05:45:00
In slightly more than 12 hours from now, Xiaomi will start selling its second batch of Mi 3 smartphones in India via Flipkart, its official retail partner. The first batch sold out in under 40 minutes last week and it wasn't exactly surprising considering the raving reviews the smartphone received. Priced at just Rs 13,999, the Xiaomi Mi 3 promises features that smartphones from rival brands priced at Rs 35,000 provide. Even I was impressed and recommended the Xiaomi Mi 3. But having a great device at a great price isn't enough.
First a bit of background on Xiaomi’s disruptive business model. It sells devices almost at cost anticipating the margins to improve over the 18 month life cycle of the device – as component prices fall over a period of time, Xiaomi’s margins improve. However, to ensure that happens, it doesn’t manufacture millions of smartphones to flood markets on day one. Instead, devices are made and sold in batches.
Xiaomi doesn't have a marketing budget. It doesn't advertise and uses social media to spread word. Its satisfied users talk about the company and its products, which helps build trust and a fan base. In China, for instance, Xiaomi launches products in batches of 100,000 units, which are scooped up in under two minutes!
And that’s where Xiaomi India’s problems began.
In an attempt to replicate China’s flash sale model, Xiaomi asked interested buyers to pre-register before the sale began. Only those who registered would be eligible to participate on the sale date. Pre-registering didn’t guarantee a user a unit but just a chance to be able to participate in the sale, which started on the noon of July 22. Xiaomi said that pre-registration would give it and Flipkart an idea of the anticipated rush and help them cope better.
As soon as the sale began, it was clear that the pre-registration was a failure. Flipkart’s site crashed repeatedly. Many users who had registered were not recognized by the system. Some users who managed to book the smartphone were later sent emails about their orders being canceled. The end result was a lot of disgruntled and disappointed buyers.
Xiaomi closed the pre-registration for the Mi 3 once it crossed 100,000. Soon after the Mi 3 sold out, sources told that Xiaomi had less than 10,000 smartphones to sell on launch day out of which it had sold 1,000 to Flipkart First customers a day in advance. The actual number of units available on sale on July 22 was closer to 5,000 than 10,000. In essence, Xiaomi had close to 20X interested buyers than the number of units it had available for sale. What went on for nearly 40 minutes after the phone went on sale was the online equivalent of a stampede had it taken place in a physical marketplace.
It isn’t surprising that the experience left a bad taste for many consumers. A quick look at some of the comments on Xiaomi India’s official Facebook page is enough to get an idea.
I don’t expect tomorrow’s sale to be any different, considering those who had pre-registered during the first round but were not able to buy are automatically eligible to participate. Even if I am optimistic and assume 10,000 buyers got it, that still leaves 90,000 potential left over buyers. Considering many interested buyers would have waited to see the first reviews and the experience of people around them, it is logical to expect at least the same number or even slightly more number of people who’d have pre-registered for round two. Even if the numbers are lesser, thanks to the backlog, it is clear that the rush tomorrow would be much higher than what was witnessed last week.
Unless Xiaomi has a significantly higher volume of stocks available tomorrow and Flipkart better prepared to handle the rush, it is going to be a messy affair. I don’t understand how pissing off customers by providing them with a shoddy buying experience can build any brand. Especially to those customers who are willing to spend their money on a relatively unknown Chinese brand in India.
Xiaomi has to overhaul its flash sale model for India. If it really needs pre-registration it should ensure it has enough stocks or stop taking pre-registrations after it hits 3X or 4X of the stocks it expects to be available. Or it could utilize a lottery system where a day before the batch goes on sale, it sends a voucher to randomly selected buyers who pre-registered, who can buy the phone and have a real flash sale in the evening if any unclaimed vouchers are left.
The way things stand right now, it doesn’t matter how good the Xiaomi Mi 3 is if the company cannot respect its customers.
