Time ago the search for physical space to start a business led to certain problems: it was very expensive, it was necessary to find a privileged location… That is why online markets have proliferated so much, being key factors for the success of massive businesses such as Amazon, Rakuten or Aliexpress. However, the ease of creating an online business has made the competition greater than ever. New terms like SEO or SEM are playing a leading role the new advertising tactics of the businesses.

It is an evidence that online businesses are growing exponentially. As consumers, we are updating ourselves as technology evolves and, as a result, the proliferation of this type of business is increasing unstoppably. The reasons are obvious and varied (The Telegraph, 2016): Larger variety of products; Total availability: 24 hours a day, 7 days a week; usually lower prices; possibility of knowing the opinions of other clients…

The traditional economic model has normalized that the big brands have retail stores. With the arrival of the digital world, most of these stores have developed online platforms to sell also through e-commerce. This format is already more than a trend, as the majority of consumers in UK prefer to buy online (Empathy Broker, 2018). However, there are times when the business seems to take the opposite direction: instead of starting as a physical store, they find its origins on the internet. This is the case of my favorite brand, Xiaomi. Or almost.

Just a short introduction:

Its evolution from start-up to one of the leaders in its sector is very meritorious. It has been considered as the fastest growing smartphone company last year (IDC, 2018), it has come to overtake its competitors in important markets such as India (India today, 2019) and it is foreseen that its sales development will be put to the same level than Apple (My Online Ca, 2015). For that purpose, Xiaomi began its journey by selling in its own digital store. In fact, in 2012 it sold 72% of its mobile devices online (Tech Crunch, 2012). After drawing the attention of innovators and early adopters on Internet with undeniable success, the firm wanted to take a step forward. Therefore, since 2015 Xiaomi authorized stores have appeared, from China (Android Headlines, 2015) to United Kingdom (Xiaomi Today, 2018).

Xiaomi‘s strategy with retail stores is certainly smart. The company does not create its own spaces but gives licenses where they can sell their official products. Therefore, Xiaomi Stores (also known as Mi Stores) are places where Xiaomi products are sold, but they are not owned by the proper company. Thus, this chinese company has a system of distributors that act as a franchise (Xataka, 2018). There are some examples, like the first Mi Store in Qatar, which was launched in partnership with its local distributor: Intertec Group (Gulf Times, 2018).

This way of acting has obviously reduced the overall expenses of the company. Added to this, there is the company’s famous 5% profit margin rule (Asian Review, 2018). In this way the company tries to spread the idea that the product will have great quality for reasonable prices while saves costs in other areas (ownership of physical places, online selling, capping profit margin in favor of quality).

As I mentioned before, the innovators and early adopters provided a great reception to the brand. The expansion from digital market to physical occurred when the number of early adopters had evolved to early majority (that is, those who are predisposed to take something new when it is mature enough). With this, a community that loved the product appeared.

According to Olandres (Yugatech, 2015), there are reasons for the creation of these physical stores that consequently have received positive feedback by Xiaomi users. I would like to highlight the following ones:

Low online adoption

Consumer Confidence

Better Availability and Customer Reach

Thus, the firm faces several factors, such as provincial fulfilment (couriers do not deliver to some remote areas), low credit card penetration, and low internet penetration. In other cases, potential customers can be afraid of online transactions (SC Media, 2014) or simply want to inspect the gadgets before buying. With this strategy, Xiaomi ensures that its market also reaches the late majority and the laggards.

Even seeing how much it has expanded, Xiaomi is essentially a result of the digital age. This is demonstrated in its beginnings and in the huge amount of sales it continues to have in the digital market. It seems that with the rise of technology, the importance of the digital medium will remain outstanding. So, mixing online sales with projects to continue selling in retail spaces like IKEA (Android Pit, 2018), the future of Xiaomi is presumably fascinating.

While writing this article I have asked myself several questions. In a world vastly digitalized, large companies still find gaps where traditional media are still valid. As a conclusion, my question would be the following:

Will online commerce really destroy physical stores?

Word count: 829

References

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