Buying a franchise makes sense for someone who does not want to build a business from the ground up. Franchisees gain access to a model that works at multiple levels – marketing, pricing and branding. As the business already possesses demand for its products, a franchise can make requisite investments and cash in on demand for the franchise's products. Here is a case for the Xiaomi franchise. Read on.
Did you know?
The consumer electronics market in question here includes smartphones, telephones, smart speakers, radios, television sets, computers, laptops, etc. and excludes household appliances such as refrigerators, washing machines, etc.
What makes Xiaomi/Mi franchises a good investment?
Global Consumer Electronics Market
The value of the global consumer electronics market is set to witness a compound annual growth rate (CAGR) of 1.82% from 2022 to 2026, according to market research firm Statista. The market's revenue in 2022 is anticipated to touch ₹75296 billion.
The average volume per capita in 2022 is expected at 1.11 pieces. By 2026, volume is anticipated to touch 8.94 billion pieces, and volume growth in 2023 is projected at 1.6%.
Indian Consumer Electronics Market
The value of the Indian consumer electronics market is anticipated to grow 1.6% year on year to approximately ₹5271206.5 trillion, with the CAGR for this market pegged at 5.76% in the period 2022 – 2026. Telephony as a segment is anticipated to be with the largest revenue in 2022.
Revenue per capita in 2022 is projected at ₹3,765.17. Volume per capita is projected at 0.61 pieces in 2022, with the entire Indian market slated to see 2.5% volume growth in 2023. By 2026, the volume is projected to total 937.6 million pieces.
The Future of the Market
The global consumer electronics market is in transition as conventional products are set to become redundant with consumers adopting smart electronic devices. Smartphones claim a major share of the entire market as Samsung and Apple flex their leading positions by reusing their technologies in other segments. Huawei and Xiaomi are among successful upstarts who are challenging the dominance of Samsung and Apple, which are seeing record increases in sales of smartphones, among other electronic products.
The main drivers in the consumer electronics market are concepts such as the interlinking of objects and smart cities, fostered by the proliferation of 5G networks. The development of the Metaverse by adopting virtual reality and integrating virtual reality with gaming will create entertainment where the real and the virtual are merged.
The Xiaomi Franchise
Now that you've seen the big picture in consumer electronics and examined Xiaomi's financials, it's time to consider the terms of the Xiaomi franchise.
Philosophy and Strategy
As part of its strategy for the Indian market, Xiaomi is targeting penetration from tier 1 cities through to small villages. The company is looking to bring together young entrepreneurs and fans of the Mi brand to make this vision a reality. This franchise program is looking to provide Indian youth with entrepreneurial opportunities.
Xiaomi is looking to market not just its smartphones but also other products within its ecosystem to rural customers at a reasonable price point. The company has committed to showing no bias toward large incumbent mobile partners, and the firm is looking to get access to fresh talent. Xiaomi is looking to sell its entire product range at stores and will aid in launching a Mi store that breaks even soon and provides a robust return on investment.
Application and Assessment
If you are interested in taking up such an opportunity with Xiaomi, fill out the online application form. What follows is the review of the application by a panel. If you clear this stage, you're in for a telephonic discussion, where you have to provide data points on the store you will operate. Once Xiaomi deems you are the right fit for the role, a franchise information packet is sent to you. This kit provides the business plan for the zone you are operating in.
Once you select the real estate for your store, the Xiaomi team will evaluate the store. After you clear this round, Xiaomi's finance team will provide its approval, in addition, to support where needed. It is when you will ink an agreement with Xiaomi, and the company will aid you with the store's launch.
Upfront Investments and Xiaomi Support
You will have to bring ₹12,00,000 to ₹15,00,000 to the table to take on a Xiaomi franchise. It is inclusive of ₹6,00,000 to ₹8,00,000 in stock investment, security deposit, fixture investment and civil investment. The retailer deposit will be returned after the store completes two years of service.
As part of its contribution to the venture, Xiaomi will invest in cladding and branding for the store. The company will also provide training, advisory, merchandising, product development, back-office support and financial support inclusive of bookkeeping, inventory audits, and financial summary reports to aid the franchise.
In the nine months ending September 30, 2021, Xiaomi reported a 38.4% year-on-year (y/y) increase in revenue to ₹2.94 lakh crores. Gross profit grew 71.5% y/y to ₹4.51 thousand crores, and operating profit rose 49.7% y/y to ₹2.25 lakh crores.
As per research firm Canalys, Xiaomi stood third in the global smartphone market in the third quarter, with a market share of 13.5%, as total shipments in the quarter totalled 43.9 million units. In September 2021, the number of monthly active users across the globe totalled 485.9 million users, up 32% on the year.
As of September 30, 2021, the company had over 40 crores of connected Internet of things (IoT) devices on its Artificial Intelligence of Things (AIoT) platform. Additionally, over 8 million users with five or more devices are connected to the company's AIoT platform. The figures mentioned above do not include laptops, tablets and smartphones.
Xiaomi is making inroads in the premium smartphone category and is enlarging its user base. In the nine months ending September 30, 2021, the company has sold close to 1.8 crores units of phones priced above ₹30,109 and ₹29,670, accounting for 12% of global shipments. Over 50% of buyers are new users on phones launched in 2021.
Xiaomi has over 10,000 offline retail stores in China as part of its omnichannel strategy. In 2021, the company boosted investment in research and development by 51.4% the year. During the year, Xiaomi unveiled its Loop LiquidCool Technology, which helps lower the rise in temperature. It also accompanies heavy usage, and Xiaomi smart glasses provide interactive features and display information in a visual setting.
Xiaomi is one of the leading consumer electronics companies in the world. So this franchise opportunity is a safe bet.