Xiaomi may follow Amazon model for its online portal in India


February 4, 2015

Anand Murali & Jayadevan PK, The Economic Times

Bengaluru, 4 February 2015

Xiaomi will likely set up a marketplace platform and bring on board third-party retailers to sell the phones on its portal Mi.com

When Chinese phone maker Xiaomi starts its own portal to sell phones in India, it may adopt the model followed by Amazon and Flipkart to work around the country’s retailing regulations.

Xiaomi will likely set up a marketplace platform and bring on board third-party retailers to sell the phones on its portal Mi.com. Xiaomi will supply the sellers so that it doesn’t flout retailing norms, according to sources. By creating a marketplace-like structure, it will avoid regulatory issues around retail foreign direct investment, said a person aware of Xiaomi’s plans in India.

"Technically, they can’t set up a business-to-consumer ecommerce site in India because that’s not allowed," said Devangshu Dutta, chief executive officer of retail consulting firm Third Eyesight.

Xiaomi, one of China’s largest smartphone vendors, has been selling devices in India by holding flash sales on e-tailer Flipkart and through AirtelBSE -1.08 % stores. The company is yet to finalise its own online plans.

"We’ve been seeking expert advice on how to structure it. We won’t do anything which is against the spirit of the law," said Manu Jain, head of Xiaomi India.

Creating a marketplace-like structure and working with third-party retailers is one of the options but the company hasn’t finalised anything, said Jain, who was one of the founders of e-commerce portal Jabong and joined Xiaomi in June last year.

The sales strategy centred on its e-commerce portal will also help offline sales as merchants from smaller towns can buy Xiaomi phones online and sell them in their stores.

Foreign direct investment is not allowed in online retailing, unless the company provides a platform to sellers. Amazon and Flipkart have Indian partners that sell a majority of the goods on the marketplace. The norms apply to Flipkart because it has received FDI in the form of venture capital and is domiciled in Singapore.

Prione Business Service, a 49:51 joint venture between Amazon and Catamaran Ventures, is one of the largest sellers on the platform. Most sales on Flipkart are through WS Retail, a company hived off by Flipkart to comply with Indian regulations on retail.

Xiaomi will continue to sell on Flipkart even after it launches its own portal, said Jain.

(Published in The Economic Times.)