There was a time when, in every home, if users visited, they easily captured Xiaomi smartphones, meaning that in every third smartphone sold in India was a Xiaomi, but now and today, this brand is continuously making losses in its market share. Now the question arises, why is Xiaomi making this much of a loss, and why are those other brands taking Xiaomi’s place? What is really happening to Xiaomi? It is now a big question mark for them.
In the year 2014, Xiaomi entered the Indian market and, with its amazing smartphones, captured nearly 1% market share within just one year. This was the most significant sign for the brand to shine in the Indian market. Over the next 4 years, Xiaomi’s market share reached 17.1%. By 2021, it was at its peak, and Xiaomi was the only company that controlled 27.31% of the market share. But then began the worst nightmare for Xiaomi, the decline in market share. Last year, Xiaomi’s market share was 20.08% and now it has reached 18.18%. The most shocking thing is that there are five primary reasons behind this decline that will surprise you. These reasons are becoming their most unexpected nightmare for a brand which was at its peak in market share.
If we discuss OPPO, Vivo and Realme, their market share keeps increasing. Today, the combined market share of these three brands is approximately 43%. Users might know that the parent company of all three brands is the same BBK Electronics, which is based in China. But there’s one thing users probably don’t even know: what does the name Xiaomi actually mean?
The Beginning of Xiaomi
Xiaomi’s story begins in 1969 when Lei Jun was born in Hubei, China. His parents were school teachers, so the income was decent. But Lei had been very interested in electronics since childhood. Opening old radios at home and understanding their circuits was his favorite hobby. Once, he even made an electric lamp using old batteries, bulbs, a wooden box, and wire pieces, which brought light to his village for the first time. It was the first time his parents knew about his hobby, but they didn’t even know that in future he was going to build a smartphone brand, which could be the most popular smartphone ever globally.
After completing his computer science graduation in 1991, Lei joined software company Kingsoft and became CEO within a few years. But later, he had to resign due to health issues. Actually, health issues were just an excuse for Lei to do something unique that would change the world’s preference. He then created an e-commerce platform called joy.com, which was later acquired by Amazon. In 2010, Lei started a software company with ex-executives from Google, Motorola, and Kingsoft, naming it Xiaomi. This name was inspired by a Buddhist concept, meaning small grains like millet or rice, the idea being to start small but have a vision to reach great heights in the upcoming generation.
Xiaomi didn’t directly enter the mobile market but first created an Android-based operating system called MIUI to provide users with a smooth experience. Seeing the smartphone boom, the company launched its first phone, the Mi1, in 2011. The vision was straightforward: Innovation for Everyone to put smartphones with top features in everyone’s hands at affordable pricing, where users can just put their hands on them. On July 15, 2014, it was the day when Xiaomi launched the Mi 3 in partnership with Flipkart at just ₹13,999. The phone sold out within 30 minutes of launch. It wasn’t just the price; people were pleased with its design and the quality, which led Xiaomi to be called the “Apple of China.”
Every year, after 2014 brought new achievements for Xiaomi, the momentum that started after entering the Indian market gave the company record-breaking growth. The combination of affordable pricing, flagship-level features, and innovative marketing made Xiaomi the favorite of ordinary people. After Mi 3’s success, Xiaomi introduced the Redmi Note series, which completely changed the game for Xiaomi in the Indian market. Every latest phone would sell out within minutes of launching. In Tier 2 and Tier 3 cities, Xiaomi’s craze grew so much that every second household had a Redmi phone in its hands. Xiaomi became people’s favourite smartphone with its affordable pricing.
By 2017, Xiaomi’s share in the Indian smartphone market reached 8.7%. In 2018, it overtook Samsung, which had been the king of the Indian smartphone industry for many years. In just four years, Xiaomi became the number one smartphone brand in India, and globally, they have made a grand entry. The company’s revenue jumped 175% in 2017-2018, crossing $23.06 billion. Xiaomi built an ecosystem including phones, fitness bands, smart TVs, power banks, and other accessories. This strategy proved to be a gold mine for Xiaomi.
