Xiaomi Comprehensively Launched Offline Channel Reform, Digital Standardization And Increased Turnover Rate

        Wu Qiang and his wife, born in 1980s, are witnesses to the changes of Xiaomi offline channels. They have witnessed the ice and fire of Xiaomi's offline channels all the way from the earliest online Xiaomi 2s to Xiaomi's direct supply point and franchise store, and then upgraded to an authorized store last year.

In 2011, Wu Qiang and his wife returned from Shenzhen to Jiajiang, Sichuan Province, and started the business of communication equipment. In the local communication street, they run a store less than 10 square meters, which is the starting point of their business.

In August 2011, Xiaomi mobile phone 1 was officially released. Later, the hot sales situation exceeded the expectation of Xiaomi company. At the same time, Wu Qiang saw business opportunities.

After Xiaomi mobile phone 1 and Xiaomi mobile phone 2 were released, many customers asked Wu Qiang to buy them. However, at that time, Xiaomi only did online, and there was no offline channel available. However, after seeing customers' strong desire to buy Xiaomi's mobile phone, Wu Qiang decided to sell it by himself.

In 2013, when Xiaomi's 2S mobile phone was on sale, Wu Qiang mobilized his relatives and friends to buy it together. In the end, several mobile phones were seized, and each mobile phone sold at a premium of 700 yuan.

In this way, Wu Qiang relied on the way of "grabbing goods" to sell millet mobile phones for three years. Until 2016, when Xiaomi began to lay out offline channels, Wu Qiang first applied to become a direct supplier of Xiaomi's mobile phones, which began to have a stable channel for taking goods. At that time, his store has been expanded to more than 30 square meters, and can sell more than 140 millet mobile phones every month at the most.

However, after becoming Xiaomi mobile phone direct supply point, the day is not as comfortable as Wu Qiang imagined. Because at that time, Xiaomi's offline channel adopted the same dealer system as other mobile phone manufacturers. Products could only be delivered to stores through layer by layer distribution. In addition, the profit margin of Xiaomi mobile phone was originally smaller than that of other products, which made many offline stores complain incessantly.

Wu Qiang also told the 21st century economic reporter that in 2018, especially in 2019, his store operation is very difficult. Fortunately, when Xiaomi mobile phone 9 was released, Xiaomi clearly proposed to focus on offline support, which helped him a lot. Because of the small profits, only by selling more can we stabilize the revenue. If we can't guarantee sufficient supply of goods, it's very difficult for Wu Qiang's stores to maintain.

In 2020, Xiaomi made a series of strategic adjustments for offline channels, which made Wu Qiang's situation change again.

Efficiency decides the life and death of offline stores

In March 2016, Xiaomi opened its first millet home, which opened the layout of offline channels. What drives Xiaomi from online to offline is the decline in sales in 2015.

In 2015, Xiaomi didn't complete the expected sales volume. In 2016, the sales volume dropped by 36%, directly falling out of the top five in the world. This is the dark moment in the development history of Xiaomi company. Later, when summarizing the reasons, Lei Jun, the founder of Xiaomi company, once said that in addition to the internal management problems of the company, Xiaomi had been focusing on online in the past, but also encountered development bottlenecks.

In fact, from the overall sales of the mobile phone market, the proportion of offline sales is much higher than that of online sales, which means that no matter how good Xiaomi's previous online performance is, it can't break through the limitations of the scale ceiling.

Therefore, expanding offline channels in 2016 is more like an emergency move for Xiaomi. From March 2016 to November 2017, Xiaomi has opened more than 220 millet homes in more than 20 provinces in China in a year and a half. This is a good start for Xiaomi, who has almost zero experience offline.

In 2017, Xiaomi walked out of the trough and mobile phone sales returned to the growth track. Behind this, offline channels undoubtedly made important contributions. Therefore, Lei Jun put forward to open 1000 millet houses in the next three years.

At the beginning of December 2020, the 1000th store of Xiaomi house was set up in Chengdu Vientiane City, and Lei Jun's three-year plan for Xiaomi house was completed as scheduled. However, in addition to completing the established action, Xiaomi's cognition of offline channels has also changed greatly through the exploration in the past four years.

