Why Xiaomi Goes Out-of-Stock So Often?

xiaomi-mi-brandThe Chinese handset brand Xiaomi, pronounced as Shao Mi, commercially launched its Mi3 smartphone in India on July 22 and was made available exclusively on FlipKart. Within minutes the smartphones went out of stock. After one week, it was again made available on July 29 and it went out of stock in ‘5 minutes’, claimed Xiaomi’s official Facebook page. Once again,  the Mi3 was put up for sale on Flipkart on August 5, and this time it went out of stock in just ‘2 seconds’. The official Facebook page of the company mentions the next sale is on August 12. Who knows, with this speed of getting ‘out of stock’, the Xiaomi smartphone might vanish from the e-retailer’s shelves in some nano seconds this time!

This trend is phenomenal, it was not even witnessed when the first iPhone was launched in 2007.

Does it baffle you? Don’t you think, why this phone model is selling like hot cakes? What is in this phone? Or, don’t you think, if this is the kind of demand for the phone in India, then why the company does not ramp up its inventory and put more stock?

We will answer you. When the Xiaomi Mi3 went out of stock the second time on July 29, I stumbled upon a satirical Facebook post that said, “Bring a Chinese phone to India, tie up with Flipkart. Put just one phone in the stock, buy it yourself and then announce ‘Out of stock’. The media will give you headlines”. The answer to all of the above questions lies somewhere in the FB post.

Though the company is not buying its own stock as mentioned in the FB post, but it certainly puts a very limited inventory on Flipkart, and that too deliberately. Not that they do not have enough supply.

Xiaomi’s Strategy

Infact, this has been Xiaomi’s strategy since their inception four years ago. Since beginning their distribution channel has always been the e-commerce platform. The Chinese firm does not distribute through physical stores, in any of its markets. And everywhere, they have deployed the flash sale model.

“The same strategy was executed by Xiaomi when they entered Hong Kong, Singapore and Taiwan market. It helps them in accurately judging the demand and they don’t have to carry excess inventory leading to lot of saving,” says Neil Shah of Counterpoint Research, a market research firm.

One more aspect of their market strategy is to create market buzz. Xiaomi, it appears, believes in the saying -any publicity is good publicity.  Since its entry to India on July 15, some way or the other, it has succeeded in buying ample mind space among the telecom media.


Flipkart advisory on Xiaomi Mi3 purchase

A small example, before the Mi3 sale for the second time on July 29, Flipkart sent out a customer advisory-cum-reminder note to all of its registered users. It said ‘the next sale is on 29th July at 2 PM’. What is more interesting is, it advised the prospective buyers to login to the Flipkart website or app 2-3 hours prior to the sale time. And the entire process of login-in to finalise the purchase would complete by 11.59PM on July 30th, the next day, though you do not have to be logged in throughout the entire process.

What it essentially meant is, the intending buyer would be thinking about the brand or his Mi3 smartphone for full 3 days- staring from the day he gets the Flipkart advisory till the closure of his purchase. Secondly, everytime the stock gets vanished, irrespective of the units in the inventory, media would make headlines. And it did. Prominent Indian newspapers including the business dailies gave enough coverage to this incident, though the total number of units that went out of stock was in just some thousands, 15,000 in the maximum case.

“From a brand perspective, directly or indirectly it helps the company and people get attracted by the buzz created by the media,” adds Shah.

Whatever be their business strategy, one thing about the Xiaomi Mi3 can not be debated. It is an awesome device at that price segment. Even if we take away the pricing element, the quality of the phone, be of its hardware or software, is certainly that of word class.  (We are currently reviewing the product, a detailed review will follow shortly.)

“Xiaomi has earned good press. the mobile specifications are at a cheaper cost vis-a-vis its competitors and so helps in getting early adopters. Flash sales is the best sales as it helps in creating artificial demand,” adds Shah of Counterpoint Research.

And its just not Xiaomi that adopting the model of flash sales. Chinese behemoth, Huawei is doing the same for one of its brands -Honor. One more Chinese firm Jiayu is also deploying flash sales for a brisk sales but it has a different model. Instead of doing the same online, it sells its phones on first-come-first-serve model.


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