Then came to 2020, when the world was fully struggling with the COVID-19 pandemic. Many companies’ revenues collapsed, but Xiaomi was the only brand whose graph continued to rise. People were shifting heavily towards smartphones for work, studies, and entertainment. Xiaomi’s strong online selling base and aggressive pricing was the biggest reason they are on peak level and that proved to be a blessing for them. Market share reached 26.4% in 2020 and was at its peak in 2021, meaning one out of every three phones in the Indian smartphone industry was a Xiaomi. Xiaomi had a loyal customer base, strong online distribution, and an excellent price-to-feature ratio. Competitors like Vivo, Oppo, and Realme weren’t even close to Xiaomi at all.
The Five Reasons for Decline
But at this peak, a mindset developed that became the most significant cause of downfall for Xiaomi, or it was the biggest nightmare for the brand. After 2021, cracks began appearing in Xiaomi’s empire. Here are the five reasons that caused the biggest downfall for the brand:
Brand Identity Crisis
Xiaomi’s biggest mistake was positioning products against its brand identity. Initially, Xiaomi’s vision was clear: make high-end feature smartphones affordable for everyone. That’s why Redmi became a value-for-money option for consumers; this was the reason for most selling affordable smartphones in India. But after 2020, Xiaomi started pushing Redmi into the premium category, launching expensive phones. However, in customers’ minds, Redmi was still a budget brand smartphone. Those wanting premium phones generally went to Apple, Samsung, or OnePlus, while those wanting budget phones were shifted to Oppo and Vivo.
Weak Retailer Relationships
Xiaomi’s bonding with offline retailers remained relatively weak. Oppo and Vivo give retailers up to 13% margin, while Xiaomi gives only 9% there was about 4% difference in the margins. The thing was clear that retailers will recommend Oppo or Vivo smartphones instead of Xiaomi. Additionally, Xiaomi follows a “sell-in, sell-out” strategy that no other company follows today. Retailers face problems because if they’re given a ₹10 lakh target, they must first buy at least ₹8 lakh worth of goods from Xiaomi. If they don’t buy, they won’t get a payout. Targets are suddenly increased without flexibility, and this was also the worst mistake they have made when they are at their peak.
Insufficient Offline Presence
Xiaomi started with online sales, which gave rapid growth to the brand. But in markets like India, good offline presence plays a significant role because smartphones are aspirational purchases here. People prefer to see and feel phones physically before buying any smartphone. In India, users don’t feel comfortable purchasing any smartphone online because of the fraud which many users have faced, where they order a smartphone, but instead of a smartphone, they get a soap bar, which is why Indian users don’t trust online purchasing. After 2021, competitors started working aggressively in the offline market. Oppo and Vivo built an strong networks with ground-level retailers, provided flashy retail counters, and offered heavy margins. Xiaomi lagged in this race due to weak retailer connections.
Confused Brand Positioning
Even today, people are often confused about the brand identity between Redmi, Xiaomi, and Mi. While Redmi is considered to be a budget-friendly brand, Xiaomi positions itself in the premium segment. But the company never clearly differentiated these identities. When brand identity isn’t clear, companies hesitate about launching big and expensive products, leading to delays or limited quantities reaching the market, and by the delays users generally prefer other smartphone brand like Oppo, Vivo, Samsung, Realme, or even OnePlus because they are also offering their phones in budget segment, so users can shift on them, which was other biggest mistake they have done.
Internal Instability
A major reason for Xiaomi’s downfall was their internal instability. In 2022, the Enforcement Directorate conducted raids on allegations of foreign exchange law violations, which severely shook for the Xiaomi’s operations. Top-level executives have resigned from the company, which directly impacted on the company’s decision-making. Execution slowed down while competitors were launching the latest phones and expanding their offline distribution and presence.
Can Xiaomi Make a Comeback?
The reality is that Xiaomi still has strong R&D, manufacturing capabilities, and a loyal fan base. If the company clears its product positioning, aggressively expands offline presence, and tries to rebuild trust with retailers, it can regain its lost position because the Indian market still has enormous potential; it just needs the right strategy to build an empire. But if significant steps aren’t taken in this direction, the decline could accelerate further, and it could be much worse for the company. The thing is pretty straightforward for them to build an empire once again by making their decision in the proper way, or they do what they are doing now.
