/Xiaomi’s sales slow down, but offline stores will make a break through, CEO says

Xiaomi’s sales slow down, but offline stores will make a break through, CEO says

Xiaomi CEO Lei Jun delivered a three-hour talk at a closed-door meeting on Sunday, emphasizing that Xiaomi will focus on running its own offline retail stores over the next five years, according to a Sina Tech report.

Admitting that Xiaomi’s sales are currently at a low ebb – with merely 15% increase in 2015, as compared with 160% in 2013 and 227% in 2014 – Lei said that a rebound of Xiaomi is to be expected within a year, in terms of sales increases, business expansion, and the improvement of its business model.

“The business model that we follow is to focus on retail, and become a MUJI of technology,” said Lei. MUJI is a Japanese company whose non-branded designs are known for their functionality and simplicity.

Through investments, Xiaomi’s ecosystem covers around 100 industries. Xiaomi’s smartphone sales have recently fallen short of their company sales targets: In 2015, they originally aimed to sell 100 million smartphones; this sales target was then adjusted to 80. Xiaomi eventually shipped 71 million smartphone units, according to estimates by market research company IDC. However, Xiaomi has offset these lower sales of smartphones by introducing various other products, introducing products under the Mi Family product line such as its smart rice cooker and air purifier.

According to Lei, home appliance stores in China are operating with 5,000 square meters on average, with an annual revenue of RMB 40 million (USD six million). Xiaomi will have its offline stores sell only 50 to 100 products, size up at an area of 250㎡, and bring in an expected annual income of RMB 50 million each. This is not some sort of empty daydream: currently, Xiaomi’s best performing offline store makes RMB 1.43 million in revenue per day.

1,000 offline stores that are 100% controlled by Xiaomi itself will be opened within the next three to four years. That amounts to an expected annual retail income of around RMB 50 billion.

Founded in 2010, Xiaomi built itself to a valuation of RMB 56 billion in five years, and may launch an IPO in 2025. Lei said that Xiaomi is likely to see a net income of RMB 10 billion from its own apps in 2017, that that his vision for the future of Xiaomi is “when our users’ homes are equipped with Xiaomi products from head to toe.”

(Top photo from Baidu Images)

Ke graduated from the University of Edinburgh with a Master's Degree in English and has worked on projects with Ipsos MORI and SDI Media. She's particularly intrigued by China's thriving technology scene and is eager to write about this flourishing industry.