Chinese handset vendor Xiaomi is planning to have a pan-India offline presence by the end of this year.
Known for its ‘online only’ strategy, Xiaomi has already tied up with Reddington for sales through “local unorganised retailers” (mom-and-pop stores).
According to Manu Kumar Jain, Head of Xiaomi Technology India, the company has begun the roll-out of its offline distribution model in Kolkata, Bengaluru, Hyderabad and Chennai on a pilot basis, since August.
New cities are being added “every few days” and “a few hundred” retail stores (unorganised local ones) have been added so far.
“We are in the pilot phase; adding unorganised retail stores where devices are available. By the end of this year, we intend to have a pan-India presence,” he said.
It has entered into tie-ups with organised retailers like “The Mobile Store” and “Airtel”.
Having entered India in July 2014, Xiaomi has so far sold 3 million devices. Initially, it tied up exclusively with online retailer Flipkart. However, its products are now sold on other platforms like Snapdeal and Amazon as well as the company website.
Offline sales According to Jain, offline sales are expected to contribute to around 25 per cent to 33 per cent of the total sales in 2016.
“This year we will be happy to increase our offline presence pan-India. In the full year of operations in 2016, we hope offline sales to be a fourth or third of our sales,” Jain told BusinessLine .
Currently nearly 90 per cent of its sales are through online channels.
Apart from mobile phones, Xiaomi’s offerings include tablets, power-banks, headphones and ear-phones, among other things.
New distribution model Xiaomi is also looking at introducing a just-in-time distribution model for off-line sales. Under the model, the requirement for the stock will be passed on from the retailer to the main distributor.
Hence, pressure of stocking products across channels will go down. This will reduces the channel’s working capital requirements and help keep margins intact, Jain pointed out.
According to market sources, retailers’ and distributors’ margins are a major component of the price of a mobile phone. With the advent of online sales, vendors are able to maintain margins even at lower prices.
Xiaomi’s offline pricing will continue to remain at par with its online one, that is, handsets will be priced the same.
“We (Xiaomi) have thin margins and in terms of offline presence, we need to figure out the right distribution model, where costs can be kept under control and margins retained. As a result we are rolling out the just-in-time inventory distribution system,” he added.