As Xiaomi pulls back from Brazil, analysts call for new strategy

By Chen Qingqing Source:Global Times Published: 2016-5-30 22:33:01

Sales tactics in China don’t always translate to foreign markets

Hugo Barra, vice president of international operations for Chinese smartphone maker Xiaomi, speaks during a news conference in Sao Paulo, Brazil on June 30, 2015. Photo: CFP

A move to scale down operations in Brazil after only about a year demonstrates that smartphone producer Xiaomi Inc is struggling to replicate its domestic business model overseas, and it needs a strategy makeover, analysts said on Monday.

China's most valuable technology start-up has apparently decided to give less emphasis to its operations in Brazil.

When Xiaomi launched its smartphones outside Asia for the first time in June 2015, entering Brazil was part of the initial move into Latin America, according to media reports.

But in an interview with an online source for Android smartphone news - Android PIT - published on Sunday, Hugo Barra, the company's global vice president, said Xiaomi won't launch new products in Brazil in the short term. He cited "constant evolution" of the rules of production and taxation for online sales there.

While Xiaomi won't launch any new products in Brazil, it will continue to sell through e-commerce sites in the country, the company said in a statement it sent to the Global Times on Monday.

"It's not surprising that the company is shifting its strategy, as it has bet too much on e-commerce development overseas," Wang Yanhui, head of the Shanghai-based Mobile China Alliance, told the Global Times on Monday.

About one-quarter of all smartphones are sold online in China, but that's not the case in other countries and regions, including Brazil and India, he noted.

"Expanding its business model from China to overseas markets is unlikely to be as promising as expected," Wang said.

Plus, the "flash sale" model is largely unknown abroad, according to Wang. These promotions are also known as deal-of-the-day sales, which last from 24 to 36 hours.

Xiaomi is heavily dependent on its home market for growth. About 90 percent of sales are domestic, despite its moves to ramp up in India and launch in Brazil in 2015, market research firm International Data Corp (IDC) said in a report on its annual performance published in January.

The company also tried in 2015 to make a transition from low-end models into more mid-range models, but most of its shipments are still the low-end Redmi line, the IDC report noted.

Low prices turned out to be less attractive in Brazil than in China, said Zhu Dalin, an analyst at Beijing-based consultancy Analysys International.

"The company has failed to unveil new, innovative products that suit the taste of local customers," Zhu told the Global Times on Monday.

Redmi 2 was the first product Xiaomi launched in Brazil, but the lack of desired functions frustrated many buyers, India-based technology site wrote on May 7.

Also, Xiaomi does not enjoy very high brand awareness overseas, despite years of effort to raise its foreign profile and sales, Zhu said.

In 2015, South Korea-based Samsung continued to lead feature phones in Brazil, with 38 percent of retail sales volume, market research organization Euromonitor International said in a report in December 2015. Samsung has invested heavily in phones with dual-chip slots, which are favored by many Brazilians, the report noted.

In second place came LG Electronics, also from South Korea, with a 22 percent share. That company has also invested in the development of new dual-chip products, the report noted.

The failure in Brazil will have a certain impact on Xiaomi's international strategy, but that doesn't mean it will abandon overseas markets, Zhu noted.

However, Zhu said, the company needs to "carefully study" how it targets customers in foreign countries.

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