China’s Xiaomi bets bigger on India retail stores amid Samsung rivalry

The head of the company in India said that the Chinese company Xiaomi will focus on boosting its sales in India from retail outlets after years of high bets on e-commerce, as the company seeks to revive smartphone sales after falling behind the South Korean company Samsung.

E-commerce sales in India via Amazon and Walmart’s Flipkart have soared in recent years, helping Xiaomi and others expand into one of the world’s fastest-growing markets, with 600 million smartphone users.

But while 44% of smartphone sales in India are now online, the brick-and-mortar segment remains the biggest play and Xiaomi expects it to grow even more.

“Our offline market position is much lower than what we have online,” Xiaomi India President Muralikrishnan B said in an interview on Friday. “Offline is where other competitors are doing fairly well and have more market share.”

Only 34% of Xiaomi’s unit sales in India this year came from retail stores, and the rest through websites that have long been its dominant sales source, according to data from Hong Kong-based Counterpoint Research. In contrast, Samsung gets 57% of its sales from stores.

Xiaomi plans to expand its network of stores beyond the current 18,000 and increasingly partner with phone vendors to offer other products, such as Xiaomi TVs or security cameras, where Muralikrishnan said the competition is less stiff.

He said Xiaomi has found that some partner stores that put their bright orange branding outside of stores display competing brands more prominently inside, a marketing issue the company will address.

Xiaomi’s offline push comes months after it lost its leadership position to Samsung, which has a much larger selection of premium phones now in vogue. The South Korean giant has a 20% market share in India, while Xiaomi, which has historically focused on budget phones, has 16%.

“Offline remains a key platform as India embraces the premium trend,” said Tarun Pathak, an analyst at Counterpoint. “Consumers who spend more want the look and feel of a premium product.”

Xiaomi plans to hire more store promoters – salespeople who lure, put out and sell phones to potential buyers inside the outlets. Muralikrishnan said it aims to double the number to 12,000 promoters by the end of next year from levels in early 2023.

Another significant challenge facing India for Xiaomi is the federal agency’s freezing of $673 million of its banking assets since last year. The agency claims that Xiaomi made illegal transfers to foreign entities in the name of royalties. The company denies any wrongdoing.

“We will continue to trust … eventually our position will be heard and validated,” Muralikrishnan said.