Crouching Tiger: Xiaomi’s Strategic Layout in Bangladesh
Consumer electronics vendors must excel in three dimensions: product, channel and branding. How does Xiaomi’s situation in Bangladesh look after three years of toil?
This article will touch upon Xiaomi's strategic layout in Bangladesh. For the market overview, please check Xiaomi’s Next Leap in South Asia: Bangladesh
► Though consistent in its layered dual-brand strategy globally, Xiaomi has been mainly targeting the premium smartphone segment in Bangladesh.
► Driven by the harsh import duties on finished smartphones, setting up local production lines is a certain move for Xiaomi Bangladesh.
► Since 2016, the company has been actively using both online and offline channels. Other value-added services, such as installment payment and free delivery, are poised to increase customer retention.
► The digital marketing and ‘fan’ culture of Xiaomi have successfully captured a younger group of customers.
Product and Brand
Xiaomi in China is showing consistency with its ‘dual-brand’ strategy, whereby the Mi brand is focused on pioneering advanced technologies while the Redmi brand is used to pursue the ultimate price-performance ratio. In Bangladesh there is an imbalance between Mi and Redmi. Apparently, Redmi is ‘redder’ (in Chinese ‘red’ sometimes refers to prevalence) than Mi, due to the local economic development and the brand management. In 2020, eight Redmi series models are currently presented on its official online store, while only one Mi series model is on show. The reasons behind this may be the following. First, under the former brand, the Redmi series and the Redmi Note series are calibrated differently, with Redmi Note aimed at looping in a wider range of customers across its large span of selling prices. There is also a narrowing-down of differences between Redmi note pro and Mi in specifications.
Even though over 2/3 of the handset market in Bangladesh is composed of feature phones, which refers to cellphones with button-based input, small displays and operating systems not designed for apps, Xiaomi and other several China-based vendors (Transsion is an exception) do not seem to be interested in touching the segment.
The first reason is that Xiaomi would face production problems, because it does not retain a feature phone production line, neither in China nor in India. The second is that the feature phone market is and will be declining even as competition intensifies as well. Lava, Transsion and Symphony has been practicing the feature phone production and sales in the Indian market as well as in Bangladesh for years. Since there’s quite limited room for innovations in feature phones, there is little room reserved for latecomers.
As the prices of Mi phones significantly surpassed overall Redmi prices, Redmi seems to have comprehensive price points and is selling at prices that are accessible to the mass market. As the GNI (Gross National Income) per capita in Bangladesh is USD 1,750, a price over 15% of this statistic is hard to align with the strategy of making profits from driving the sales quantities. IDC recapped an average selling price (ASP) of smartphones in Bangladesh at USD 99 in 2019. Compared to the average, even low-end brands under Xiaomi Corp. are well-above it, making a picture of a trendy but rather high-end, business phone brand in the market.
To boost local production, since 2017 the government of Bangladesh has been offering some tax benefits to local assemblers and increased import duties. Later on, the import duty on imported handsets hit 32%, which is even higher than in India, at 20%. India’s rising import duties and recently imposed restrictions on FDI (Foreign Direct Investment) have been forcing Chinese vendors to march into the local manufacturing industry.
Though there is no official announcement that Xiaomi is setting up its local production in Bangladesh – yet this is almost a certain move since the tariff policy still offers room to grow, and its counterparts, such as OPPO, vivo and Samsung, have already contributed in local manufacturing development. Besides the policy issue, local production offers great help in smoothing the inventory and sales flow when there is a steep change in local demand.
China and India, as the first and second largest import partners, take 32% and 16% of Bangladesh’s total import volume, respectively. However, Bangladesh’s electronics devices market did not heavily rely on the import due to the limited demand, local production capacity and the abnormally high import duty. Compared with China, India is a small fish in terms of imports for Bangladesh, for the trade value of Bangladesh in terms of mobile phone import generated from India is less than 10% of China’s. Though there is a limited access to Xiaomi Bangladesh’s specific import data, it is fair to deduce that Xiaomi in Bangladesh is still at the stage of high dependency on China. Though it failed to diversify supplier sources to reduce the risks of uncertainty brought by overreliance on a single source, India will serve as a strong backup to address the potential risks of concentrating production in mainland China.
Distribution in Bangladesh
Xiaomi never lacks imagination in terms of business model tweaking, especially in the later product lifecycle period, i.e. marketing and sales. In Bangladesh, a country with a fairly good Internet penetration rate that resembles China’s at 58%, Xiaomi developed sound online sales channels, as well as 229 offline stores and distributors with a much higher number in quantity.
For online distribution, the company partnered with local e-commerce platforms DealBazaar and Gadget and Gear to manage online services. Notably, the online purchase offers a value-added financial service, in which customers could resort to an equated monthly installment for payments. This financial-related service revealed the firm’s ambition in a thorough product and service coverage for customer needs.
For the offline channel, offline Mi stores and Shwapno outlets are the right places to look into. Among the 64 districts in the country, Mi store covers 58 districts, depicting a complete coverage and localization in distribution. In addition, the partnership with Shwapno outlets would further assist in Xiaomi’s in-depth sales throughout the country.
Marketing and sales
Liked by 2.56 million people, the Facebook page of Xiaomi Bangladesh served as the main social media channel for promotion and public communication. Keeping a pace at two or three new updates on Facebook each day, the number of ‘likes’ and ‘comments’ is around 2,000 on average, which is ten times as large as the online presence data of its local competitor Walton.
Though Walton and Xiaomi have quite close smartphone market shares, the huge gap of attention from Internet users indicates the user portrait of Xiaomi is that of a younger generation, with better Internet literacy and tech awareness. The fan culture of Xiaomi also contributes a lot in terms of digital marketing. The traits of the firm’s user structure promises its future growth space through further Internet service offers and growing customer loyalty.