This small summary will analyze the opinions, attitudes and behaviors of the U.S. millennials towards the smartphones and new brands in particular based on different secondary sources, which will help to make the conclusion whether the decision to “go or not go” with a launch of Xiaomi phones in the US.
Millennials is an increasingly important segment for all the brands in the United States. Nielsen says there are about 80 million of millennials in the U.S. and they have $200 billion of U.S. buying power, which is huge, however, the mature consumers have $3.2 trillion buying power. Millennials outnumbers the segment of baby boomers (about 75 million people), and their number is growing very fast. Euromonitor International suggest that growing urbanization in the U.S. led by millennials generation means the growing demand for tech products as the way to interact in the large cities. Meanwhile, the sales of consumer electronics in 2014-2015 have increased substantially compared to the decrease witnessed in 2013-2014, however, the signs of maturation of many markets, including smartphones, become more evident (Euromonitor International). The reasons is that consumer electronic is a very competitive market in the U.S., and the large and established brands dominate different segments; Apple (22.2%) Samsung (15.4%) and LG (7.5%, see Appendix B) have the highest brand recognition and they capitalize on this brand recognition in different segments of smartphone market, including low-end (Euromonitor International). Euromonitor International notices that in 2010-2015, the volume sales of smartphones has increased by almost 180%, achieving the level of about 144 million units in 2015; the level of penetration is 174% among households. However, the level of sales of portable consumer electronics has stagnated, because smartphones have destroyed a number of categories of products, such as portable music players. However, as millennials are open to new brands and experiences, the market is still open for new innovative products, as it was in the case of GoPro in camcorders or Fitbit in wearable electronics (Euromonitor International). Moreover, the new opportunities appear with wearable electronics, especially because Apple Watch kept the category in the public eye in 2015 (Euromonitor International). Furthermore, the outlook is generally positive, as about half of millennials plan to buy a new smartphone or try buying wearable each year (as for 2014-2015) (Shelton, Appendix B).
The recent 2016 survey revealed that brands no longer treat millennials as a homogenous group (AdvertisingAge, 2016). Instead, they focus on very creative and sophisticated targeting based on their interests and characteristics, however taking into account some common characteristics, such as tech-savviness. For example, XiaoMi might be interesting for a large share of truly tech-savvy millennials (about 12% according to Euromonitor reports), but might not be interesting for other groups. However, the U.S. millennials still have common characteristics, or, at least, the tendency towards particular characteristics. Hence, it will be useful to consider the trends among all the millennials when making the decision over the entrance of XiaoMi into the U.S. market.
Millennials tend to be mobile, they are 110% more likely to leave a job after 24 months of work (compared to Generation X), while more than half want to live in big cities; however, the majority of them are not confident in their financial future (Nielsen). This means they might be prone to buy the products with the best value/price ratio at some point. With the rise of such services as Uber and Lyft and other non-transport services, all using smartphones to develop an entire competitive industry, Euromonitor International believes that producers of mobile devices should focus on portability and urbanization to win the millennials on-the-go consumer base. On the other hand, millennials’ has much higher expectations of products and services, and they have almost zero tolerance for products that have glitches; they are also very skeptical, even when the reviews are from trusted sources (Nielsen).
Millennial are ready to spend on the items they believe are crucial for them, this includes electronic and mobile devices; about 95% of surveyed Millennial own smartphones while many use mobile internet to search for information about products while social media can deepen their relationships with a brand (Nielsen). Hence, smartphones are crucial for millennials, and they are ready to spend a considerable share of their income to have the best flagship phone, which possibly weakens the positions of XiaoMi. On the other hand, the devices might become the best second phone, especially for those having iPhones but wishing to play with Android devices. Solomon cites a study according to which nearly half of millennials believe losing their smartphone is a more severe loss than losing their car; many call the situation of losing access to their mobile devices as a “tragedy”. However, Solomon also warns about the dangers of generalization; however he also notices that smartphones can be regarded as a “new catchall” for millennials, this generation “rarely smokes but smartphones replaced smoking as the thing to do in those lonely moments.” Another important thing to notice is the focus on socialization and sharing when millennials buy and consume products and services; they ask for advice their online friends and share their experiences in their social network profiles and blogs (Solomon).
