Xiaomi goes to Europe, the price is 4500 yuan more expensive than domestic, why?

Wen | You Yong, Huang Xingyi

Ed. Zhou Luping

On February 27, MWC opened in Barcelona, and domestic mainstream mobile phone manufacturers were basically present. Xiaomi will release the Xiaomi 13 series in China at the end of last year, and it will be released again in Europe.

The phone itself is no different, but the price is a bit surprising. The starting price of Xiaomi Mi 13 in Europe is 999 euros, about 7330 yuan, and the Xiaomi Mi 13 Pro starts at 1299 euros, about 9531 yuan. Compared with the domestic price, the starting price is 3999 yuan and 4999 yuan respectively, the former is a difference of more than 3300 yuan, and the latter is a difference of more than 4500 yuan.

Why is there such a big difference in the price of the same product in the two markets? Xiaomi dares to set such a high price, just to benchmark Apple in price?

An industry insider told Digital Intelligence Front that Xiaomi's approach is not really to start at the high-end, but to stimulate the sales of mid-range mainstream products in Europe, while at the same time showing a more conscientious brand image at domestic prices. But Digital Intelligence Frontline learned that the reason behind it is not just that simple.

01

Europe is 4500 yuan more expensive than the domestic behind

Xiaomi, which has always been the main cost-effective, sold for more than 7,000 yuan at a starting price in Europe, which is somewhat incredible.

"Due to revenue, cost, channel fees and other reasons, it is true that Chinese electronic products are much more expensive overseas than their domestic counterparts." A veteran of a major mobile phone manufacturer told Digital Intelligence Frontline.

Previously, there was a theory that tariffs led to an increase in the cost of mobile phones, just as countries such as India and Indonesia have been using tariff policies to prompt Chinese mobile phone manufacturers to build factories in the local area. However, according to Digital Intelligence Front, Europe basically does not impose tariffs on mobile phones exported to China.

The biggest burden actually comes from the operator. "The operator's overall profit margin is very large, and the commission is very heavy, resulting in high costs." The people said that Europe is more expensive than domestic sales because of tariffs.

Compared with the prosperity of the domestic commercial market, Europe and the United States are dominated by operators and large chain retailers. Among them, operator channels account for 50%, other offline retail stores account for 40%, and online retail accounts for only 10%.

"European operators and large chains have strong control over terminals and strong bargaining power." The boss of a large mobile phone dealer told Digital Intelligence Front that operators have a lot of say in mobile phone sales, which not only causes higher channel fees, but also "capital costs caused by account periods." And mobile phone dealers all over the country are paying with one hand and hand-to-hand goods.

"Big brands that have already done overseas have a certain bargaining power and can negotiate lower deductions with stores, but the cost of new entrants will be high." The aforementioned distributor said that Xiaomi has not been in the European market for a long time.

At present, domestic mainstream brands have basically announced cooperation with European operators. For example, OPPO has joined hands with the four major telecom operators in Europe: British Telecom, Deutsche Telecom, Telefónica and Vodafone. As early as 2018, Xiaomi cooperated with Hong Kong's Cheung Kong Hutchison under Li Ka-shing, and now it has basically reached cooperation with mainstream European operators.

Second, the difference between domestic and overseas application ecology. Earlier, a person from a large mobile phone manufacturer told Digital Intelligence Front that in the domestic market, hardware is basically not very profitable, or even loses money, but domestic manufacturers have established an application ecology, which can bring huge Internet revenue. But overseas is a different situation, "soft income is basically zero", these money are almost all earned by Google, can only rely on the hardware itself to make money. This also invisibly raises the price of mobile phones.

Again, it is related to local income. Although the per capita income gap between EU countries is still relatively large, Denmark has reached a monthly salary of 6128 euros, and Bulgaria in last place has only 800 euros. However, according to Eurostat, the average monthly salary in the EU in 2021 was 2,791 euros (about 19,000 yuan).

The per capita disposable income of the mainland in the first three quarters of 2022 is 3,072 yuan per month. "If you look at the income-price ratio, this price is much cheaper in Europe than in China." The aforementioned dealer said.

High local income has also contributed to the high operating costs of mobile phone manufacturers in Europe. Based on Germany's minimum wage, Germany's minimum wage will be 12 euros (about 85 yuan) per hour from 2022, while Shanghai's minimum wage is 23 yuan per hour, which is far from the same.

Another factor that cannot be ignored is the competitive environment. Wu Yiwen, deputy director of TechInsights smartphone research, told Digital Intelligence Frontline that the competition in the domestic smartphone market is very fierce, and in the context of the homogenization of Android mobile phones, consumers are relatively stronger, choose more, and can get products with higher hardware cost performance. In the European market, competition is less, costs are higher, and therefore premiums are higher.

