Air purifiers, TVs, and now refrigerators: Is Xiaomi ready for its home appliances empire?

Xiaomi’s smart home appliance lineup is part of the company’s “smartphone+AIoT” dual-engine strategy announced earlier this year.

Photo: Stock.tuchong.com
  • Xiaomi’s appliance initiative started six years ago when the company launched its first white good the “Mi” branded televisions in 2013. Now its appliance portfolio has spread across 22 categories.
  • In January, Xiaomi announced a “smartphone+AIoT” strategy with a pledge of RMB 10 billion for implementation.
  • All Xiaomi’s home appliances products fall under one of the three stages: the trial stage, the expansion stage, or the mature stage.
  • The online market has always been the stronghold for Xiaomi while the offline channels leave a great potential for it to explore.

On October 11, China’s smartphone-turned-smart-everything-maker Xiaomi officially launched its first slew of refrigerators, priced at between RMB 699 (USD 99) and RMB 2,999, in its latest step to build up a more comprehensive smart home appliance lineup, which is part of the company’s “smartphone+AIoT” dual-engine strategy announced earlier this year.

Born as a budget smartphone maker, Xiaomi’s appliance initiative started six years ago, when the company launched its first white good the “Mi” branded televisions in 2013.

Ever since then, it has been adding a series of new items to its appliance portfolio that now spread across 22 categories. Those products—which are key pieces to the company’s smart living ambition—now range from air conditioners, washing machines, and standing fans, among others. In its six years’ race to assemble the portfolios, Xiaomi’s also building up a home appliance empire.

All these appliances are operated by and connected to its proprietary app, the “Mi Home”, which serves as the central brain of Xiaomi’s smart home gadgets.

The other engine

In January this year, Lei Jun, the founder and CEO at the Hong Kong-listed company, announced a “smartphone+AIoT” strategy with a pledge of RMB 10 billion for implementation.

Following the announcement, in March, Xiaomi set up an AIoT committee that consists of executives across the organization in an aim to synergize resources and efforts related to the strategy. The executives are mostly from Xiaomi’s core businesses, translating to the company’s determination in pushing forward the AIoT strategy.

The newly minted concept of AIoT, is a combination of artificial intelligence (AI) and the ecosystem of connected devices known as the Internet of Things (IoT), referring to an emerging field of devices using AI to help humans complete various tasks.

In Xiaomi’s case, it applies the AIoT novelty to transform homes into intelligent spaces with smart devices that can be customized to an individual’s preferences.

The three stages tactic

Since the launch of the Mi televisions in 2013, Xiaomi has already built up the world’s largest consumer IoT platform, which is home to more than 132 million smart gadgets (excluding smartphones and laptops). How did the company trek so far over a short span? It has a three stages tactic.

All Xiaomi’s home appliances products fall under one of the three stages: the trial stage, the expansion stage, or the mature stage.

Xiaomi uses the trial stage to launch a wide range of products, from fridges, range hoods to stoves—most of which are just freshly released this year—to explore the market. Those products usually would have fewer SKUs (stock keeping units), meaning they would have fewer models for consumers to choose from.

And if one trial stage product gets popular after being marketed, Xiaomi would move it to the next phase, the expansion stage, to make it available in different models at different prices, catering to various consumer segments.

Products fall under this stage include air conditioners, washing machines, as well as rice cookers.

As for the mature stage, which includes only the Mi TVs currently, is meant for those with a proven track record in terms of sales and market share. For those, Xiaomi would produce and market them in a varied selection to cover as many as possible segments.

For instance, last year, Xiaomi sold 8.4 million smart TVs globally, surging over 200% from the previous year. They are sold on more than 50 models, from as little as RMB 699 to as much as RMB 8,999, with each model provides differentiated functionalities.

Xiaomi is closely monitoring the market response to its appliances, such as the white goods—air conditioners, fridges, and washing machines, and prepares to move those up the stages ladder.

The Mi refrigerators which just hit the online stores this month come in four models, and are very likely to be moved into the expansion stage next year.

Currently, most of its appliances are still in the “testing the waters” trial stage, those include cordless vacuums, induction cooktops, microwaves, and gas stoves.

This tact allows Xiaomi to cautiously but steadily roll out an encompassing product lineup that doesn’t just contribute to its top line but also aids its smart home ecosystem ambition, from smartphones to home electronics.

READ MORE: Can a treadmill become Xiaomi’s next breakout product?

Similar to traditional home appliances manufacturers such as Midea, Haier, Gree, and TCL, Xiaomi can now provide customers with a full set of smart devices under its Mi brand, and there is still room for further expansion across all categories.

The expansion into smart home appliances also marks a continuation of Xiaomi’s attempts to diversify the product range from its traditional offerings of smartphones—whose sales have been on a decline. With an aim to diversify its revenue and lower dependence over smartphones, Xiaomi has turned to home appliances to generate new growth momentum.

Xiaomi has been adept at entering a new product segment, seizing market shares by dangling out the carrot—affordable pricings. This strategy will only be effective only when Xiaomi launches new products in the market segments it has never tapped before. But as it expanded its offerings of home appliances, it is getting more difficult to introduce the next “star” product.

Address the offline weak point

While Xiaomi has been making solid progress in inching towards its home appliance empire through its three stages tactic, the strategy also has its Achilles heel, which is its heavy reliance on online sales and lacking in offline channels.

The online market has always been the stronghold for Xiaomi as it relies on the performance of this channel to compete with other traditional appliance makers. Situations are the same for Xiaomi’s other products such as robot vacuums, air purifiers, water purifiers, and rice cookers.

While Xiaomi is trying to replicate its smartphone business model to home appliances, the huge gap between Xiaomi’s online and offline performance indicates it hasn’t tapped much of the offline market. Although this leaves a great potential for Xiaomi to explore, it is still unknown whether it will invest a large sum of money to boost its offline presence.

Instead of simply selling smart home devices to customers, Xiaomi has to set a strong foothold for products under the “trial stage” and have all its smart products interconnected seamlessly in an individual’s home. It needs to figure out a way to monetize the new business model, paving the way for its home appliances empire.

The original article was written by Ouyang Weikang and Cecilia Xu of 36Kr, KrASIA’s parent company.

Contact the writer at [email protected]