Despite older generations are now also using online shopping and online reviews to search for products, digital-native millennials are the majority among the shoppers in many categories, including electronics (Nielsen). While the internet is the major source of information for them, nearly half of millennial regularly watches TV, including TV news (Nielsen). However, XiaoMi’s business model is to avoid any expenses on advertising. This might good in the case of targeting at the millennials in the U.S. Millennials as they also trust the online and mobile formats of retail, however, most of them prefer the multi-channel approach in searching for products and shopping (Nielsen). Moreover, Millennials trust online opinions and reviews (70%), though the level of trust is lower compared to the recommendations from friends and acquaintances (85%) (Nielsen). AdvertisingAge notices that Black Friday deals for electronics are particularly successful among the millennials. This might be a useful strategy for XiaoMi, considering the fact that launch of the U.S. version might not be earlier than in late 2016.
The Internet retailing becomes the most important retailing channel for millennials generation as a considerable share of consumers first view electronics products in brick-and-mortar stores and at the showrooms and then buy them online due to convenience and lower prices; established retailers try to improve the situation by offering multichannel retailing and price-matching practices (Euromonitor International). At least two-third of them shops online to search for hard-to-find items (Nielsen). This is true for many U.S. online reviewers of XiaoMi’s products who ordered them online despite the lack of the official distribution in the United States. In general, the internet retailing has reached the level of US$270 billion in 2015 in the U.S. consumer electronics accounted for about US$40 billion of sales; while millennials remain the largest online segment (Euromonitor International). These facts are particularly pleasing for XiaoMi, as its business model promotes selling products only online as the measure to push the costs down. However, it might be useful for XiaoMi to open one or two showrooms in the United States to make the local young consumers acquainted with the products in the real life. Meanwhile, Euromonitor International suggest that the entrance of new market players, especially Chinese, is hindered by the structure of the U.S. smartphone market, as the major share of smartphones is solder via telco-operated stores such as AT&T, Verizon, and Sprint; however tech-savvy millennials are more interested in buying contract-free devices. XiaoMi's affordable prices result in the retail price that is still attractive even compared to many prices subsidized with mobile contract plans offered on the U.S. market (Teck). Moreover, Teck notices XiaoMi would probably use the tactics of adjusting the features and characteristics of its main models towards each new market they enter, hence their attractiveness might be great not only because of the low prices but also because of the higher value to the targeted groups.
More than 65% of millennials surveyed state they will value the brands of the companies that are famous for their CSR programs (AdvertisingAge, 2016). It is not the strongest side of XiaoMi, along with other Chinese companies, as company closely cooperates with Foxconn. However, the company is known for promoting social initiatives in India, along with the efforts to build the phone targeted to Indian customers within the country. One possible way to improve the image among the U.S. customers is to move some of the manufacturing capacities to the United States to use the label “Assembled in the U.S.” for all the XiaoMi’s smartphones sold in the United States. In addition, XiaoMi would have to increase own sustainability similarly to a number of prominent American companies, one example is Apple public commitment to the environment and social responsibility. In addition, Nielsen notices millennials generation places a higher emphasis on health attributes of the products as compared to other generations (33% vs. 25% for the older generation); 29% are ready to pay a premium for these attributes. The very affordable XiaoMi’s wearable starting at the point of $15 in China, which have a number of functions that work best in pair with the brand’s smartphones, might become a very successful product in the United States.
XiaoMi's business model and value proposition resonate with the characteristics of millennials as the consumers of smartphones, they are interested in the low-priced tech which does not mean low-tech and compromises (Teck). AdvertisingAge notices millennials are not interested in being engaged with a product and brand not buying them; the brands should make the consumers their fans and constantly refresh and improve product line and value offered (AdvertisingAge).Hence, another important factor that also resonates to the U.S. millennials is the lack of any branding and advertisements but the focus on the word-of-mouth promotion and using the opinions of tech-savvy consumers to increase the brand awareness; social networks are important for MiFans acting as brand ambassadors (Teck). However, the readiness of U.S. consumers to participate in MiFans given their individualism is questionable. What is more important, the part of the XiaoMi's brand DNA to adapt the company's products, marketing message, and campaigning to a particular target segment (Teck).
