We Strive For Affordable Technology: Manu Jain, Xiaomi
Manu Kumar Jain co-founded Jabong.com, a fashion and lifestyle e-commerce portal in India and served as its managing director till January 2014. An IITian, he’s currently the global vice-president of Xiaomi as well as MD of Xiaomi India. In a chat with Suman K. Jha and Avishek Banerjee, he talks about what makes Xiaomi the company it is today.
Excerpts:
Tell us about the journey of Xiaomi so far...
Xiaomi is probably one of the most innovative companies in the world. And perhaps the fastest growing tech company on the planet. The company is only eight years old. Started in April 2010. A lot of people don’t believe we are an eight-year old company. If you look at most tech startups in India that are big, they are atleast 10-12 years old, including some of the biggest names. So we are younger than most tech startups in the country. The company was started by Le Jun, who is the founder, CEO, and chairman of the company. By the time he turned 35, he was already a multi-billionaire coming from a super poor family. And then he retired. And then he said I need to come back and do something differently. So he came back from his retirement eight years ago to start Xiaomi. The most interesting thing is Xiaomi was not started as a smartphone company but as a software or technology company. The simple philosophy was we will build an operating system which is unique, differentiated, has a lot of features that no other Android phones will provide, is very customisable, and also very user friendly. So the first one and a half to two years we were just building operating system, not making phones. We started making phones only six to seven years ago.
What is it in the DNA of Xiaomi that explains the kind of rapid expansion the company has undergone in its short existence?
Our vision statement is ‘innovation for everyone’, which means we want to ensure that technology is made affordable. And we want to ensure that technology should not be accessible just for the classes but for the masses too. There is a certain segment who would want to buy the latest and the best flagship, but they don’t want to pay a huge amount. We will basically ensure that we are always there for them. Secondly, our board has stated in the constitution of the company that no matter who is the board member or CEO, 100 years down the line, the company can never make more than 5 per cent profit margin on any hardware device. That does not mean we will always make 5 per cent. We will cut down costs massively and make very little profit for ourselves and we pass it on to our consumers. We have zero marketing costs, almost zero. We don’t see our TV ads, print ads, outdoor hoarding. We use social media. Another thing unique about Xiaomi is our team. If you look at the entire team, they are very young. Thirdly, it is about customisation of products. Whether you look at hardware, software or anything, we customise for local conditions. Like our software MIUI is hugely customised for India. It allows dual WhatsApp accounts for two numbers, an integrated train IRCTC into SMS which lets you check PNR status, train status through messages.
After going public, the brand has probably not lived upto the hype that was expected from it? Would you agree with that?
First of all, when the company is doing exceptionally well, even small things that do not go well, people will always find fault and say ‘Oh I told you something is wrong with the company, not everything can be right’. Look at any company, even the bests of the bests in the world, they would have their ups and downs. Even while I was telling you Indian numbers, it seems everything was right. In reality, a lot of things that we have done did not gone right. From outside you are not able to see that. Why? Because we quickly corrected our mistakes and moved forward. We try not to repeat the same mistakes. But something that comes out in the public, people try and latch on to that negative part. If you look at just the IPO, because a lot of people wrote stories around that time, this was the third largest tech IPO ever and the largest tech IPO in the last 4 years, which just talks about the credibility of our IPO. And then the way I look at it, let’s not worry about the small fluctuations here and there. We went public in eight years which is a great testimony of investor confidence in Xiaomi and we have been able to generate wealth for our investors and all our shareholders.
Who do you see as your competition in the Indian smartphone business?
At some level, everybody. At some level, nobody. When I say nobody, I am not being pompous or cocky about ourselves. I am just being realistic. We have a very different DNA from other companies. For example, all other players sell from 6,000 shops in Delhi. Do you know how many shops we sell from in Delhi? 250 vs 6,000 shops by all other brands. Do you know who is the number one player in the offline market of Delhi? It is Xiaomi. Today in offline, we are present in 40 cities. Out of that, we are already number one in eight cities and very close to becoming number one in another 15. So in total, we are number one or about to be number one in 23 cities.
What do you think will be the future of stores?
A combination of the both. Around 2014 when we started, it was around 90 per cent offline and 10 per cent online. And now it is around 65 per cent offline and 35 per cent online. I think it will stabilise around this number. Thirty to forty per cent will be online and 60-70 per cent will remain offline. This is only with regard to smartphones. Within this 35 per cent, Xiaomi has 55 per cent marketshare and within this 65 per cent, we have 20 per cent marketshare. The combined weighted average becomes 30 per cent marketshare.
Does that make the future all the more challenging?
Of course yes. We already have 30 per cent marketshare (in the smartphone segment). Recently, I went through a report that stated Xiaomi’s growth is slowing down. Of course, we are doing 10 million phones every quarter now. There is no other brand that has sold 10 million smartphones ever in the history of India. We were the first brand that crossed the 10 million mark last quarter. When we were 3 million, we were growing 100 per cent year-on-year. From one million to 2 million and then to 4 million (units). Now when we are doing 10 million, you can’t expect us to go to 20 million because there is a base effect. You can’t expect us to grow from 30 per cent to 60 per cent in a year. In online also, we reached the 55-60 per cent mark and we stabilised at it, that’s where the challenge is, how we innovate even further.
In the TV segment, who is your competition? Any plans to go beyond 55 inches?
Each category (of TVs) would have different competition. At some level, there is no competition. When you switch on this TV, you see full content, which you won’t find in any other TV. We have aggregated content from Hungama, SonyLiv, Hotstar, etc. In the smart TV segment, the biggest players are Samsung, Sony and LG. If you see our TV business, it is a very different experience from any other TV you have seen. It is across 32, 43 and 55 inch segments. Our 55-inch is the thinnest TV in the world, which is available at Rs 45,000. I wish we would go beyond the 55-inch TV (segment), but the Indian household is not big enough.
With the kind of expansion India is undergoing, is that the reason the country happens to be such an important market for Xiaomi?
Of course. It is the fastest-growing market globally or among the sizeable ones. If you look at the smartphone base, India is the second largest in the world after China. If you look at the overall number of phones sold in India, it is second largest in the world after China. If you look at smartphone sales every year, it is second largest in the world after US and China. But soon, India will overtake the US and become the second largest in the world. We are still growing very fast. So we will continue to grow for 5-10 years with respect to smartphone sales. Last year, we were at 125 million units. According to my estimates, in the next five to six years, India can be at 200 million units per annum.
Are you also targeting the premium segment where OnePlus is a market leader?
We have launched a new brand called Poco. If you basically look at the specs of Poco, it will be redefining the entire flagship (segment). It will basically beat any flagship in the country including whatever brands you are mentioning at an incredible price, with Snapdragon 845 and liquid cooling technology. It is made of Kevlar, the same material used in bulletproof jackets.
What do you think of being called the ‘Apple of China’?
Personally, me and Xiaomi has a huge respect for Apple. It is a great company. We have respect for all our competitors including Samsung, Apple. These are all great companies. We just believe we have a very different philosophy. I don’t think we share the same philosophy with any other company. Some of these companies make huge profit margins . I have heard various media reports of companies earning 30, 40, 50 and 60 per cent. We never make more than 5 per cent. So philosophically, we are different. Some of these devices are meant for a certain TG if you have arrived in life, own a lot of money and buy Rs 80,000-worth smartphone. Our aim to bring the same technology at Rs 25,000 to Rs 30,000. I don’t think we are similar to any other company. Maybe the reason why people call us so is because we are known more for innovation. But honestly speaking, there is no similarity in our philosophy.
