Xiaomi has forgone its tradition of revealinghow many smartphonesit sold the previous year. The strategy yielded many headlines for the highly-regarded Chinese outfit, but today its CEO admitted that Xiaomi has been in transition after growing too fast.
The writing was on the cards, even as early as January 2016 when Xiaomirevealed it had sold over 70 million devices in 2015. An impressive number, for sure, given the backdrop of slowingsmartphone sales worldwide, but it was short of the companys public target of 80 million, which was reduced from an initial 100 million.
Its been fairly evident from analyst reports that 2016 wasnt a year for blockbuster Xiaomi growth. While itfeatured near the top of the sales pile in China, and held steady in India, its top emerging market, there was no great acceleration as in past years. For example, sales jumped from 7.2 million in 2012, to 18.7 million in 2013 and 61 million in 2014.
A Xiaomi rep confirmed to us that the company will not be disclosing its 2016 sales numbers.
Thats to be expected in many ways. Not only is explosive growth hard to maintain, but the traits that set Xiaomi apart from the competition its use of components and online-only sales platform have been widely mimicked and copied across the mobile industry. That means it trades primarily on its brand, a tough ask when you are selling affordable devices and Apple is the most desirable smartphone in China by some mile.
But Xiaomi didnt help itself too, by making bold predictions and hammering home the PR on its growth. CEO and co-founder Lei Jung admitted today that generally it had moved too quickly.
In the first few years, we pushed ahead too fast. We created a miracle,but also drew on some long-term growth, Lei said in a letter to employees. So we have to slow down, further improvein some areas, and ensure sustainable growth for a long-term future.
It isnt clear if Leis thesis extends to Xiaomis valuation, which reached $45 billion courtesy of a $1.1 billion funding round in December 2014. Many pundits feel that Xiaomi has done little to justify that tagsince then.
Despite the honest admission, the tone of his letter is upbeat. Lei told Xiaomis staff that the difficult times are behind us.
While Xiaomi hasnt revealed those sales figures, it did push out a range of business metrics that it hopes illustrate how it is growing as a company that goes beyond simply selling smartphones, which it recently admitted it makes noprofit on.
Lei made the following reveals in his letter:
- Xiaomi reached $1 billion in annual revenue in India for the first time
- Three of Xiaomis 54 offline stores passedRMB 100 million ($14.5 million) in GMV this year each the GMV includes sales of partner products and it plans to open 200 more in 2017, and 1,000 more by 2020
- Xiaomis Mi Ecosystem has 50 million connected devices which includes smart TVs, fitness trackers and more which brought in RMB 15 billion ($2.2 billion) in sales
- Xiaomi has applied for 16,000 patents globally, 3,612 of which havebeen granted to date
- Xiaomis revenue from internet services doubled in 2016 it didnt provide a figure but, based on a Reuters report from 2015, it appears to havesurpassed $1 billion for the first time
Heres the interesting part of what Lei said, he wants to push on and see Xiaomi development its offline retail arm. Thats right, the company that pioneered the online-only model is looking to brick and mortar sales.
Lei said Xiaomi has to aim wider because its current distribution model is limited, but you could certainly add stiffer competition as another factor:
Our e-commerce strategy has also faced some challenges. E-commerce now makesup just over 10 percent of overall retail in China, and the online smartphone market onlymakes up 20 percent of the overall smartphone market. Xiaomi has great ambitions, andwe are not satisfied with just being an e-commerce smartphone brand, so we have to upgrade our retail model, and incorporate offline retail for a new retail strategy.
He stated his belief that the companys internet services revenue model has been proved and presumably scaling the reach of its products is the next step to building on that progress and raising that revenue.
Beyond expanding its retail presence, Xiaomi plans to focus on developing artificial intelligence which it has deployed in face detection systems increasing its global presence, and developing fintech solutions in 2017. The company already offers its ownApple Payrival and is preparing to launch a digital bank service in China, too.
While theres no target for handset sales, Lei Jun said his humble goal for the year is to reach RMB 100 billion ($14.5 billion) in revenue.
Article updated to correct information about Xiaomis retail stores
