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How Xiaomi & Huawei disrupt smartphone market with e-commerce?

July 09, 2014 CK Wong Category : , , , , , ,

The 3 models of smart phone retailing

The 3 models of smart phone retailing

With the emergence of Chinese brands like Xiaomi, Huawei etc, the whole landscape of smart phone retailing has been disrupted, at least in some parts of the world.

Before this, major brands like Samsung have been adopting the "traditional" way of distribution and retailing, via physical distributors and dealers.

Xiaomi has emerged as a pure Internet play, where as its models are only available via online purchases (bar some special partnerships). Xiaomi does not position themselves as phone brand or manufacturer, instead its logo of "mi" symbolize "Mobile Internet". Yes, they are an Internet company.

Huawei on another hand applies a hybrid model, in which its Ascend series are available via "traditional" channels while the Honor series are available exclusively online, just like Xiaomi.

Why Internet play works for Xiaomi & Huawei?

Why e-commerce works for Xiaomi and Huawei?

As opposed to the existing smart phone brands, Xiaomi and Huawei (Honor series in this case) manage to "skip" the "traditional" marketing and distribution model.

They don't allocate massive advertising budget to promote their brands, instead they adopt "hunger marketing" strategy (to be explained later) to reach out to the consumers.

Both Xiaomi and Honor series are only available exclusively online, which in this case, the smart phones don't travel across layers of distributors and dealers to reach the hands of consumers.

For consumers, it is "value-for-money" or "no-brainer"

Cost saving passed to consumers via e-commerce

Imagine with every Samsung that you buy, how much of the price you pay is going to their big bang advertisement?

For the Chinese brands, with every dollars saved on the advertising and distribution, the cost saving (by estimation 30% to 50%) is being passed to the consumers.

With the cost lowered, the pricing of Xiaomi and Huawei Honor models are very affordable and attractive, which makes it "value for money" and "no-brainer" for consumers to buy online. This brings us to the next topic - hunger marketing.

What is Hunger Marketing?

Hunger marketing demonstrated by Xiaomi and Huawei

In fact, hunger marketing is nothing new. Apple has been doing it with the launches of iPhone and iPad series. 

The logic behind hunger marketing is to control supply, create demand and word-of-mouth. In layman terms, limited stocks are being launched first, and followed by batches. Obviously there will be a lot of consumers who can't get it first hand hence it can be the talk of the town.

Gadget is the perfect fit for hunger marketing, where as consumers like to brag for being one of the early proud owners. Internet and e-commerce provides a super platform for hunger marketing campaign, via the speed of virality and distribution advantage.

However, it does not apply to everyone...

Samsung Galaxy Note 3 Neo campaign backfired
Image source: Lowyat

Why hunger marketing might not work for everyone?

Samsung Malaysia has launched a campaign (as a response to Xiaomi and Huawei?) to slash half of its Galaxy Note 3 Neo from RRP RM 1,699 to RM 850.

The trick is only 1,240 units are available via 62 of the participating outlets. With 20 units allocated to each outlets, we cannot blame the possibilities of outlet owners keeping the units and resell later (difficult to audit). It is not a surprise to see many consumers venting their frustrations unable to buy the heavily-discounted unit (see screenshot above).

This case study proves that it is challenging to apply hunger marketing tactics for "traditional" brand who leverages on the physical distribution channels. They have the burden of maintaining the relationship with their distributors and dealers, without the flexibility of pure online play.

In the next installment, we will take a closer look at the showdown of Xiaomi vs Huawei.

Special note: This article is made possible thanks to the collaboration with 360 eCommerce.


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