High is not easy, low is not easy - a sentence tells the biggest dilemma of Xiaomi in recent years.
There is a very interesting phenomenon, when the iPhone in people's hands begins to become stuttered, the thought in their minds is: Is this phone used for too long? And when Xiaomi starts to stutter, it will suspect that this chip is not OK.
At the end of 2021, Xiaomi founder Lei Jun announced at the xiaomi 12 conference that xiaomi will fully benchmark Apple to learn from Apple in terms of products and experiences, but users do not buy it.
On the evening of March 22, Xiaomi Group announced its 2021 financial report, which was defined as an Internet company's millet at the time of listing that year, and the per capita consumption in the latest quarter was only 14.3 yuan, while it targeted Apple, with a per capita consumption of more than 70 yuan.
Huawei's withdrawal left a piece of fat for the mobile phone market, and Xiaomi was a seed player with high hopes at the time, but in the end, not only did not eat much meat, but the proposed strategy also reached the time when it was necessary to introspect.
01
Huawei fell, Xiaomi is not full
On July 16, 2021, Lei Jun announced a "big good news" on Weibo: in the second quarter, Xiaomi surpassed Apple in the market share of global smartphones and rose to the second place in the world. The "millet baton Huawei" predicted at the beginning seems to be gradually realized, especially in the European market, xiaomi's share once rose to the second place.
In China, however, this has not materialized.
It's not that Xiaomi doesn't work hard. As early as 2019, Xiaomi proposed a high-end strategy. One of the signature operations is the stripping of Redmi and the adoption of a dual-brand strategy. In The words of Lei Jun, Redmi focuses on the ultimate cost performance, focusing on e-commerce, while Xiaomi focuses on high-end and offline new retail.
At the end of the day, it's all about profit. Since Lei Jun firmly claims that it is impossible to increase prices, the road to high-end is imperative. In this regard, Lei Jun does have efforts, before there are self-developed chips, and then there are self-built factories. In 2021, when xiaomi 12 was released, Lei Jun shouted out the sentence "Xiaomi high-end mobile phone officially benchmarked against Apple". Before that, the price of Xiaomi Mi 10, Xiaomi Mi 10 Pro and Xiaomi Mi 11 series has risen from more than 3,000 yuan to more than 6,000.
But a one-time operation, after all, it is difficult to hide the decline of this annual report.
In 2021, Xiaomi smartphones achieved total revenue of 328.3 billion yuan, an increase of 33.5% year-on-year, and the overall shipment reached 190 million units. Specific to high-end smartphones (retail priced at 3,000 yuan or more than 300 euros), Xiaomi's shipments exceeded 24 million units, accounting for 13% of the total - almost the same as when Huawei withdrew a year ago.
Huawei did give up a piece, and its market share dropped from 13% in 2020 to 6%, but it was not Xiaomi that seized the opportunity, but Apple. Xiaomi only increased by 2%, and the share obtained was comparable to OPPO.
"Huawei's withdrawal pushed Xiaomi to the front row, but the question is whether Xiaomi has the strength to become the first echelon[7]." A Xiaomi International Department person said so in an interview with the media.
There is also an opponent who reorganizes the mountains and rivers - glory.
After more than half a year of pain, Glory achieved a counterattack in the third quarter of 2021. According to the domestic smartphone sales in Q3 2021 released by well-known statistical agencies, the shipment of Honor mobile phones reached 14.2 million units, a sharp increase of 96% from the previous month, returning to the top three in the market.
Honor CEO Zhao Ming said this sentence when facing the decline in the domestic mobile phone market: "It is risky for friends to overstock. If we rise quickly, they will overwhelm so many goods and become inventory. In the smartphone industry, there is no starvation, only death[6]. ”
Judging from the actual situation that happened, this remark can be described as very serious.
02
Users come, but they don't spend money
In Xiaomi, mobile phones are not only used to sell goods to make money, but also have a more important role: to acquire users and let them use Xiaomi's Internet services and peripheral products.
From the current situation, it is difficult for Xiaomi to obtain high profits by selling mobile phones alone, even for high-end machines, because its brand premium is limited. The same is selling 10,000 yuan, Apple can earn 6,000 yuan, and according to the 18% gross profit of Xiaomi Group, it may earn less than 2,000.
In Xiaomi's business model, it takes Xiaomi mobile phone as the starting point, constructs an ecological chain through IOT devices, strengthens user experience, builds a complete traffic closed loop, and finally realizes through Internet services.
According to common sense, high-end can win users with higher consumption power, so as to obtain more income in Internet services.
Observing whether this monetization path is passed, the indicator of average customer consumption is very important for Xiaomi. But the result? It has been declining since the end of 19 years.
There are two reasons for this. First of all, it is natural because the proportion of high-end mobile phones is still low, and secondly, the consumption power of Xiaomi users is lower than expected.
Xiaomi's revenue structure is divided into three major businesses: smartphones, IOT and the Internet. The ideal scenario would be this: mobile phone revenue will maintain a steady growth rate, and the proportion of IOT and Internet service revenue will increase. This means that the mobile phone has gained more users, and the user uses the mobile phone as a traffic entrance, further consuming follow-up services.
But in fact, the proportion of IOT and Internet revenue has not increased, but has declined.
Looking at the monthly active net increase of Xiaomi MIUI, there is no obvious relationship with the income of IOT and life consumption business.
According to this, it can be reasonably inferred that many users are just the "cost performance" of the white prostitute Xiaomi mobile phone, and have not joined the ecological chain of xiaomi for consumption.
According to the annual report, Xiaomi's latest season of ARPU is 14.3 yuan, and the Meituan takeaway next door has an ARPU of more than 40 yuan. Xiaomi's benchmark object, Apple, had an ARPU of more than 70 yuan in the first quarter of 2020.
