Xiaomi's e-commerce platform Youpin

Xiaomi's aspirations for extending the boundaries of its core business lies

Youpin is where Xiaomi's aspirations for extending the boundaries of its core business lies. Its product categories have been extended from core products smartphone and TV to ecological chain companies - air purifier and self-balancing scooters kind of products. Now, it has become an independent quality e-commerce platform selling a variety of products including mattress and leisure wear.

Xiaomi model

Hardware, new retail, and internet service are dubbed triathlon for Xiaomi. Specifically, new retail entails the online Xiaomi Mall, Xiaomi Youpin, and offline Xiaomi Home.

Youpin is just like the biggest outside circle of a funnel, which aims to pick the best SKU from the market for Xiaomi, according to Gao Ziguang, the vice president of Xiaomi ecological chain and general manager of Xiaomi Youpin.

Assuming there are 20 thousand SKU, Xiaomi will pick two thousand most suitable ones to Xiaomi Mall and introduce 200 of those to Xiaomi Home. Youpin is in charge of the long tail part.

Youpin’s SKU has expanded to 2.7 thousand in Q1 2018, which was expected to reach 5 thousand by the end of 2018.

Youpin was originally an e-commerce entrance on Xiaomi Mijia dock, not even a plan in the entire ecological chain. It was created to help users buy smartphone-related products and consumable items. Surprisingly, it made over 1 billion yuan in sales almost without any investment in the early days.

It came independently from Xiaomi’s internet of things (MIoT) team and had been developing into an independent quality retail e-commerce platform since December 2017.

Some still regard it as a part of Xiaomi that sells hardware. However, Youpin’s products have extended to 15 categories and 2.7 thousand SKUs, covering almost everything from intelligent hardware, life necessities, to food & beverage.

Xiaomi derived roughly 68.9% of revenues from smartphones in Q3 2018, with only around 9.25% from internet services. Its strong strength is not in technology but in business retail.

Leijun, Xiaomi's founder and CEO, once said that Xiaomi aims to be "MUJI in Technology", meaning it aims to sell affordable products of high-quality and unique designs. The advantage of such a model lies in supply chain management, unique design, and earning more profits by sales volume.

People used to simply attribute what Xiaomi has achieved so far to "Xiaomi Model". In fact, Xiaomi’s exclusive model is the most common business model, that is, selling products of highly cost-effective. It goes like selling smartphones, making best-selling products, and selling it at a price as low as possible.

In the same way as Youpin's slogan "heart-warming products with an honest price", indicating Xiaomi makes good products and only earns reasonable profits.

The "reasonable" here doesn’t mean that the final cost will be just 55 yuan in the case that the first cost is 50 yuan. The key lies in cutting intermediates as more as possible to improve efficiency and reduce cost.

Xiaomi takes high cost-effective as the core. That explains why lots of consumers can directly buy the products he wants without comparing the prices, be it online or offline, physical goods or virtual services. They have already developed trust in Xiaomi.

Xiaomi's cost-oriented pricing requires it cut other costs incurred by hardware materials. Not every manufacturer is able to do so and that's one of Xiaomi's strengths.

The best-selling products help to share the cost. In other words, when you produce a product that’s the best of its kind at the same level, you might receive thousands of orders for that product. With a large volume of products sold, the various costs including research and development would be shared.

For example, though the cost of production for Xiaomi wristband is nearly 70 yuan, the wristband is finally priced at 69 yuan. At last, it became one of the best-sellers. Consumers can see a big difference in prices while the products are the same in quality.

All rules are served for users' trust in Youpin. It means users trust Youpin that any product enlisted in Youpin is of high-quality, cost-effective, and easy-to-use.

Xiaomi, as a company, is not destinated to be successful, but Xiaomi model will obtain success finally, according to Leijun. It plans to apply the Xiaomi model to other areas given that it has been approved successfully in smartphones.

Xiaomi's empire of ecological chain companies

Selling affordable smartphone is not the final goal of Xiaomi. Leijun has started to establish the Xiaomi ecological chain since 2013.

Starting from producing smartphones accessories, for example, Xiaomi and Zimi Tech co-produced the first best-selling mobile power bank, the ecological chain has been gradually expanded into smart hardware related to home automation and lifestyle. Finally, those companies constitute Xiaomi's ecological chain.

Zimi Tech is one of the early share-buyers and mainly produces mobile power bank, which acquired several billion transactions in the first year.

Nowadays, Xiaomi has over 200 suppliers, 120 of which are ecological chain companies and another 100 of which are third-party companies.

Specifically, there are 26 ecological chain companies in daily necessities, which can be divided into everyday consumables, including towels, bedding, paper products, stationery, clothing, and shoes, and smart hardware, including electric toothbrush, children's toy, smart blood-pressure meter, and Bluetooth thermometer.

All those products converge upon Youpin and are finally sold at Youpin.

The company that produced Mi 90 points Trolley Case, one of the best-sellers, has gone public with a value of 6.7 billion yuan. By comparison, Dr.Bei is rather inconspicuous in selling dental surrounding products. It sold 240 thousand toothbrushes in seven days after crowdfunding at Youpin.

But the figure was huge for the founder Zhang Jun, who started smart hardware business at his 40s. It's not easy to obtain success in this field. Xiaomi ecosystem makes it easier for startups like Zhang Jun's.

Xiaomi spares no effort in investing and cultivating those companies who joined Xiaomi ecological chain. What it provides include, but not limited to, finding core team members, introducing Xiaomi's business management and product methodology, providing funding, and dealing with supply chain and quality management problems.

But all of that is not the most important. In Zhang Jun's eyes, Xiami leads him to make products for the mass population in China. In other words, to meet 80% of users' need. While most startups normally go to the opposite - to use an extremely innovative product to challenge the market and do big business at the beginning. That's not the right way.

Youpin's methodology