Xiaomi’s success may have also been its downfall

Xiaomi has had a lot to boast about over the last few years, and it’s certainly taken every opportunity it’s had to do just that, but things were a lot different last year. Everything started off normally, with Xiaomi boasting that it had sold more than 61 million smartphones in 2014, and expected to sell at least 80 million in 2015, but then the company went quiet. Its conspicuous silence raised some suspicions, and when the company finally started talking about its sales again, all it really said was that it no longer considers sales numbers to be important. Obviously that was just an excuse for Xiaomi to keep its sales numbers a secret, because it wasn’t even able to meet the low end of its 2015 sales goals. 

At the start of 2015, Xiaomi co-founder Lin Bin rung in the new year with a lengthy open letter that celebrated two major milestones: The company had sold 61 million smartphones in 12 months, and it had lured $1.1 billion from investors. Xiaomi is starting 2016 with more humility. After four years of surpassing nearly every sales benchmark it set for itself, the Beijing-based company is now breaking with tradition by declining to reveal its annual smartphone shipments, most likely because it didn’t hit its goal of selling 80 million. After correctly predicting the smartphone industry’s price war, and creating a groundbreaking business model, Xiaomi has become a victim of its own success. The company increasingly looks like every other Android phone maker out there—because its competitors have successfully copied Xiaomi in a race to provide the cheapest, fastest-to-market device out there. Xiaomi’s executives, led by charismatic co-founder Lei Jun, correctly bet that most consumers would view Android smartphones as largely indistinguishable from one another, leading to a price war. In order to keep prices as low as possible, Xiaomi pioneered the idea of selling phones primarily online, directly to consumers. The company relied on a flash sales model to help predict demand (and build up hype), and sold just one or two devices to benefit from bulk pricing on components.