Will Xiaomi Be China's First Tech Superbrand?

Xiaomi mascot Mitoo [L] dreams of overseas market share.

The business press is all agog over the emergence of Chinese mobile phone maker Xiaomi. Supposedly, we are on the cusp of a Chinese tech superbrand competitive with products from anywhere else in the world. Naturally I'm a bit skeptical. Aren't these Chinese the same folks who had to buy the ThinkPad name from IBM to be able to sell PCs abroad? Outside of China and B2B circles, who's heard of Alibaba and Baidu? It doesn't really count when you buy off brands others have developed or you're only big in China. Admittedly a nation of 1.3 billion is a pretty big market, but being big there doesn't make you a household name worldwide.

Enter Xiaomi. The press keeps drawing comparisons between its founder Lei Jun and Steve Jobs--he is an engaging salesperson for his products too--though he'd rather be his own man. Personally, I'm taken by their mascot Mitoo who sports an army hat bearing a red star, of all things. Let's just say Mitoo's political affiliations are being toned down for overseas markets where Communist paraphernalia is not quite as welcome (such as Taiwan). Given how racist-protectionist Americans are about foreign technology firms with Communist Party affiliations, I shudder to think how Xiaomi's reception will be Stateside if its mascot remains a red booster! In any event, some of the hype I cannot understand. For instance, they claim Xiaomi's exclusively online retail model is unique. Has Businessweek ever heard of Michael Dell?

Xiaomi’s real invention is its business model. It sells online, never in stores, and avoids conventional advertising, devoting only about 1 percent of its revenue to marketing. (By comparison, Samsung earmarks 5.4 percent.) Instead, the company relies on China’s social networks, Weibo and WeChat, and the free press Lei gets as a national tech hero.  

There's no doubt about it: to be able to boast that Xiaomi has become a global brand, it must crack Western markets. Otherwise, it will be regarded as a China-only phenomenon. For this mission they've hired former Google man Hugo Barra:

On the 11th floor in the main building, in a corner office, is the realm of Hugo Barra, the Brazilian-born Google executive who made news by joining Xiaomi in 2013 to lead its overseas expansion. As he talks, Barra paces his spare office, which overlooks the old tenements that once housed the workers of the demolished wool factories. Barra’s shelves are stocked with Mitoo dolls and other knickknacks. Evidence of his five-year tenure at Google hangs on the walls, including a framed Pac-Man doodle that once appeared on the search engine’s home page.

Barra is naturally bullish about the company’s prospects abroad, and one new weapon is the $130 Redmi smartphone, which Xiaomi introduced last year alongside the pricier Mi 3. The phones look alike, but the Redmi sports an inexpensive processor from Taiwan’s MediaTek. Barra even mulls the prospect of a $50 smartphone that might one day upend the economics of mobile. “I don’t think it’s possible today, with the quality of software and hardware that we would expect,” he says, “but I expect that could change over time.”

Xiaomi has to show it can use Western social media tools such as Twitter (TWTR) as well as it has exploited Weibo and WeChat. It must extend its supply chain across oceans and adjust its business model to countries where carriers sell handsets and customers aren’t accustomed to buying phones online. It must also overcome the association that Chinese brands have with piracy and counterfeiting. And Xiaomi will have to learn to do with less free, worshipful publicity. “Lei Jun is a relative nobody outside China, so leveraging his fame may be a little bit more difficult to do,” says Michael Clendenin, managing director of China’s RedTech Advisors. “Guerrilla marketing won’t be as easy.”

To get props as China's first tech superbrand, America awaits as the world's largest consumer market. Otherwise, Xiaomi will only be regarded as a mainly Chinese phenomenon a la Alibaba, Baidu, etc.