Xiaomi: How Chinese smartphone giant is taking on Apple and Samsung by word of mouth

Xiaomi is a phone brand you may have never heard of, but you will. Although it was possible to buy its handsets for some time if you looked hard enough, its first official move into the UK came last November with a highly attractive, innovative phone called the Mi 8 Pro.

This week, its second flagship phone goes on sale, the Mi Mix 3, and it’s even more eye-catching. It’s a slider phone. No, not like those tiddly Samsung feature phones from the nineties, this phone slides only about 1cm, enough to reveal the camera hidden behind. Which, in turn, means the phone's front really is all screen – well, technically it has a 93.4 per cent screen-to-body ratio. Unlike other full-screen phones, there’s no notch because there’s no need to find room for the camera.

I spoke to Xiang Wang, the company’s global senior vice president and head of international business. We met at the Barbican Centre in London and sat in a corner that defined the eccentricity of the building, with sloping floors and corridors that narrow unexpectedly. I began by saying that this was a building that made a strong first impression and asking him how he wanted Xiaomi to be seen as it arrives in the UK.

“I think the first impression of the brand should be that this is a cool company, very young, energetic and very cool," he said. "It’s a very different culture and different product philosophy to others. That’s the most important thing we want to achieve.”

There are certainly some differences that stand out from the start. For instance, the company has publicly stated it will not make more than 5 per cent profit, about which more later.

The first thing people will see is the product, so how will Xiaomi – pronounced 'show me', with the 'ow' similar to 'now' – get across the coolness of the company from the products?

“We carefully picked our products for our first launch in the UK. We were struggling to pick which one because we have so many,” Wang said.

The new phone, the Mi Mix 3, was also a contender for being the first UK release. “It is another high-end model with a good camera, strong battery, new stuff inside. In the end, we went for the Mi 8 Pro because of its design with its cool transparent back, in-screen fingerprint sensor and so on. So, I think the UK audience may like it. We are also releasing a scooter, we think we picked the best, coolest products we have for the UK market.”

Yes, that’s right, Xiaomi also makes an electric scooter. The range available in the UK includes half a dozen phones, a fitness tracker, a nightlight and a couple of power banks, but in China the products available are much more numerous. The plan is to offer a much wider range here, too, one day.

“Through the Xiaomi stores we want to learn what the British consumer wants and needs so we can bring the right products to the UK. Now, we have just brought the hot-selling products from China and elsewhere because it takes time for us to do the testing and certification for the local requirements of each market. We think that in the future when we have a bigger customer base, we will have a better idea of what works for each country.”

So, why is Xiaomi building its presence now in the UK? “I think the rationale is this. On 7 November 2017 we had our first launch event in the western world, in Madrid, Spain. We tested the market and now we are number three in Spain. We work with all channel partners including online and offline carriers, including building our own Xiaomi stores there. The initial success in Spain gave us much more confidence for the western European markets. These are developed markets in which we had never worked before. Last May we launched our pilot service in France and Italy, in Milan and Paris and so the next natural step was the UK.”

This may lead to different challenges, it seems. “The UK has a lot of technology innovations, plus art, fashion, and an energised younger generation. I think this could be a good place for us. There are also a lot of challenges in the UK because the normal consumer doesn’t know us. Those who do know us are engineers and the younger generation who have come across us on the internet. Also, in the smartphone world, the UK is still a carrier market, so we have to spend extra effort to make customisations for carriers. That’s another challenge. Overall we’re very confident.”

When I met a senior executive at Huawei a year ago, he said it would be easy for the brand to be the world’s number one (it’s already climbed to number two, overtaking Apple in recent months, leaving only Samsung ahead of it). But that wasn’t the most important thing. What would be Wang’s ambition for Xiaomi?

“Our ambition is not to become the number one smartphone hardware company – we definitely want to be one of the important and biggest tech companies in the world. But our aim is not just selling hardware, we are much more than a smartphone company. We build more products than that.”

One of the standout features of the brand is the competitive price: Both the new Mi Mix 3 and the Mi 8 Pro are priced at £499, half the price of an iPhone XS. How is the company making the phone for that price?

“Internally we are making huge efforts to improve operating efficiency. Actually, unlike traditional hardware companies, we do not spend huge sums of money on traditional marketing and billboards. We use social media and other channels to communicate our products. Basically, it’s word of mouth. If someone loves our products, they will tell their friends, family colleagues.”

From 2018 the company set a maximum profit level of 5 per cent. If profit exceeds this, Xiaomi has said they will return the excess to consumers. “Yes, we did this already, last year. We gave coupons to our consumers which they can use to buy our products. That’s one way, which we did last year for Chinese consumers.”

Xiaomi expects the range to grow in the UK, but Wang points out that there’s already something for every pocket.

“Actually, we have the whole portfolio from the entry-level to flagship covered. We will gradually bring more but we understand we need to be focused," Wang said. "The UK market is very different from others, there are still a lot of entry-level products but the high-end part of the market is very big. The phone network Three has been asking us to offer better entry-level products and we are doing that.

"In the mid-range we want to understand it better, we’ll listen to the carriers more.”

It sounds like the company will see what works in China first, to get a clue as to what will work here in the UK. But Wang reveals that this may some day lead to products tailor-made for British tastes. “In the long run, once we have built more resources, we can think about products which can be designed specifically for the UK or Europe. But now we basically pick products from our portfolio. We have to do some customisation, for example the frequency requirements are a little different, so we have to add a band to serve European consumers.”

Every phone manufacturer faces a challenge. Handsets have just become the same thing – a black oblong with a glass or metal back. How does Xiaomi differentiate?

“The Mi Mix 3 is one way to stand out from the crowd. The competition is severe so we are competing on every front, for instance, design and material – the Mi Mix series was the first to use ceramic, as a unibody, the entire phone was built from one piece of ceramic, including the frame. That’s another choice. As for technology, we always partner with the best, for items such as the in-screen fingerprint sensor.”

This is in the Mi 8 Pro, but not the new Mi Mix 3 which has a conventional rear-mounted sensor.

Finally, how does he view competition?

“I think competition is good – if everything is the same and we have efficiency, the cost advantage, from making it in China in large numbers, then we don’t need to make a lot of profit from the hardware. Other companies have a business model where they need to spend a lot of money on marketing. We don't do that, so our products are high quality but not high price.”