Xiaomi, a Chinese smartphone company established in 2010, is already being compared to the American giant, Apple. Xiaomi holds a firm grip within the Chinese market, having a 5% market share for the second quarter of 2013, exceeding Apple’s 4.8% for the first time.

There are two main reasons for Xiaomi’s success (outlined in this video):

1. Affordable Price and Unique Revenue Streams: Xiaomi sells its phones for $330, far cheaper than the $860 iPhone. Selling at a lower cost allows Xiaomi to attract a larger customer base. Xiaomi remains profitable nonetheless because it is able to cut costs through its short channel of distribution, selling directly to customers online rather than through retail stores. Likewise, Xiaomi has a unique revenue stream. Instead of gaining revenue solely from the sale of the phone itself, it also gains profit from selling services, such as apps and wallpapers, to its customers. This may not sound lucrative but Tecent, one of China’s largest internet appstores, sold $5billion worth of these services last year.

2. Strong Customer-Oriention: When it comes to its customers, Apple is very autocratic and product oriented, limiting user customization and feedback. Xiaomi on the other hand is more customer-oriented, getting feedback from customers on Weibo on potential features for its future models. This plays an important role in Xiaomi’s success, as it closes the gap between the company and its customers and thus builds customer loyalty.

Image: Xiao Mi’s boss Lei Jun holding a press conference on Xiao Mi’s new release, the Mi3

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