Xiaomi targets 10bn yuan revenue from 1000 new offline stores
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Chinese smartphone maker Xiaomi has pinned its hopes on offline sales with a plan to open 1,000 brick-and-mortar stores over the next three years, targeting 10 billion yuan in revenue from this channel, its founder and chief executive Lei Jun said on Wednesday.
Xiaomi aims to boost the number of its physical stores, called Mi Home, to 200 this year from 51 at the end of last year, Lei said at a forum in Yabuli in the northeastern province of Heilongjiang.
“I am confident that each of the offline stores can achieve sales of 10 million yuan [per month],” he said. That means Mi Home retail stores are expected to contribute 2 billion yuan (HK$3.39 billion) in sales per month.
Lei said 2016 was a tough year for Xiaomi as he was “confused” about how to expand into more innovative sales channel from just e-commerce.
Traditionally, running brick-and-mortar stores will inflate costs and erode profits, making it hard to offer high quality and inexpensive products to customers, Lei said. The toughest part is therefore to build new stores with high efficiency to control costs, he said.
One of the challenges for Xiaomi is that we need to make essential adjustments after rapid growth
Lei Jun, Xiaomi founder and CEO
“Unlike other chain stores, Mi Home stores are all self-operated by Xiaomi. At the end of last year, our 51 stores were able to achieve sales per square metre of 260,000 yuan,” he said.
“I am confident that each of the offline stores can achieve sales of 10 million yuan [per month],”
Lei told his staff last month that Xiaomi has targeted 100 billion yuan in revenue this year, which was subsequently described by market watchers as unrealistic, with many sceptical it was achievable.
However, Lei said he is confident that Xiaomi can meet the target.
“Considering Xiaomi’s foundation, this small target is not too difficult to achieve. I am more concerned about how to make our foundation more solid,” he said. “One of the challenges for Xiaomi is that we need to make essential adjustments after rapid growth.”
Despite China’s continuous growth in e-commerce, companies have been putting increased efforts into expanding offline channels, or integrating their online and offline businesses.
E-commerce giant Alibaba Group founder Jack Ma Yun has said that e-commerce had become a “traditional business” which would soon disappear. A new retail model which integrates online and offline, as well as logistics and data across a single value chain, would be the next trend, said Ma, who first raised this idea in October last year. Alibaba owns the South China Morning Post.
This article appeared in the South China Morning Post print edition as:
Xiaomi targets 10b yuan in offline sales
Questions & Answers
Q.What is Xiaomi's specific target for revenue from its new offline stores?
What is Xiaomi's specific target for revenue from its new offline stores?
Xiaomi aims to generate 10 billion yuan in revenue from the 1,000 new brick-and-mortar stores it plans to open. This revenue is expected to come from its expanded offline channel over the next three years.
Q.How does Xiaomi plan to expand its physical store presence this year?
How does Xiaomi plan to expand its physical store presence this year?
Xiaomi intends to increase the number of its Mi Home physical stores from 51 at the end of last year to 200 by the end of this year. This is a significant part of their offline expansion strategy.
Q.What challenge does Xiaomi acknowledge regarding its rapid growth?
What challenge does Xiaomi acknowledge regarding its rapid growth?
Xiaomi recognises that one of its main challenges is the need to make essential adjustments following its period of rapid growth. This indicates an internal focus on adapting their operations and strategies.
Q.What is the key difference in how Mi Home stores are operated compared to other chain stores?
What is the key difference in how Mi Home stores are operated compared to other chain stores?
Unlike other chain stores, all Mi Home stores are self-operated by Xiaomi. This allows the company direct control over their retail outlets and customer experience.
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