In China, Xiaomi has overtaken Apple with 5% of the market. To get there, they are taking a unique strategy designed to make something big happen with frighteningly low margins. By offering their phones as close to cost as they can, Xiaomi hopes to shake up the Chinese market, and perhaps the world.
In an interview with the Wall Street Journal, Xiaomi founder Lei Jun detailed their ongoing designs on building something big in China. Noting that most things on the internet are free -- and widely used because of it -- Jun said “It's through a free model that you can most quickly attract users, so we try to sell our products as close to the cost of materials as possible."
Xiaomi uses their website to sell most of their phones, as well as a variety of accessories and collectibles. From cases to batteries, anything one needs for their Xiaomi phone is available. Even sales of plush rabbits, the company mascot, dot the bottom line. For the two year period ending in 2013, Xiaomi says they’ll have sold 680,000 rabbit dolls to fans.
The other part of the strategy is listening to customers, with Jun noting that Xiaomi likes to relate back to fans and tell them when one of their suggestions is heard. “If you give us a suggestion, and we quickly change it, you will have a long-lasting sense of achievement” said Jun, noting that those who enjoy such a close relationship often help with word-of-mouth advertising.
Although quiet on Xiaomi’s plans outside of China, Jun seems to be both aware and objective about the competition. When asked how Xiaomi fares against Apple and Samsung, Jun was well aware of their position. “We have some parts that are weaker than them, some parts that are better” he said, noting that while Xiaomi is on the fast track to success, they’re in no hurry. Saying he felt Xiaomi needed three years or so to really be up to snuff, he added "I don't think we at Xiaomi need the market to decide whether what we're doing is good or bad. We need to do it according to our own plan."