Xiaomi proposed a premiumization strategy in 2019, planning to benchmark the Apple brand by launching a series of high-end mobile phones. They have implemented a dual-brand strategy, positioning the Redmi brand at the ultimate cost-effective ratio and the Xiaomi brand at the high-end market. In addition, Xiaomi has launched a variety of offline retail models, such as Xiaomi Home*** Xiaomi Home stores and Xiaomi Home authorized stores. While selling these high-end models, Xiaomi has significantly expanded the number of offline stores. However, this dream of premiumization has been beaten back by reality in two ways.
First of all, Xiaomi's choice of premiumization may not be the right time. The global mobile phone market has seen a significant decline in replacement demand after 2021, and the epidemic has caused many people to start saving money. Xiaomi's series of high-end phones does not create enough impulse to change phones in terms of functionality. Even Apple's iPhones launched in recent years haven't had too many major updates. This has reduced consumer demand for high-end mobile phones.
Secondly, the rise of Honor after the divestiture has put competitive pressure on Xiaomi. Honor rose at an astonishing rate after Huawei's spin-off, taking over most of the market space left by Huawei. In the fourth quarter of 2020, Honor's market share was only 46%, but a year later, the share soared to 17%, surpassing Xiaomi's 158%。The rise of Honor has caused Xiaomi to lose some market share, further exacerbating the decline in its mobile phone business.
Judging from the data, Xiaomi has experienced a decline in the mobile phone business since the first quarter of 2022. From 8 in 2016The 9% market share climbed all the way to 15. in 20218%, Xiaomi has achieved some success in the Chinese smartphone market. However, since the first quarter of 2022, Xiaomi's shipments and market share have begun to decline. At the same time, the revenue of Xiaomi's mobile phone business also showed a downward trend. From a single-quarter scale of about 50 billion yuan in 2021 to a scale of about 40 billion yuan per quarter in 2022. In the fourth quarter of 2022 and the first quarter of 2023, Xiaomi's mobile phone business revenue fell by 27% and 23%, respectively.
Although Xiaomi has launched a series of high-end phones, its performance in the high-end segment has not been ideal. In fact, Xiaomi sold an average of only 6 million high-end phones per quarter in 2021, a figure that further decreased to 4 million units in the first quarter of 2022, almost one-third of its original size. Due to poor sales, Xiaomi began to stop announcing sales of high-end phones in its financial reports.
There may be two problems with Xiaomi's premiumization strategy. First of all, in the context of declining market demand, high-end positioning is carried out, and consumers' impulse to replace new models is weakened. Second, the rise of Xiaomi's rival Honor after Huawei's spin-off has put competitive pressure on Xiaomi. Honor inherited the market space left by Huawei and quickly increased its market share. As a result, Xiaomi lost some of its market share and was unable to realize the expected premiumization gains.
The reason for the decline in Xiaomi's mobile phone shipments is not in line with its premiumization strategy, with consumers less willing to buy high-end phones in the context of weakening market demand, and the rise of rival Honor has further weakened Xiaomi's market share. Xiaomi's overly optimistic approach to opening a large number of offline stores and distributing them has led to an excessive inventory backlog. The downward trend of Xiaomi's mobile phone business has also been verified in the data, with a decline in shipments and market share, as well as a decrease in business revenue.
For Xiaomi, it should assess the situation and adjust its product strategy according to market demand. In the context of declining market demand, Xiaomi can consider paying more attention to the cost-effectiveness and innovative features of its products, and launching new products according to the actual needs of consumers. At the same time, strengthen brand marketing and channel construction, improve the coverage of products and sales channels, and maintain a keen sense of touch in market competition.
Finally, Xiaomi needs to recognize that the high-end market is not easy to conquer, and requires a more prudent and refined business strategy. Only by truly thinking from the perspective of consumers and providing practical products and services can we be invincible in the fierce market competition. In the future, Xiaomi can continue to innovate and provide differentiated products, and look for other growth points, such as the development of areas such as the Internet of Things and smart home, to achieve sustainable development and business growth.