Hey, Guys have been ever wondered, Why does Xiaomi need a
second brand? In fact, why do all major Chinese smartphone makers have multiple
brands? . Our story begins and ends with Xiaomi. The company completely changed
the Chinese smartphone market in 2011.When it launched with its crazy, online
only business model that focused on cutting out the middle men, not keeping any
inventory, and selling phones with razor thin margins. Traditional phone makers
like Oppo and Huawei, who have to give their offline retail partners often over
50% margins to sell their phones, simply couldn't compete with this model.
Offline retail is expensive, so seeing Xiaomi's rise, they had to react. And
they both came up with pretty much the same solution.
Step 1: Launch an online brand which replicates most of
Xiaomi's business model and offers similarly aggressive prices. After all, the
Xiaomi model was innovative, but not exactly hard to copy.
Step 2: Double down
on offline retail with the Oppo and Huawei brands.
After all, even with Xiaomi's success, the majority of
people still bought their phones offline even in China, the most e-commerce
focused country in the world. Online and offline retail had to be split into
two brands, because they're such wildly different businesses. It costs a lot
more to sell offline, so you need higher prices. But those high prices don't
work well online with competitors like Xiaomi around. Hence, the need for two
separate brands. The offline brands got the premium features first like how
Vooc fast charging was on Oppo phones for two years before it arrived to
OnePlus as Dash charge, or how Huawei phones got duo cameras, Bleica
partnerships, and the newest Korean processors, before the honor models got
them and so on. The offline brands also received much more premium marketing to
turn them into fashionable, lifestyle brands all of which combined, were
supposed to justify the higher price tags. In the meanwhile, the online brands
had much more bare-bones devices that focused on having the best possible price
to performance ratio. Buying online, better specs nearly always win as direct
comparisons are very easy to make. And this plan, worked! Xiaomi was suddenly threatened online and had
nothing to fight back with offline. The meteoric rise of Xiaomi was not only
stopped, the company's sales actually started shrinking.
Both Oppo and Huawei
overtook Xioami in China and even Xiaomi's expansion abroad, especially to
Brazil and India, started faltering too. Xiaomi had to do something. So just
like the offline guys figured they could just go online, Xiaomi figured that
they could just go offline. They just needed to find a way to undercut the
offline brands on price significantly. Which, they did. Instead of having a
separate online and offline brand like Oppo and Huawei had, they decided to
stick with just one at first, and found ways to make more money outside of
selling phones. Se, Oppo and Huawei make money primarily from selling phones.
Xiaomi, though, doesn't. They sell phones
at cost, or even at a loss, and rely on making money on internet
services. I made a whole video explaining this business model that you can see
right here. And on top of that, Xiaomi stores don't only sell phones, but also
lots of other items, too, like rice cookers, electric scooter thingies, power
banks and so on, which a network of companies supplies them with, all under the
Xiaomi brand. They make money from those too, which means that, unlike Oppo and
Huawei, Xiaomi could keep their offline phone prices relatively low without
hurting their online sales model too much. This diversification really worked
for Xiaomi, as they're now back to the same insane growth numbers that they had
before their streak was broken. One segment that they were especially
successful in is the crucially important, 10 to 20 thousand rupees segment in
India, the largest smartphone market after China. This is the most important
smartphone segment in India, which is why companies developed their best bang
for buck devices for it, like Xiaomi's Redmi phones, Oppo's F Series phones,
Nokia's newly announced 5.1 and 6.1 devices, Samsung's J Series, and many
others. And so far, Xiaomi's aggressive prices, combined with their focus on
both online and offline retail channels, has made the Redmi the biggest winner
in it. Which brings us to RealMe, Oppo's direct response to Redmi. Oppo, who
lost significant market share in India to Xiaomi since its comeback, assigns
Sky Li, formerly the head of Oppo India, to win back this crucially important
segment from Xiaomi, and many of Oppo's best people were moved over there,
showing not only its importance to Oppo, but also that, after spinning up
OnePlus, the company has become an expert at creating new brands. Now, you
might wonder, why not just have OnePlus launch a phone in this category. After
all, they are supposed to be the bang for buck online brand of Oppo. But, there
are a few difficulties with that. Oneplus just isn't a budget smartphone brand
anymore, as they have slowly increased their prices from around 300 USD you all
the way to over 500 now. They don't want to be seen as an ultra budget phone
maker anymore. They want to make a profit selling phones, and the aren't all
that "online only" either. The sell through carriers in Finland and
the UK, and a couple of other countries by now as well. They've also tried
launching a mid-range phone, the OnePlus X a few years ago, and they themselves
admitted that it wasn't well received by fans. So, OnepLus is now focused on
creating a premium flagship for enthusiasts, while RealMe can focus on beating
Redmi. Which brings us to the Poco phone. My guess is that, As Ash from C4E
Tech has said, Xiaomi's realized that using the same brand for both online and
offline channels has, over time, started to limit Xiaomi, and that they wanted
to create a device that can be ultra competitive by making it online only. They
have also probably realized that Oneplus raising their prices gets Xiaomi a
pretty big opening to significantly undercut them. After all, Oneplus has to
make a profit from selling phones while Xiaomi doesn't. It's clear looking at
the Poco launch event that they are pitching this phone directly against
Oneplus, who makes up the bulk of flagship smartphone sales together with
Samsung in India, and who is growing very quickly, giving Xiaomi a real
headache. If things go well, Poco will be to Xiaomi what OnePlus is to Oppo, an
even more competitive, even more bang for buck brand for enthusiasts. Launching
multiple brands gives a company the ability to target completely different
users that wouldn't be available to them if they only had one brand. Just think
of Oppo and OnePlus. Hardcore smartphone enthusiasts tend to sneer at Oppo's
selfie campaigns, while people who love fashion and luxury would probably want
to have something more fancy than a OnePlus. Having both lets Oppo reach both
groups. And, as the smartphone market matures, I totally expect to see more
multi-brand companies in the future, just like we've seen in other consumer
facing industries like cars and clothes as well. Fun fact: Did you know that
OnePlus didn't own the oneplus.com domain name until about a year or two ago.So,
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