According to reports, the first batch of Xiaomi 3 devices were officially made available for purchase a few days ago, and all 100,000 units were sold out within 1 minute and 26 seconds. The phenomenon of instant sellouts has become a topic of discussion every time Xiaomi launches a new product. The industry has mixed opinions about this.
On one hand, Xiaomi phones are favored and praised by consumers for their extremely high cost-performance ratio. On the other hand, almost every instance of rapid sellouts raises numerous questions among consumers: why does Xiaomi, this "skilled housewife," often lack "rice"? The severe shortage and supply-demand imbalance of the Xiaomi 3 once again dragged Xiaomi into the whirlpool of public opinion regarding hunger marketing.
Hunger Marketing at Xiaomi Raises Doubts
Since the launch of its first phone on August 16, 2011, Xiaomi, which sells phones through an internet model, has received widespread attention. At the same time, every generation of Xiaomi's new products has left "Mi Fans" struggling to grab them. The industry and media have labeled Xiaomi with the tag of hunger marketing.
On October 15th, when the highly anticipated Xiaomi 3 was officially released, all 100,000 units were snapped up within 1 minute and 26 seconds. Under the regret of many Mi Fans who couldn't get their hands on one, the "scalpers" saw an opportunity and, with the enthusiasm and experience of flipping Apple's "Golden Tycoon," began flipping Xiaomi phones. From Taobao and other channels, the unofficial price of Xiaomi 3 has been raised by several hundred to over a thousand yuan. In response, consumers have directed criticism towards Xiaomi's hunger marketing strategy.
In addition, on the day of the Xiaomi 3 release, Xiaomi TVs also started their first round of flash sales, with the first batch of 3,000 units selling out in just 1 minute and 58 seconds. During this Xiaomi TV flash sale, some netizens accused Xiaomi of marketing stunts. A professional familiar with related technologies claimed that the "flash purchase" button on the sales page was essentially useless because it didn't process any POST requests but directly generated a "sold out" page. The so-called "flash purchase" button merely redirected the page to the sold-out page. Consumers were dissatisfied with Xiaomi's explanation of insufficient production capacity and unmet demand. A market size as large as this, with only 3,000 new units being shipped, indeed had the suspicion of being a stunt.
Regarding Xiaomi's explanation of insufficient production capacity, an industry insider pointed out why Xiaomi's toothpaste-squeezing style of supply makes hunger marketing "always effective"? "In fact, insufficient production capacity is just an excuse; the domestic mobile phone manufacturing industry already has mature industrial chains and production lines. The real issue is that Xiaomi cannot find enough components at low enough prices. Therefore, for Xiaomi to make large-scale profits, they must wait until component prices drop further before mass-producing, which is Xiaomi's profit-making mindset."
Data from China Quality万里行 shows that in 2012, the complaint department of China Quality万里行 received a total of 25,028 complaints, with Xiaomi phones ranking first in complaints about mobile phone products. The main issue involving Xiaomi phones was "non-delivery." According to China Quality万里行 data, there is a sales model in marketing called "hunger sales," and Xiaomi adopted this model, intentionally lowering production to manipulate supply and demand, creating an illusion of insufficient supply to maintain higher product prices and profit margins.
Does Xiaomi's Marketing Advantage Still Exist?
Mentioning hunger marketing, Xiaomi indeed has its unique advantages. Among many smartphone products, the general impression given to consumers by Xiaomi phones is high cost-performance and user experience focus. It seems that Xiaomi phones have become the "fighter jet" among domestic brands.
In the smartphone field, Xiaomi focuses on the "cost-performance" card. Lei Jun, chairman of Xiaomi, introduced that the Xiaomi 3, priced at 1999 RMB, is equipped with a Sony 13-megapixel F2.2 aperture stacked rear camera, Philips dual LED flash, and a 2-megapixel back-illuminated front camera. In terms of the screen, it uses a 5-inch full HD IPS retina screen from Sharp and LG, with a larger yet finer display, and also features the globally highest standard 2GB LPDDR3 memory and globally highest standard 16GB eMMC4.5 flash storage, along with a 3000 mAh lithium polymer battery. Faced with these multiple "globally highest standard" data points, it's hard for consumers to say no to the 1999 RMB price.
Focusing on user experience is another advantage of Xiaomi. From the operating system to application software, and then to hardware, Xiaomi's philosophy is exactly opposite to Apple's "influence users" —— "adapt to users." Lei Jun, Xiaomi's CEO, said during a press conference in 2013, "Xiaomi encourages designers to talk to customers for feedback, and updates its Android software every Friday."
Xiaomi has clearly become one of the hottest stars in China's smartphone manufacturing industry. Lei Jun, Xiaomi's CEO, confirmed in August that Xiaomi has completed a new round of financing, with a valuation reaching $10 billion. Since the launch of its app store, the number of activated users has exceeded 17 million, with daily searches exceeding 1.3 million times, and daily downloads breaking 5 million times, including more than 200 five-star premium apps. According to surveys, Xiaomi's phone shipments reached 7.03 million units in the first half of this year, while the entire 2012 shipment volume was only 7.19 million units. These signs indicate that Xiaomi has grown significantly. However, as Xiaomi products become increasingly popular, its "lightning-fast sellout" marketing strategy also hurts consumers quite a bit. Can what was once an advantage still be considered an advantage now?
After-sales Service and Patents Become Weak Points
Despite numerous accolades accompanying Xiaomi's growth, it still has a long way to go to become truly strong. After all, the amount of water a bucket can hold is determined by its shortest plank.
Due to its unique sales model, Xiaomi's after-sales service has always been criticized. Although Xiaomi's after-sales director revealed that to enhance user experience, besides the already established 429 authorized centers, Xiaomi will officially open 18 flagship stores providing after-sales services next year, and even open its first physical store next year, issues such as fewer after-sales service outlets, repeatedly unrepaired phones, and poor staff attitude remain common consumer complaints against Xiaomi.
At the same time, compared to manufacturers like Apple, Samsung, and Huawei, Xiaomi lacks technological and patent accumulation. In such a fiercely competitive smartphone market, Apple sues Samsung and HTC worldwide, and litigation costs can easily reach hundreds of millions of dollars. In this perilous domain, can Xiaomi really achieve "innocence prevails"? It is reported that the patents obtained by Xiaomi Technology can be counted on one hand, and most of them are design patents, while the number of invention patents representing higher innovation levels is zero. Such patent shortcomings may discount Xiaomi's development.
Recently, Tongzhou Electronics engaged in a fierce patent battle with Xiaomi over "patent" issues. "We have already filed a lawsuit against Xiaomi, and the Intermediate People's Court of Shenzhen has accepted the case," said Liu Xiangfa, head of Tongzhou Electronics' marketing department. The court has accepted one of Tongzhou Electronics' patent litigation requests. However, in response to Tongzhou Electronics' accusations, Xiaomi issued a statement saying, "We have not yet received any legal documents or patent claims related to Tongzhou; the relevant functions of Xiaomi boxes are all original designs, with no plagiarism involved."
Zhang Yi, CEO of iiMedia Research, believes that "recent fluctuations in the market indicate that for manufacturers aiming to build reputable brands, there are still many thresholds and pressures in the TV box market, such as policies, copyrights, and patents. These issues will become increasingly prominent as competition intensifies. For those manufacturers who want to grow big and establish their own brands, these are problems that must be considered."
Nowadays, Xiaomi has brought in Hugo Barra, former global vice president of Google in Silicon Valley and vice president of Android products. The success or failure of overseas expansion remains uncertain, but solving the constraints of after-sales service and patent issues domestically is fundamental to product development.