In this way, it is not enough to benchmark the apples yourself, but also to find a way to make the rice flour benchmark fruit powder.
On the one hand, this extremely low ARPU value is due to the significantly lower overseas user consumption of Xiaomi mobile phones, which is estimated to be only about 4.22 yuan, which significantly lowers the average value of the group, and more importantly, it may be necessary to find reasons from Xiaomi's own history.
03
Indelible labels
Xiaomi's high-end is blocked, which can be understood from two aspects, one is that it has not improved the brand tone in the minds of consumers, and the other is that it is late in the offline channel of selling mobile phones.
On February 3, 2021, Lei Jun, who was quite active on Weibo, threw out a question: If Xiaomi released a high-end mobile phone of ten thousand yuan, would you buy it?
There are many remarks under Weibo, but the reality is quite bone-chilling. In the past two years or so, Xiaomi has launched a high-end price of mobile phones, but from its average price has not been able to break through, has always hovered around 1,000 yuan.
If the data of the financial report is translated into text, it is probably like this: buy millet originally because of the cost performance, if you want to spend 5,000 or even tens of thousands, then why not choose Apple?
At the beginning of its establishment, Xiaomi quickly opened the market by relying on "cost performance", but this "low gross profit" style of play is a typical double-edged sword. Xiaomi was eventually also eaten by its "extreme cost performance".
On the one hand, this positioning has caused Xiaomi to delay the research and development of high-end products. Taking the core components of mobile phones, chips as an example, although Xiaomi has successfully developed its own surging series of chips, it has only been applied on its low-end mobile phone 5C, and the market life is only half a year. Its flagship digital series has always used Snapdragon series chips.
In contrast, its benchmarking object Apple, its self-developed A4 chip, not only as early as 2010, has been applied to its flagship mobile phone. Moreover, at the WWDC2020 conference, as Cook announced that Apple Computer will use the self-developed chip M1 MAX, it has successfully realized that all product chips are self-developed.
Labels, on the other hand, don't tear when you want to.
Compared with Lei Jun's questionnaire survey "ten thousand yuan machine", what everyone remembers most is his emphasis on cost performance.
For example, he has been chanting "Xiaomi should make a good product that moves people's hearts and has a generous price.". In 2017, he said, "The loneliest feeling is that almost all people have advised me to sell Xiaomi products more expensive, and I feel that everyone does not understand my ideas and pursuits." In 2020, there are also Xiaomi executives who have said something like this: "Xiaomi believes that in the future of the world, those who have to get dick silk will get the world, and young people will get the world." ”
In the case that high-end has been put on the agenda, there are still such words, Xiaomi's brand building is obstructed and long. 2 million in exchange for the logo, but it is difficult to update people's psychological positioning of the brand.
As for channels, Xiaomi is a company with Internet genes, which are also reflected in the channels through which it sells mobile phones. Xiaomi in the start-up era even only sold online.
But in China, more than 80 percent of mobile phones are sold from offline channels. For mobile phone brands, after the online traffic dividend is exhausted, offline channels are enough to determine the life and death of a brand. Not only that, the experience of offline channels has a profound impact on enhancing brand influence. The most typical example is the results achieved by offline channels to help OPPO and vivo.
In March 2016, the first Xiaomi Home opened, but compared with other brands, Xiaomi's offline channel layout is late. (We have detailed the layout of Xiaomi's offline in the article "Millet Home, The Itch of Lei Jun", and interested readers can move to read it).) By 2020, in the domestic mobile phone market, offline channel sales account for more than 70%, while Millet only accounts for 7%.
Xiaomi reformed the channel in 2019 and adopted three models: Xiaomi Home flagship store + Xiaomi Home store + Xiaomi Home authorized store. Among them, the former is Xiaomi's own business, and the latter two are ways to join.
Although the three offline stores have greatly improved the efficiency of opening stores, they have also brought two drawbacks. First, the high sales expenses caused the loss of profits, and Xiaomi's sales expenses doubled in two years to 20.98 billion. Comparable to its adjusted net profit of $22 billion. Secondly, the three models of stores have different service experiences and show a decreasing relationship.
In October last year, some people questioned the mismatch between Xiaomi's sales growth and the increase in offline stores. The answer given by Lei Jun is that it takes time to verify. Half a year has passed, combined with the latest data, Xiaomi's offline road has not yet passed.
04
End
Although Lei Jun once again shouted out a declaration of breaking the ship, to press all the honors of life and fight for xiaomi, the goal of this battle is not a mobile phone, but a car.
At present, the R&D team of Xiaomi's automobile business has more than 1,000 people, and it is expected to be officially mass-produced in the first half of 2024, with an initial investment of 10 billion yuan, and it is expected that the investment amount will reach 10 billion US dollars in the next 10 years.
The first echelon of Wei Xiaoli has already moved towards profitability, and Lei Jun's car is still stuck on the concept. At the same time, Xiaomi's mobile phone basic disk does not seem to be so stable.
I think Guan Yu also thought the same thing: I first concentrated my forces to take down Fancheng, and then turned back to save Jingzhou.
[1] Xiaomi's annual reports
[2] Xiaomi performance exchange minutes
[3] Xiaomi's high-end cannot rely solely on rice noodles. Photon planet
[4] Overseas markets have become a new engine of growth, and mobile phones × AIoT to create an ecological moat zhejiang merchants international
[5] Sales in the global high-end smartphone market increased by 24% year-on-year in 2021 199IT
[6] Zhao Ming's "Battle of Glory", The Paper
[7] Xiaomi does high-end, not as simple as imagined, financial magazines
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