship mobile phones. Xiaomi Mi 11, which launched the Snapdragon 888 chip, once had a very good start, and the early sales were also very good. Xiaomi's financial report shows that in the first quarter of 2021, the Xiaomi 11 series ranked first in the Chinese domestic market sales of Android mobile phones at the same price.
However, the Xiaomi 11 series has overturned in product quality, and a bunch of quality problems have appeared in the follow-up, including burning the motherboard, black screen shutdown and burning WiFi, which has caused many complaints.
As of February 2022, Sina Black Cat has complained about the Xiaomi Mi 11 with a whopping 11,500 pieces, much higher than Xiaomi's other models. In a QQ group of "Xiaomi 11 motherboard problems", there are even more than 1800 users gathered.
Ruan Yong, head of a supplier partner of Xiaomi, told the "Finance world" weekly that Xiaomi 11 because it wanted to grab the first launch of Qualcomm Snapdragon 888, the research and development cycle was greatly shortened, and there were many problems. This year's Snapdragon 8 series chips, Xiaomi is still the first, "Xiaomi digital series to grab qualcomm's debut has become a tradition, but the effect and sound volume has not been as good as before." ”
Such a situation has appeared many times in the history of Xiaomi's upward movement. At the beginning of 2020, Lei Jun said: "Xiaomi 10 is Xiaomi's first product to impact the high-end market. But in fact, this is not the first time Xiaomi has shouted a high-end slogan. In 2015, Xiaomi released the Note series, the first upward breakthrough; in 2016, Xiaomi released the MIX series, but this series in addition to the previous two generations of models have a good reputation and market performance, from the MIX 3 has not been able to continue the previous performance.
"Xiaomi is still a little tired when it goes up." Fan Qi said a very realistic problem, "There is no black technology anymore, what high-end do you take." "Xiaomi's high-end slogan is not a day or two, but the reality is not satisfactory, representing xiaomi's highest level of xiaomi folding screen mobile phone sales are not good, the latest news is that the price of xiaomi MIX FOLD has been more than 3,000 yuan lower than the pricing."
"The chip and the screen are not yours, there are only marketing means left, and rice noodles are also limited." Fan Qi said.
This is the lifeblood of Xiaomi. Chips and screens, the most core components of mobile phones, need to be supplied by Qualcomm and Samsung, which also causes a number of domestic mobile phone brands to frantically grab the first launch every time the Snapdragon flagship chip is released.
Xiaomi once tried its own chip. In 2017, the first mobile phone main processor Surging S1 was launched, but it was not successful due to poor performance. Xiaomi soon lost patience, and Zhu Shangzu, the chip bull who joined, also ran away, and eventually the chip project was not solved. Compared with marketing, Xiaomi's determination and investment in core technology seem to be less hot.
In the first week after the Spring Festival rework in 2022, Xiaomi's self-developed charging chip surging P1 fell into the "OEM" storm. Some netizens posted a set of wafer screen printing comparison charts of Xiaomi surging P1 chips and another chip on social platforms, and there is a certain degree of similarity between the two, so the surging P1 is questioned to be "bought".
However, the party concerned, Nanxin Semiconductor, said that the Xiaomi surging P1 chip was designed by Xiaomi itself and oem by Nanxin Semiconductor (internal code SC8561). "Xiaomi's self-developed surging P1 charging chip is completely different from the topology of the South Core SC8571, which are two charging chips with different designs, different functions and different positioning."
"Nanxin Semiconductor does not actually have a foundry (manufacturing) business." According to people familiar with the matter, perhaps Xiaomi outsourced the chip design to Nanxin Semiconductor, which is very common in the industry. However, Xiaomi has not yet responded to this news.
Offline channels are redundant
After Huawei was suppressed, the high-end mobile phone market left a lot of blanks, which allowed domestic brands such as Xiaomi to see a great opportunity to impact the high-end. In order to seize Huawei's sales position, Xiaomi has increased the speed of opening stores in 2020 and 2021.
At the end of October 2021, Lei Jun announced the opening of the 10,000th store of Xiaomi Home in Shenzhen. The coverage rate of Xiaomi Home in the county town has exceeded 80%, and it has covered 2200 counties. The increase in stores has brought about a decline in the efficiency of a single store. Fan Qi found that stores that sell more than 100 units a month are good stores, while before that, the sales of the same store were at least 200 units.
