(Chinese Version)

“I decided to found Smartisan not to earn a fortune, but to make friends,” Luo Yonghao, CEO of Smartisan Technology, explained when introducing Smartisan Smart Air Purifier at the press release of Jianguo Pro 2. The air purifier was widely interpreted as a sign Smartisan would expand its product line. Recently, it was reported that Smartisan was looking for third-party brands in an attempt to build the “Smartisan Craftsmen Alliance”.

For a discerning eye, it is quite obvious Luo is trying to follow the path of Lei Jun and build an ecosystem similar to that of Xiaomi, at least from the aspect of taking advantage of the brand popularity and marketing. Will Mr. Luo succeed in this “adventure”? What’s missing in Mr. Luo’s Smartisan, compared with Xiaomi?

It is known that smartphone business is the center of both Smartisan and Xiaomi. However, the positioning, performance and influence of their smartphone business determines that their ability to expand product line will be different. Although revenue from Xiaomi’s ecosystem has reached RMB 2 million in 2017, and some of Xiaomi ecosystem products have grabbed the first place in according markets, smartphone business remains the center of Xiaomi, as Mr. Lei recently claimed.

From the aspect of smartphone sales, while Smartisan sold 2 to 5 million smartphones in 2017, Xiaomi’s smartphone shipment reached 92.4 million for the past year, according to IDC. In other words, there’s huge gap between Xiaomi and Smartisan in terms of smartphone sales.

Why is smartphone sales so important? Well, for smartphone makers, smartphone sales determines the sales of sideline products, to a certain degree. Take one of the most popular Xiaomi sideline products, Xiaomi Smart Band (a smart wearable device made by a company Xiaomi invested in) for an example, its sales volume reached 11.6 million by September. Therefore, it’s reasonable to predict that its annual sales volume might reach 15 million, roughly 16 per cent of that of Xiaomi smartphones. The figure will be even lower when it comes to other less popular sideline products, such as Mi Power Bank, Mi Air Purifier, Mi Floor Sweeping Robot, etc. From this aspect, it’s no easy to predict how many sideline products Smartisan could sell.

However, it’s worth noticing that Xiaomi’s success has to do with the high coupling effect and high quality-price ratio of its sideline products. Since foundation, Xiaomi is known for its high quality-price-ratio products. Although its sales plummeted for the past two years, its persistence on quality-price ratio never changed. In fact, high quality-price ratio is also the very reason Xiaomi succeeded in the Indian smartphone market.

Smartisan's rumored $ 110 electric water heater

Yet, so far, it seems that Smartisan’s sideline products will have neither of these advantages. For example, it is revealed that Smartisan was busy developing an electronic water heater to be priced at RMB 699 (around $ 110). If true, I really doubt who’s going to buy this product. After all, Xiaomi’s similar product is charged at only RMB 199 (around $31.4).

After winning the market and users with its clear brand and product positioning, it’s reasonable Xiaomi carries on its ideas to other sideline products. Similar with Xiaomi smartphones, Xiaomi’s sideline smart lifestyle products also feature high quality-price ratio.

As for the close relationship between Xiaomi’s sideline products with its core business, it’s worth noticing that all these sideline products are integrated to Xiaomi’s smartphone ecosystem through Xiaomi smartphones or a variety of APPs. In other words, to enjoy more customized service, users will have to own a Xiaomi smartphone or download the respective APPs. As a result, there’s huge synergistic effect between Xiaomi core smartphones business and its sideline business.

In comparison, Smartisan didn’t have a clear brand positioning and a huge enough user base. Therefore, the attractiveness of Smartisan’s sideline products can be quite limited.

Although Smartisan has always been boasting its high-end design and exquisite craftsmanship, its smartphones are priced at the mid and low-end price point, while its best-selling smartphone model is priced at RMB 1,000 price point. However, it’s worth noticing that sales of even Smartisan’s best-selling smartphone is quite insignificant in the entire Chinese smartphone market. In other words, Smartisan is at a marginalized position in the Chinese smartphone market, in any account.

Without a clear brand positioning and a solid user base, it’s almost like daydreaming when you decide to follow suit and also develop sideline products, especially over-priced high-end products.

For third-party brands, Smartisan won’t improve their brand popularity and publicity much. Instead, participation in Smartisan’s Craftsmanship Alliance will only confuse users more about their brand and products. Since customers can’t have a clear impression of Smartisan’s products, they can’t relay that impression to its sideline products, which will ultimately affect their consumption decisions.

To wrap up, without a clear brand and product positioning, Smartisan still has a long way to go to catch up with Xiaomi. In this case, it’s hard to understand why Smartisan wants to follow the path of Xiaomi and form an alliance too. After all, it might only end up with something that look similar on the surface but operates entirely differently underneath.

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The article is published with authorization from the author @Sun Yongjie, please note source and hyperlink when reproduce.]  

 Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.