Taking into account the significance of opinion leaders in promoting electronic devices among millennials, it is important to analyze what are the opinions of the brand among the U.S. consumers, using the analysis of user-generated content. For example, if analyzing the comments on The Verge, a prominent media covering IT industry, it can be suggested that considerable part of the savvy users know about the brand. A number of comments reveal that users believe that under-rated as their build quality smartphones often on part with flagship phones. Some of the comments praise XiaoMi for an active work on feedback and testing community with many developers. However, a number of comments notice that Moto G and One Plus One smartphones might offer greater value for the U.S. consumers, taking into account both have a well-known stock Android and OxygenOS respectively. A number of comments tell that XiaoMi’s phones are not inspiring according to them and they are "nothing more than a run-of-the-mill Android phone but cheap," however other comments praise XiaoMi for promoting the strategy of selling the devices for "ridiculous profit margins". Meanwhile, several comments highlighted the fact that it would be difficult for XiaoMi to operate on the western markets because they might be "they’ll be sued to oblivion" for copying the ideas from flagship devices of well-known brands. Similarly, while Amazon.com does not have many reviews of Xiaomi smartphones, as majority of the reviews come from Xiaomi Action Camera competing with GoPro and Xiaomi's wearable devices, most of them are positive about the phone (sold via third-party unofficial resellers) and the most prominent comments include the notion that the brand offers the “best bang for your bucks”.
It is evident that XiaoMi smartphones are not the direct competitors for the Apple and Samsung's flagship models, as affluent buyers are ready to a premium for the products of well-known brands; XiaoMi's strategy is to target the younger consumers, and Millennials in particular, as many of them cannot afford flagship models (Teck). Another reason is the millennials generation ready to try new brands and products, even if they have money while older consumers tend to stick to established household brands, be it Apple, Samsung or Sony (Teck). Teck notes that the United States has a relatively high share of millennial generation in the overall population, however, the share is lower than in many emerging markets, such as India (about 40% compared to 66% in India, where XiaoMi has launched few products, see Appendix C).
In conclusion, the analysis has revealed that it might be a good decision for XiaoMi to enter the U.S. market, as U.S. millennials have a number of traits which might be in line with the XiaoMi’s value proposition. However, given the highest competitive pressure of the U.S. market, possible complexities in terms of the legal framework and higher spending power of the U.S. consumers, it is not recommended for XiaoMi to enter the U.S. market in the near future. However, offering the opportunity for interested U.S. consumers to buy XiaoMi’s products online from abroad without additional charges might be a good compromise.
Works Cited
Quantitative Sources:
AdvertisingAge, “#Millennials, 2016”. Web. 26 January 2016 <http://adage.com/tag/millennials/64>
Euromonitor International, “CONSUMER ELECTRONICS IN THE US”, 2015. Web. 26 January 2016 <Euromonitor Database>
Nielsen,. “Category: Millennials”, 2015. Web. 26 January 2016 <www.nielsen.com/us/en/insights/news.html?sortbyScore=false&tag=Related:Millennials>
Shelton, Brent, “GOING MOBILE: SMARTPHONES AND WEARABLES LEAD CHARGE [INFOGRAPHIC],” 2015. Web. 26 January 2016 <https://www.fatwallet.com/blog/smartphones-wearables-infographic/>
Qualitative Sources:
Teck, Loo Wee, “What Other Companies Can Learn from XiaoMi”, 2015. 26 January 2016 <Euromonitor Database>
Solomon, Micah, “2015 Is The Year Of The Millennial Customer: 5 Key Traits These 80 Million Consumers Share,” 2015. Web. 26 January 2016 <http://www.forbes.com/sites/micahsolomon/2014/12/29/5-traits-that-define-the-80-million-millennial-customers-coming-your-way/#6969af7b2a81>
Consumer feedback sources:
Amazon.com, “Xiaomi”, 2016. Web. 26 January 2016 <http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Daps&field-keywords=Xiaomi&rh=i%3Aaps%2Ck%3AXiaomi>
The Verge,. “Xiaomi”, 2016. Web. 26 January 2016, <http://www.theverge.com/search?q=Xiaomi&type=Comment>
Appendix A
Appendix B
Appendix C
