Xiaomi is meeting Huawei domestic aggression head on

Smartphone manufacturer Xiaomi plans to increase the investment in channel and retail development in the Chinese market by $725 million, to improve its position and to counter the expected aggression from market leader Huawei.

Bloomberg cited its source at Xiaomi that the Chinese smartphone company has decided to invest CNY 5 billion ($725 million) over the next three years to shore up its channel and retail position in China’s contracting smartphone market. This will come on top of its current budget and will be spent on channel expansion, partner incentive, and sales force financing, according to the report.

The decision is also made in anticipation of Huawei’s aggressive channel and retail movements in China in the near future, the source told Bloomberg. Huawei, the smartphone market leader in China admitted recently that its business will suffer from the US sanctions and the severance of business relations by companies like Google. In the consumer segment, which now accounts for more than half of Huawei’s total revenue, the impact will mainly in the overseas market with the disappearance of Google services from its smartphones posing the biggest impediments to consumers’ purchasing decision. This will drive Huawei to further strengthen its grip on the Chinese market, where it is already supplying one out of ten of the smartphones being sold.

Xiaomi has reaped the benefits after investing heavily in the overseas markets in recent years, having broken into the top five in a number of European markets while also well received in growth markets like India. It has the ambition to become the market leader in its home market too, but so far, the company has been vying for the fourth position with Apple, trailing Huawei, OPPO, and Vivo.

Huawei and Xiaomi also adopt different retail strategies. In addition to smartphones, Huawei also sells its full line of consumer products in the retail outlets including PCs, tablets, and other consumer devices.  Xiaomi, on the other hand, has carried the “ecosystem” concept from online, which used to its exclusively channel, to offline retail. In addition to its own branded products, centred around the smartphones, partner products on its IoT ecosystem are also offered in the retail outlets, in line with its strategies.