India is a land of immense opportunity for business. Capitalizing on those opportunities means understanding the complexities that await businesses who want to get in on the ground floor. Vikram Singh, who heads the alliances/partnership team for smartphone manufacturer Xiaomi’s business in India, recently gave PYMNTS an inside look into how he sees the market unfolding.
Here is an excerpt of the conversation.
PYMNTS: Please provide us with a high-level overview of your business and the customers you serve.
VS: In Xiaomi’s India business, we sell phones and phone-related accessories, as well as home ecosystem products. We primarily sell products through our Mi.com online platform but also through partner sites, such as Amazon, Flipkart and Snapdeal.
PYMNTS: Describe the customer shopping experience today, and how has that changed over the last five years?
VS: Xiaomi started business in India back in 2014. When we launched in India, it was exclusively on eCommerce site Flipkart. After about six months, we expanded our products to other online retailers, like Amazon and Snapdeal, and we worked with these three partners for about a year. Then, in June 2015, we also launched Mi.com and eventually expanded to offline as well, but the physical channel is much smaller.
I think the biggest thing we’ve seen from the beginning until now is the rapid growth of the usage of the site, which is primarily driven by two things. The first is the assortment of the product options that are available online, and the second is the number of platforms. When we started, we only had the website; now, we have the site and a mobile app. A lot of optimizations have been made around the product sites to improve the user experience.
PYMNTS: What is the impact of mobile to your business, and how do consumers engage with your business? What other technologies have made an impact one way or the other?
VS: For us, 70 percent of classic users and about 50 percent of other users come to us on the mobile app. If I was to include the mobile site as well, those numbers would increase by another 10 percent. We manufacture and sell our smartphones, and all of those devices come with our mobile app pre-installed, which is why we have such a high number of what we call “classic users” that come to use the app. We already have a huge customer base in India, and a lot of those users engage with us on the mobile app.
Since we manufacturer our mobile phones, we also own the UI of the operating system on the phones and can offer our users an enhanced version of the Android OS, which has a lot of local features. That also helps us in growing user engagement. All in all, we get a huge share of traffic and a great deal of customer data on the mobile app, which helps us in sending out targeted communications.
PYMNTS: How do people pay for the things they buy? How has that changed over the years?
VS: Customers have the option of paying through cash-on-delivery (COD), which is the most preferred option by far. About 80 percent of our customers prefer to use COD. The remaining 20 percent is prepaid, which can go through credit card, debit card, NetBanking or using the EMI (easy monthly installment) option.
Recently, due to the demonetization in India, we saw a significant increase in the share of prepaid transactions. There are a lot of people who have traditionally used the COD option that have started moving to prepaid. As a business, we want to increase the share of prepaid transactions, but we have done the math and see that the COD transactions actually turn out to be cheaper than the prepaid transactions given our higher average transaction value. Roughly 90 percent of our revenue is generated by selling phones, which cost, on average, about $150–$200, so the COD fees are significantly lower than the amount that we would pay the payment gateway. For us, COD comes out to be cheaper.
PYMNTS: Are there any forms of payment that may be accepted in the future? What is on your payments roadmap?
VS: We are working on implementing wallets, like MobiKwik and Paytm. That is something that we expect to happen over the next two months. During the next two quarters, we also want to introduce gift cards on the website so that people will be able to buy a gift card and send it to family or friends to redeem, which would make gift cards another payment option.
PYMNTS: What should businesses know about doing business in India?
VS: I think doing business here is extremely challenging. India is a huge country, and all of the states are different to operate in, especially in terms of understanding the various rules or regulations that exist in each state and being compliant with them. When we launch new products, we have to go through a lot of specific processes with the government because of that, which takes time, so there are definitely barriers that can slow things down.
PYMNTS: What will make the biggest impact on your business over the next five to 10 years? Why?
VS: The biggest thing that will help Mi.com grow as a platform is the number of smartphones that we sell over the next two to three years. This is important because, as I said earlier, all of the smartphones come with our mobile app pre-installed. If you look at the cumulative number of users that we could have over the coming year by selling 5 million–10 million phones each year, on average, that’s a significantly high penetration. After four years, we would have about 40 million app users, so even if half of those users drop off, we would still have a base of about 20 million users, which is a lot. I think that will have a really strong impact in terms of driving the number of users to the platform.
Secondly, it will be product offerings. Our last two phones have been the number one selling smartphones in India, so in the next five to 10 years, the plan will be to continue to do a good job of delivering the right phones to the market. In order to increase loyalty, I think we’ll also need more ecosystem products to drive cross-category purchases so that consumers will become part of the overall ecosystem of the Xiaomi brand and experience all of the different products that we offer.
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