In India, the question is how to get market proportion offline: Xiaomi's Lei Jun

Xiaomi's growth in India has been beyond expectations and will form the base of international expansion for the Chinese smartphone maker and internet company.

Speaking to Gulveen Aulakh and Karan Bajaj, CEO Lei Jun said growth in India and markets such as Indonesia, besides China, will drive its overall revenue to $15 billion by year-end. Focus on replicating online efficiencies in offline retail will be key to the next phase of growth. Edited excerpts

How has the India journey been?

Xiaomi's India journey has been way beyond our wildest expectations. According to IDC, we are number one in online. In the last two quarters, out of three phones sold online, one is a Xiaomi phone. We have created a lot of new records in the online space ­ our new product Redmi Note 4 has sold more than a million phones in the past 45 days.

What has your biggest challenge been in India?

Supply and manufacturing. In our latest Redmi 4A sale, we sold 2,50,000 phones in just 4 minutes. This also means a lot of users who want to buy our products could not get it and had a bad experience. So, we have already opened our second factory to ramp up manufacturing and solve supply issues so users can buy our products easily.

Xiaomi is facing challenges to overall growth in India. Are these similar to your China experience?

If we compare India and China growth, the success is very similar to what we have seen in China in the first two years. The business model we innovated is very effective when ecommerce is growing rapidly. Maybe in a couple of years, we may face challenges in India similar to the ones we face in China today.

The biggest challenge is that online market share compared to overall market share is actually rather limited. In China, ecommerce is very established, but unfortunately the whole ecommerce market share is just 10% of goods sold in China. In India, after we achieve more than 50% market-share in online space, the question is how to do the same in offline.|

Is this a global realisation that online has peaked, underlining offline's growing importance?

I don't look at it that way. I believe in past 20 years, ecommerce is a great invention. But, it cannot completely replace offline. Both have their own advantages. The challenge is how we use the internet way of thinking and technology to improve offline efficiency.

Last year, we coined a term -new retail. Basically, it is using the internet way to do offline. We can move value for money items from online and sell it offline at the same price. We experimented with a new model called Mi Home in China last year and achieved great success.We will try the same in India and think about new retail too. In China, we name this method Internet Plus.

Can you explain the Internet Plus model? How do you get efficiencies?

A lot of services on Internet are free, but if the user is not satisfied with them, it's meaningless. We are pricing products at cost, so if we do not have loyalty and the user is not happy, what do we have? For example, we only have about 10 categories and hope each SKU will sell great volumes. This way, manufacturing, repair and warehousing cost is low. Then we use ecommerce. We can easily price products at half the price of what our competitors are selling. We use the same way of thinking and apply it to offline ­ our retail store in China called Mi Home is 100% operated by us at almost the ecommerce efficiency.

When can we expect to see the first of Mi Home stores in India?

We are experimenting and thinking.One key concept about the internet way of thinking is you need to experiment, get feedback and then iterate on the model. If we test and it works well, then Mi come can be an inspiration to India's retail economy.

Is the 50-50 onlineoffline channel a goal for India as well?

In India, we need to first focus on how to get 50% market share in online. Currently, this is more than 30%.

What about exports from India?

It is a possibility but even today we are running out of stock very quickly in India. We need to fulfil demand from Indian consumers before we consider exporting.

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