02

Xiaomi's careful thinking

It is not difficult to find that there are many objective factors that mobile phones in the European market are more expensive than those sold in China. But if you compare it sideways, Xiaomi still has some subtleties in pricing.

Taking the iPhone 14 as an example, the starting price of this mobile phone in Europe is 1019 euros (about 7476 yuan), while the starting price of the iPhone 14 in China is 5999 yuan, a difference of less than 1500 yuan.

Looking at Huawei, the starting price of Huawei Mate 40 in Europe at that time was 899 euros (about 7100 yuan), and the price of the same configuration machine in China was 4999 yuan, the difference was only more than 2000 yuan.

In contrast, Xiaomi is more exaggerated in pricing than Apple and Huawei, directly adding about 3,000-4,000 yuan to the pricing of the domestic version. But many netizens doubt that Xiaomi's product power and brand power are not enough to support this price.

Peng Dingxian, a veteran of the mobile phone industry, analyzed the frontline of digital intelligence that Xiaomi's high-end mobile phone market in Europe is more for strategic considerations than sales. Although Xiaomi ranks third in terms of shipments in the European market, it is dominated by low-end mobile phones.

Previously, Huawei's mobile phones were restricted by Google GSM and chips, resulting in a cliff-like decline in overseas business. The outside world once thought that other domestic brands could fill the gap of Huawei mobile phones. Xiaomi even moved its European headquarters from The Hague, Netherlands, to Düsseldorf, Germany. This is also Huawei's base in Europe, and OPPO's European headquarters is also located here. Many employees of Huawei's European department jumped to Xiaomi and OPPO.

But from the actual situation, Xiaomi still eats more of the share of the low-end market, while the high-end flagship market is divided by Apple and Samsung.

Previously, Lei Jun has been shouting the slogan of "comprehensive benchmarking iPhone" to start a public opinion war for high-end brands. Now it seems that Xiaomi has chosen the simplest and crudest benchmarking path - directly raising the price.

"Xiaomi also does not expect Europe to succeed in a high-end breakthrough." Peng Dingxian said that compared with Apple and Huawei's high-end real sales, Xiaomi's share in the European high-end market is very limited, and the Xiaomi 13 series will not have much impact if it sells more or less.

"This is the strategy of manufacturers, high-end can not start at once, may as well set a high price to show the image, at the same time can stimulate the mid-end mainstream products in Europe." Peng Dingxian said, "In addition, you can compare in the domestic market, show that the domestic price of your products is more conscientious and cost-effective to enhance brand image and sales." ”

03

Overseas is becoming increasingly important for Xiaomi

The contribution of overseas markets to Xiaomi is more important than other mainstream domestic mobile phone brands.

Xiaomi's performance in the domestic market in recent years has not been good. In 2021, Xiaomi mobile phone shipments in the Chinese market reached 50.5 million units, ranking third. By 2022, Xiaomi's domestic shipments fell to 38.6 million units, dropping to fifth place.

But in the overseas market, it is a different picture, in 2022, Xiaomi's overseas market shipments reached more than 110 million, almost 3 times the domestic market's 38 million shipments. From the perspective of market segments, in addition to the North American market Xiaomi did not enter, Xiaomi has achieved the top five positions in the Western European market, Asia-Pacific market, Central and Eastern European market, Latin American market and African Middle East market, and its regional development balance is higher than that of other Android manufacturers.

"We estimate that overseas markets account for more than 70% of Xiaomi's global shipments in 2022." Wu Yiwen told Digital Intelligence Frontline. In 2015, Xiaomi's revenue from overseas markets was only 4.1 billion yuan, accounting for only 6.1% of total revenue, but with the success of the Indian market, by the end of 2017, its overseas market revenue had reached 32.1 billion yuan, accounting for 28%. In the third quarter of 2022, Xiaomi Group's overseas revenue has exceeded that of China.

However, Xiaomi still takes a high-cost route overseas, and most of its shipments still come from low-end models. In 2021, the average selling price of Xiaomi mobile phones is less than 1100 yuan.

Moreover, Xiaomi's largest overseas market, India, has seen a lot of conditions. On the one hand, in Q4 2022, Xiaomi lost the first position in mobile phone shipments for 20 consecutive quarters; On the other hand, at the beginning of this year, Manu, Xiaomi's number one contributor in India, announced his resignation.

Wu Yi believes that Xiaomi's local pressure is not limited to accusations and pressure from Indian authorities, increasing competition in the Android camp, the withdrawal of local executive teams, and Xiaomi's excessive reliance on online channels. Xiaomi's measures to reduce inventory have also had a negative impact on Xiaomi's shipment performance in this market. "Given the above headwinds, we remain cautious about Xiaomi's performance in India in 2023."

Not only India, the entire overseas market is basically the figure of domestic mobile phone brands, whether it is the low-end market or the high-end market, the competition with Xiaomi will also intensify.