Lei Jun's new goal: the life-and-death battle of "high-end" Xiaomi

Author 丨 White Poplar

Editor 丨 Zhang Weixian

Figure Source 丨 Figure Worm

On the evening of February 16, Xiaomi held the first new product launch conference in 2022, and released new products such as Redmi K50 e-sports edition, Redmi K50 championship edition and Redmi e-sports router AX5400.

Since its introduction three years ago, the K series has become the flagship model of the Xiaomi group Redmi brand. At the press conference, Lu Weibing, partner of Xiaomi Group, president of China and International Department, and general manager of Redmi brand, announced that the cumulative sales volume of The Redmi K40 series officially exceeded the 10 million mark.

The Redmi K40 series was released in February 2021, with a total of four products, and the Release of the Redmi K50 Esports Edition and the Redmi K50 Championship Edition are equivalent to officially opening the prelude to the K50 series.

For Xiaomi, after proposing the goal of "winning the world's first sales in three years" in August last year, the entire group has a clearer development direction - impact sales, in this process, the Redmi brand and K series products will also play an important role.

In the next three years, in addition to sharing the task of impacting sales, Xiaomi mobile phone brands now have a new goal.

After the Spring Festival holiday, Xiaomi Group held a high-end strategy seminar, at which Xiaomi formally established a high-end strategy working group and put forward the new goal of "winning the first place in the market share of domestic high-end mobile phones within three years".

This is a detailed goal disassembled by Xiaomi Group on the basis of the goal of "global sales first". Lei Jun, founder, chairman and CEO of Xiaomi, stressed at the meeting that the high-end road is the only way for Xiaomi to grow, and it is also a life-and-death battle for Xiaomi's development.

Two big problems to solve

In fact, at the annual investor day held last year, Xiaomi has explained to investors the importance of high-end strategies and specific ways to play.

At that time, Lu Weibing proposed that Xiaomi mainly faces three challenges and tasks in the Chinese market, the first two are from a narrow crowd to a whole population, from e-commerce to omni-channel, and the third is to achieve high-end brand.

An analyst told the 21st Century Business Herald that for Xiaomi, through the expansion of the product series and the layout of new retail, the first two tasks are relatively easy to achieve. The most challenging thing is actually the high-end, because the high-end that Xiaomi wants to achieve is not only the product from the low-end to the high-end, but more importantly, the high-end of the brand.

For Xiaomi, after two years of exploration, it has found two problems on the road to high-end: one is that the investment is particularly large; the other is that the cycle is particularly long.

The investment here includes both technology investment and market investment, which is indispensable for any high-end product. Therefore, if high-end products want to make money, they must rely on scale, and only with a certain market size can the cost of each product be reduced.

The cycle is long, on the one hand, because from 0 to 1 to do high-end products, whether it is the insight of user needs, or product research and development, sales climbing, etc., need a round of verification; on the other hand, consumers' changes in a brand perception also need a long cycle.

Lu Weibing admitted that 2021 is the stress test year of Xiaomi's high-end, and it has indeed encountered many problems in terms of product quality and product experience. But in its view, these problems are all tuition fees handed over by Xiaomi, and Xiaomi has gained a lot because of this, "If you don't do these explorations, you will never know where the difficulty is."

Get into the fast lane

Nowadays, Xiaomi's thinking on the road to high-end has become clearer. At the end of last year, at the Xiaomi 12 new product launch, Lei Jun announced that in the next five years, Xiaomi's research and development investment will increase to more than 100 billion yuan, which is double the investment plan two years ago.

Sufficient technical investment will be the basis for Xiaomi to promote high-end, and at present, the competitiveness of products brought by self-developed technology has actually begun to appear. For example, the successive releases of the image chip surging C1 and the charging chip surging P1 have further improved the experience of xiaomi mobile phones in core hardware functions such as taking photos and fast charging.

In addition to products, the capacity building of marketing and channels will also be the core link for Xiaomi to achieve high-end. Since 2021, Xiaomi has increased the layout of offline channels, as of October 2021, the number of Millet Homes has exceeded 10,000, an increase of 8,000 compared with the beginning of the year, and has now achieved 95% of urban coverage, 80% of county coverage and 4% of township coverage.

The above-mentioned analysts said that in addition to the increase in the number of stores in Xiaomi's offline channels, it is more noteworthy that a considerable number of stores are opened in the mall of the core business circle, coupled with a unified store management system, which is not only conducive to enhancing Xiaomi's brand image, but also conducive to making Xiaomi's high-end products efficiently reach users.

Changjiang Securities pointed out in a research report that offline channels are necessary for the layout of the high-end mobile phone market, and about 60% of high-end smart phones in China are sold through offline channels, and at the same time, offline channels are also of great significance for the promotion of high-end products.

Generally speaking, the maturity of offline stores requires 9-12 months of cultivation, which means that the operation of thousands of Xiaomi Home stores will mature in 2022, which may help Xiaomi further increase its share in the high-end market.

Canalys recently released a report showing that in the whole year of 2021, Xiaomi mobile phones have a market share of 15% in China, ranking third. Among them, in the fourth quarter of 2021, Xiaomi's mobile phone market share in China was 16%, and the shipment volume was 13.5 million units, which was the only mobile phone manufacturer other than Apple that increased its shipments month-on-month.

If you only look at the high-end market, the research report of Changjiang Securities shows that in the global market, Apple and Samsung still occupy the main share of high-end products, and the share of the global market of more than $600 in the first three quarters of 2021 reached 67% and 17% respectively. In the domestic market, Apple and Huawei occupy the main market share, and Xiaomi currently has only 6.6% market share.

However, for Xiaomi, which has made a late start, 2022 may be the year when its high-end strategy has entered the fast lane. Recently, Lei Jun disclosed a data inside Xiaomi: the first month of shipments of Xiaomi 12 and 12 Pro far exceeded the sum of all other brands of Snapdragon 8 mobile phones, of which Xiaomi 12Pro became the Android sales champion of the e-commerce platform JD.com and Tmall in the 4000+ price segment in January.

Lei Jun said, "Xiaomi's high-end road has been gone for 2 years, there are successes, there are setbacks, and it has now reached a new stage." At the same time, the high-end road cannot be achieved overnight, and it is necessary to firmly believe that Qingshan will not relax, maintain long-term strategic determination and continuous investment."

As he said, Xiaomi Group has indeed reached an important turning point. In terms of development strategy, an important change in Xiaomi is to transform some of the past "strategic attempts" into "strategic attacks", and as for whether it can eventually occupy the market highland, this will be the question that Xiaomi Group will answer in the next three years.

Editor of this issue Wang Tingting Intern Zhan Huinan