Can POCO Scale New Heights as Independent Brand?

In 2020, Xiaomi spun off POCO as an independent company. Though POCO has separate management, it utilizes Xiaomi’s R&D capabilities, supply chain, logistics, and innovations. This type of support-sharing mechanism is quite common among smartphone brands. While we feel the move to go independent, in itself, will not have a major impact on POCO’s brand identity, it can certainly grow as an individual brand if it works towards its advantages. The brand offers key flagship features in the value-for-money segment for its tech enthusiast audience. POCO saw sales growth of 567% YoY in 2020, from a small base.

POCO’s Global Market Sell-through

Counterpoint Research POCO’s Global Market Sell-through
Source: Counterpoint Research Global Handset Model Sales, March 2021

Some of the key highlights of the POCO’s journey so far are:

India: POCO’s biggest market

More than half of POCO’s global sales came from India in Q1 2021. Its leaner portfolio and aggressive marketing strategy quickly caught the attention of tech enthusiasts in the country. POCO smartly selected its online channel with Flipkart, as most of Xiaomi’s sales happen on Amazon.

POCO leverages the Flipkart platform to directly compete with other brands. POCO was in the second position on Flipkart and fourth in terms of total India online smartphone shipments in Q1 2021. In January this year, it conquered the No.1 position on Flipkart for the first time. This was mainly due to increased shipments of the POCO C3 and POCO M3 models from the budget segment. One of the key reasons for the success of its models on Flipkart is a clear differentiation within the lean portfolio addressing the needs of its target audience at different price points.

Hence, even with a lean set of models in its product portfolio, POCO had the highest number of models in the Top 10 shipments on Flipkart – POCO C3, POCO M3, POCO M2, and POCO X3 in the first, second, sixth, and eighth positions respectively in Q1 2021.

POCO’s success story in the Indian market is driven by demography – more than one-third of the country’s population is youth and tech-savvy, wanting to experience flagship-like features at affordable prices and a greater focus on CMF (Color, Material, and Finish) further helped to gain market share.

Global Expansion on the cards:

POCO’s youth-centric strategy played a vital role in scaling up its success in India. Now, POCO is expanding in markets like Europe, Thailand, Indonesia, Vietnam, and the Philippines. Southeast Asian nations like Indonesia and the Philippines have nearly one-third of the youth population in the 15-35 age group, just like India and favorable for POCO to grow. However, POCO has different strategies for different markets in terms of channel and product portfolios.

Channel Strategy – Key to Success

About three-fourths of POCO’s global sales lean toward the online channel driven by India’s Flipkart contribution. However, unlike India, POCO also operates offline in Thailand, Indonesia, Russia, Vietnam, and the Philippines.

More than 80% of sales in Indonesia, Thailand, Vietnam, and the Philippines happen offline. In Indonesia, due to geographical and logistical constraints with scattered islands, the online mode of delivery is not feasible. Also, most of the SEA markets are price-conscious and believe in local shops. The offline-active OEMs also played a major role in shaping this behavior.

As a result, POCO is offline heavy in these markets. It operates online here by adopting a hybrid channel strategy where one can order online and collect the device from the nearest local shop.  Therefore, POCO is smart in localizing its channel strategy based on the geographic and demographic split, preference of consumers, and market dynamics. This attribute of POCO is a big positive for the brand.

Product portfolio: Lean and Diverse

Considering India as an example, POCO recently launched a 5G model in the country, the POCO M3 Pro, in the sub $250 price segment. But it has launched three 5G models outside India. The two 5G devices not launched in India are comparatively in a higher price range but it is likely to accelerate its 5G portfolio as well. POCO’s main target is to compete with other 5G smartphones in the budget segment. Therefore, POCO’s strategy for India will be locally driven and focuses on tech enthusiasts and young audiences.

Possible challenges and solutions for POCO

POCO may face some challenges in its journey to establish itself as an individual brand. POCO has rebranded a few of its models that carry the same DNA as Redmi. This strategy can be understood during the initial period when the brand needs support but can be avoided in the future.

As mentioned earlier, POCO focuses on localization strategy across the globe. With the changing demographics and geographic preferences, managing the resources for delivering and adapting to change may become a challenge with limited shared resources. Also, POCO is a new brand in few markets and consumers’ acceptance levels may take time to go up. POCO should also refresh its product portfolio regularly across all markets to maintain momentum. Additionally, with hardware getting commoditized, POCO will also, at one point in time, need to look into its efforts in software and adjoining product categories in the consumer electronics space.

Counterpoint research is a young and fast growing research firm covering analysis of the tech industry. Coverage areas are connected devices, digital consumer goods, software & applications and other adjacent topics. We provide syndicated research reports as well as tailored. Our seminars and workshops for companies and institutions are popular and available on demand. Consulting and customized work on the above topics is provided for high precision projects.

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