First of all, the importance of offline channels is self-evident, but in terms of quantity, there is still a big gap between Xiaomi's 1000 stores and tens of thousands of competitors. And in the original dealer system, millet found it difficult to expand the scale.

How to break the game, this problem is placed in front of Lu Weibing. In November 2019, Lu Weibing, who joined Xiaomi company for less than a year, formally took over Xiaomi China. Under the group's strategy of "hitting China hard", how to break the shackles of offline channels has become the No.1 task of Xiaomi China, and it is also the biggest challenge for Lu Weibing in his new position.

Shang Jin, vice president of Xiaomi group, said in an interview with 21st century economic reporter that after taking over China, Lu Weibing first tried to help Xiaomi manage regional market through third-party service providers“ But later we found that this would not work, because there would be no moat without heavy investment in assets, and the management efficiency must be done by Xiaomi and brought down to the line, so that it can be done. "

Shangjin said that the real competitor of offline channels is actually e-commerce, because e-commerce is more efficient, and all competition is about efficiency. If offline stores can't improve efficiency, they will be eaten by e-commerce sooner or later.

Based on this, Xiaomi's adjustment strategy for offline channels is also more clear, that is, to help offline stores approach e-commerce efficiency infinitely. In order to achieve this, it is obviously not possible to rely on the original channel model. After more than half a year of intensive research, Xiaomi finally came up with a set of digital and standardized solutions.

Similarities and differences of three types of offline channels

In the new channel strategy, Xiaomi has broken the original layer by layer distribution system, and all stores are directly connected with Xiaomi company. The change brought about by this is that every product of Xiaomi is directly from Xiaomi factory to each store, which greatly reduces the loss of profit and time.

In fact, only in this way can Xiaomi really implement its digital and standardized management mode. For example, in terms of digitization, the retail app based on Xiaomi's research and development can make the inventory, sales and other business data of each store clear at a glance.

In terms of standardization, all the decoration styles of Xiaomi's home are unified. At the same time, offline channels keep pace with online channels in terms of promotion and activities.

After the reform, Xiaomi's offline channel has only three modes: first, Xiaomi's flagship store; The second is Xiaomi's exclusive store; Third, Xiaomi's authorized store. Among them, the former is Xiaomi's self-management, and the latter two are the way to join in.

For Xiaomi, the main value of flagship stores is to display the brand image, so these stores will be opened in the best position in the core business circle, and will not care about the profit problem. In addition, the flagship store has another important role, that is, to train store managers for exclusive stores.

Shangjin told reporters that there will be a store manager dispatched by Xiaomi company in all the exclusive stores of Xiaomi house, and they are selected from the flagship stores in order to help the exclusive stores better manage and operate. Therefore, the flagship stores should also create a team of "Xiaomi store managers".

The difference between authorized stores and exclusive stores lies in the ownership of goods in addition to the absence of store managers stationed by Xiaomi. Shangjin said that for exclusive stores, Xiaomi has set a new business logic, that is, as long as the goods in the store are not sold to consumers, they are all Xiaomi's stocks. What's more, the price they get is the same as the retail price. The profit point lies in the rebate provided by Xiaomi after the goods are sold.

Under such a mode, the profit-making mode of Xiaomi's exclusive store is no longer like that in the past, which is based on the profit of each machine, but more on the turnover rate. As long as the turnover efficiency is high, even if the profit of single investment is not high, the final overall return will not be too low. Moreover, for franchisees, after no inventory pressure, they can invest more money to open more stores, thus improving the turnover of goods.

As for the authorized stores, their profit model is still to earn the price difference, that is, the stores take the goods at the purchase price, then sell them at the retail price, and bear the inventory by themselves. However, in addition to this difference, authorized stores in the overall image and business methods, and franchised stores have no big difference.

Shangjin frankly said that from the perspective of Xiaomi, of course, we hope that all Xiaomi's homes are exclusive stores. However, the assets of this mode are too heavy. In addition to bearing the risk of inventory, Xiaomi also has to send store managers and invest some decoration costs. Therefore, at this stage, in the market below the county level, the mode of authorized stores still needs to exist.