Wang Qing, a millet dealer from Beijing, revealed to the "Finance and Economics" Weekly that the current millet propaganda rarely mentions gross profit margin, but instills the concept of ROI (return on investment) to dealers, requiring the operation efficiency of offline stores to be close to e-commerce, relying on high turnover to improve the comprehensive gross profit of dealers.
In order to speed up the turnover, in the latest channel strategy, Xiaomi cut the original multi-layer distribution system, and stores can directly dock with Xiaomi factories for delivery. In contrast, Huawei, OPPO and other manufacturers still use similar national and provincial methods to connect retailers and then reach users, and profits are diluted in layers of distribution.
Another significant change is that in order to solve the inventory pressure of dealers, Xiaomi will take back the right to store goods, and the inventory that cannot be sold in the store will be paid by Xiaomi, but the channel provider needs to promise to inject a part of the payment, and Xiaomi will issue the corresponding value of the goods. "The payment belongs to the channel provider," Wang Qing said, "this is also a necessary condition for joining at present." ”
Xiaomi insists that as long as the turnover efficiency is high, the overall return will not be too low. In June 2019, Gao Ziguang, who is still trading offline channels, said in an interview with the media, "(Now) most retailers can achieve a guaranteed annual return of 20% or more than 30%. ”
In Wang Qing's view, Xiaomi's efficiency winning strategy can "turn up" is the need for prerequisites, because to fully consider the flow of people, the current mobile phone manufacturers' offline site selection is to value the "into the MALL rate", to open a store in high-end shopping malls is regarded as the key to winning the offline channel, the past old and broken communication street form will gradually be abandoned.
Entering a supermarket is not an easy task. Most shopping malls welcome only direct-operated stores, but direct-operated stores mean heavier operating costs. Wang Qing revealed that at present, investing in a Xiaomi Home direct store in the Beijing business district requires a commitment to inject 3 million yuan, and the cost of recovery is more than 1 and a half years, and under the influence of the epidemic, the time may take longer.
At the 2021 Xiaomi Investment Day Conference, in response to investors' questions about the mismatch between sales growth and offline store increments, Lei Jun replied: "Xiaomi Home is a chain store, and it takes 9-18 months for each store to open a hot store process", and pointed out that investors are going to new stores, and new stores should be excluded to see the performance of 2000-3000 stores a year ago.
Tang Gong, a mobile phone dealer in Fujian, was deeply touched, and he opened the first Xiaomi Home store at the county level in May last year, with a comprehensive cost of 700,000 yuan for the first order, and his expected return time has been set in three years. In other words, if you want to monitor the effectiveness of this round of offline reform, you need to give Xiaomi more time.
But more channel vendors don't seem to buy it. "After the reform, the profit point of mobile phones has increased, but it is still not competitive compared to Huawei." Another channel provider admitted to the "Finance world" weekly, "After the Huawei accident, in order to survive, many channel providers consider turning to other brands, OPPO and vivo are within the scope of consideration, but there is no millet, we must give priority to the brand with high profits, rather than the model of mortgage payment." ”
"There are very few regions in the country that can complete the task one hundred percent." Fan Qi told the weekly magazine Caijing. On the one hand, the poor performance of the Xiaomi Mi 11 series has directly affected the sales of xiaomi mi 12. On the other hand, it is also related to the rapid rollout of offline channels.
Xiaomi's strategy is to provide generous rewards to front-line salesmen, such as selling a folding screen mobile phone, the reward for the clerk is 200 yuan, the sale of Xiaomi 12 and 12Pro are rewards of 50 yuan, and the Xiaomi notebook reward is 80 yuan - these are all rewards other than the normal commission. This practice has greatly improved the enthusiasm of the clerks, "We have some clerks, and the light platform rebates six or seven thousand yuan a month." ”
However, merchants who join Xiaomi Home may not be able to make a lot of money. "People xiaomi ensure that you don't lose money, but you can never make a lot of money." A xiaomi merchant sighed, "The merchant is always the part he should earn, no matter how xiaomi adjusts, it is like this." ”
In his view, Xiaomi does not need merchants to have too much ability, there is money on the line, and encourages merchants to be "TOP customers" and "blue-blooded customers", adhere to the strategy of "less business and more stores", which is convenient for management. "Xiaomi is not looking for shrewd people now, but only for rich people." Fan Qi said that there is not much threshold for opening a millet store, "You are an old man in the communications industry, you have a strong market ability, Xiaomi does not want this, he wants to be obedient." ”
Fan Qi is considering opening stores for other brands and products. He said that for a merchant like him, who is not too large, xiaomi has brought him less than enough temptation.
