Chinese company Xiaomi is the largest smartphone manufacturer in India, a position it assumed from Samsung in January. It has been a relatively long road for Xiaomi, where it needs to deliver quality budget smartphones that undercut Samsung on price. However, Xiaomi is about to embark on its riskiest market strategy, and it could harm its continued growth in India.
According to recent comments from the company’s CEO, Xiaomi could soon increase the pricing of its smartphones. Such a move would be interesting because it would change one of the core aspects of Xiaomi’s success; the company’s ability to deliver quality smartphones at affordable prices (mostly through its Redmi brand).
In India and China, Xiaomi built its reputation on affordability, and in the former country achieved great success in the budget range. India is a nation where tens of millions of consumers are still using feature phones. Over the next decade, there will be a mass migration of customers to smartphones, the company that is leading the market over this time will enjoy enormous success.
Many of those Indian customers don’t have the disposable income to buy smartphones, so will be seeking smartphones that are the best options in the budget range. So far Xiaomi has been that brand, but if a price increase comes, will the company become too expensive for many Indian customers?
Xiaomi may think its main rivals (Samsung, Huawei, and Oppo) are already more expensive, so there is no way for those companies to pass it in India. However, there are a few smaller brands that are starting to increase their business in India, including one that presents a clear threat to Xiaomi.
Realme has found huge success in India thanks to largely following Xiaomi’s model of building good smartphones that represent value for money. The Oppo-backed brand has enjoyed rapid growth in India, much like Xiaomi did several years ago. Over the last year, the Realme 1 arrived with excellent specs and a cost of just Rs7,600.
It was enough to make customers instantly make the Realme brand a major player in India. The company followed with the Realme 2 series, the Realme C1, and the selfie-oriented-smartphone RealmeU1. Not one of these handsets cost more than Rs14,000.
Earlier this month, the Realme 3 arrived and showed Xiaomi there truly is a new brand to contend with. It sold over 210,000 units in its first day on sale and has since sold 311,000 units through flash sales in just two weeks. For reference, Xiaomi’s best-ever launch in India was the recent Redmi Note 7 Pro, which sold 200,000 units in its first day.
As Xiaomi moves to a strategy of higher cost to better compete with rivals such as Samsung and Huawei, it seems Realme is poised to give the company a battle for budget dominance in India. The irony is, Realme is building its success by following the model used by Xiaomi in its surge to the top of the market.