Xiaomi targets 10bn yuan revenue from 1,000 new offline stores

Chinese smartphone maker Xiaomi has pinned its hopes on offline sales with a plan to open 1,000 brick-and-mortar stores over the next three years, targeting 10 billion yuan in revenue from this channel, its founder and chief executive Lei Jun said on Wednesday.

Xiaomi aims to boost the number of its physical stores, called Mi Home, to 200 this year from 51 at the end of last year, Lei said at a forum in Yabuli in the northeastern province of Heilongjiang.

“I am confident that each of the offline stores can achieve sales of 10 million yuan [per month],” he said. That means Mi Home retail stores are expected to contribute 2 billion yuan (HK$3.39 billion) in sales per month.

Lei said 2016 was a tough year for Xiaomi as he was “confused” about how to expand into more innovative sales channel from just e-commerce.

Traditionally, running brick-and-mortar stores will inflate costs and erode profits, making it hard to offer high quality and inexpensive products to customers, Lei said. The toughest part is therefore to build new stores with high efficiency to control costs, he said.

“Unlike other chain stores, Mi Home stores are all self-operated by Xiaomi. At the end of last year, our 51 stores were able to achieve sales per square metre of 260,000 yuan,” he said.

Lei told his staff last month that Xiaomi has targeted 100 billion yuan in revenue this year, which was subsequently described by market watchers as unrealistic, with many sceptical it was achievable.

However, Lei said he is confident that Xiaomi can meet the target.

“Considering Xiaomi’s foundation, this small target is not too difficult to achieve. I am more concerned about how to make our foundation more solid,” he said. “One of the challenges for Xiaomi is that we need to make essential adjustments after rapid growth.”

Despite China’s continuous growth in e-commerce, companies have been putting increased efforts into expanding offline channels, or integrating their online and offline businesses.

E-commerce giant Alibaba Group founder Jack Ma Yun has said that e-commerce had become a “traditional business” which would soon disappear. A new retail model which integrates online and offline, as well as logistics and data across a single value chain, would be the next trend, said Ma, who first raised this idea in October last year. Alibaba owns the South China Morning Post.