4500 stores in five months

Last year, Xiaomi took the lead in Henan Province to test this set of channel model, and then began to promote it nationwide. In mid June this year, 21st century economic reporter visited Xiaomi's offline channels in Sichuan Province. During this visit, the head of a channel business in Chengdu told reporters that they have now opened more than 30 millet houses. Compared with the past, he thinks that the biggest change now is the higher efficiency of the retail system.

"Xiaomi retail app is very easy to use, through which we can master the situation of all stores at any time. Now we can be responsible for more than 30 stores by ourselves, but if there is no retail link, we need to increase the manpower by at least three times." The person in charge said. In addition, in addition to the improvement of management efficiency, in terms of profitability, the monthly revenue of his single store in the past was hundreds of thousands, but now it can reach more than 2 million, and the profit margin has also increased by 2-3 points to about 10%.

Wu Qiang is now opening Xiaomi's authorized store. At present, he has opened two stores in Jiajiang, Sichuan Province. Wu Qiang told reporters that his perception of the difference between authorized stores and exclusive stores is not strong, because from the actual operation situation, he is not worried about having inventory. Not only that, he plans to continue to expand the store area, expand business.

In November last year, Lu Weibing set a goal to make every county in China have millet homes in the coming year. Subsequently, under the brand-new channel strategy, Xiaomi's store opening speed began to grow explosively. On January 9, this year, Xiaomi set an amazing record of 1003 Xiaomi houses opened at the same time in a single day. By the end of April, the number of Xiaomi houses had exceeded 5500.

There are 1000 stores in three years, which is in sharp contrast to the 4500 stores in five months. Behind this, Xiaomi is also sending a signal to the outside world, that is, it has found out the best model for offline channels.

In May this year, Lu Weibing said that after half a year's efforts, Xiaomi has achieved 100% County coverage in Henan and Jiangsu provinces. It is expected that by the end of this year, the goal of full County coverage will be achieved. On this basis, Lu Weibing also put forward a more ambitious goal, that is, to open 10000 Xiaomi home authorized stores in the township market in the future.

Lu Weibing is full of confidence in achieving the new goals. This is compared to five years ago, Xiaomi's home is now much more attractive to offline channels“ For example, in the past, when Xiaomi wanted to enter a large shopping mall, shopping malls had to consider it. But now, many shopping malls take the best position to invite Xiaomi's home to enter, because Xiaomi's home can bring customer flow. "

The same is true for channel operators. The general manager of a large communication company in Sichuan said frankly, "in 2018, Xiaomi came to negotiate with Xiaomi to open a store. At that time, we were hesitant, but now, we hope to have more cooperation with Xiaomi."

Compared with offline stores of other brands, Xiaomi's home also has two significant characteristics

First, Xiaomi has a strong fan attribute. For example, Xiaomi's home in Wangfujing shopping center in Leshan is Xiaomi's first offline store in Sichuan. At that time, local rice noodles were involved in the whole process of the store's opening. Now, the shop often holds some rice noodles activities.

Second, Xiaomi's earlier ecological chain layout has shown its value. Wu Qiang told reporters that the replacement cycle of his customer group is about 2-3 years, so if Xiaomi's home only sells mobile phones, it will certainly not be able to maintain, while Xiaomi ecological chain products are a good supplement.

The person in charge of a communication company that has signed cooperation with more than 50 offline stores with Xiaomi said that he did not want to sell mobile phones all his life, but in the past, there were high barriers between the communication industry and the home appliance industry. Now, through Xiaomi's ecological chain, he can set foot in more fields.

Higher user stickiness and richer product categories have become the core advantages of Xiaomi in developing offline market. However, compared with competitors, the number of Xiaomi's offline stores still has a lot of room for growth. So next, Xiaomi will continue to maintain the momentum of rapid development on the offline channels. How much value can this set of offline playing methods produce? Maybe we can find the answer in Xiaomi's future financial reports.

(at the request of the interviewer, Wu Qiang is a pseudonym)