Pressure from Apple and Glory
The rapidly expanding offline channels once brought very positive results to Xiaomi.
"I have great news with you." This is the beginning of Lei Jun's all-staff letter released in July 2021, and the excitement is overflowing. In the second quarter of 2021, Xiaomi's mobile phone shipments ranked second in the world for the first time, which is the closest he and his Xiaomi have been to the top of the list. Lei Jun, who is over 50 years old, has set the goal of "standing second in the world and first in the world for three years" for Xiaomi.
However, the country is easy to attack and difficult to defend. "The press release of the third quarterly report issued by Xiaomi Group did not put the mobile phone business in the most conspicuous place as in the past, especially the semi-annual report, and there was very little ink." A mobile phone industry observer said.
According to the report of market research agency Canalys, the global market share of Xiaomi mobile phones in the third quarter of last year was 14%, less than Apple's 15% market share, ranking third, and even lost the first position in Europe, Russia, Southeast Asia and other markets.
In a conference call after the earnings report, Wang Xiang, president of Xiaomi Group, attributed the decrease in mobile phone shipments to the intensification of chip shortages, which directly affected the shipments of Xiaomi mobile phones of about 10 million to 20 million. In addition, Wang Xiang also believes that it is related to the external environment, "Xiaomi's market share has declined, mainly related to the strong performance of the iPhone 13." ”
According to a data from HCR Huichen, in 2021, on the domestic high-end smartphone share (more than 5,000 yuan of price models), Apple rode the dust, reaching 74.26%, while Huawei still maintained a market share of 17.82% in the case of two consecutive years of shortages, and Xiaomi was even less than a fraction of Huawei's mobile phone share, only 2.97%.
In addition to the pressure of Apple, the old rival Glory restructured and then rose, but also the millet step by step. The above report shows that the domestic market share of Xiaomi mobile phones is 14%, which is surpassed by the glory of 18% market share and ranks fourth.
A Glory insider told Caijing Tianxia Weekly that Glory undertook Huawei's backlog of replacement needs in the past six months, and also took over Huawei's inherent channel resources, supplemented a large number of dealers to enhance offline capabilities, and has shouted export numbers internally, and will top the domestic market in the next 12-16 months.
Honor and Xiaomi have been competitors before. Both brands have strong Internet genes, and the overlap between play and label is very high, and in the competition for the user's mind, they often pose a "with you without me" posture. The person said that Glory had resumed overseas markets at the end of October last year, with Western Europe as the first destination market. After Huawei's exit, this high-end market is Xiaomi's fastest growing area.
In the face of the double squeeze of Apple and Glory, Xiaomi's organizational structure has changed frequently in the past year.
The most recent time was that Liu Yi, vice president of sales of Xiaomi's international department, was transferred to China as the general manager of the e-commerce department, responsible for the sale of Xiaomi mobile phones and other products in CHANNELS such as JD.com and Tmall. Liu Yi is also in charge of the "war room" in China, which is the core department of Xiaomi's construction of offline channels, and is in charge of coordinating provincial companies. Wang Xiaoyan, general manager of the e-commerce department, became the general manager of the sales operation department in China, and was in charge of the second department of sales operations, the third department of sales operations and the operator department.
Some Xiaomi employees revealed that throughout last year, the mailbox received more than 30 internal letters to adjust the organizational structure and personnel appointments, which far exceeded that of previous years, showing the anxiety of Xiaomi for "high-end".
Now, Lei Jun has set a higher goal for Xiaomi. However, there is not much time left for Xiaomi to hit the high-end.
In the past few years, Xiaomi and Lei Jun have never lacked marketing and attention, but lacked real core competitiveness, but Lei Jun does not seem to think so. As business strategy expert Zhou Said, high-end is not only a high premium for devices and capabilities, but also a display of high-potential thinking and scientific and technological leadership. Judging from Lei's general statement, Xiaomi has not yet jumped out of the thinking of market share competition.
(Fan Qi, Wang Qing, and Tang Gong are pseudonyms in the text)
This article is originally produced by AI Finance and Economics, an account of Caijing Tianxia Weekly, without permission, please do not reprint it on any channel or platform. Violators will be prosecuted.