(Yicai Global) June 29 -- Lei Jun, the founder of soon-to-go-public Chinese electronics firm Xiaomi has repeatedly set out plans to increase the number of its offline stores to 1,000 by the end of 2019. As of this month, the company has only reached 394 stores in China, a far cry from its lofty target. With only 18 months to go, what can Xiaomi do to accomplish this target?

Xiaomi gives a very lofty definition of "Xiaomi fans" in its listing prospectus: "Xiaomi fans" are a group of users who are loyal to the brand, actively participate in Xiaomi's platform, and actively give suggestions on product development. The Beijing-based firm attaches great importance to the value of Xiaomi fans. Lei once said in public, "The main business of Xiaomi is to make products that Xiaomi fans like, what they like is what we work on."

The number of Xiaomi fans is very large. Official data from Xiaomi shows that as of March 2018, the number of monthly active users of the firm's MIUI mobile operating system is approximately 190 million, and the number of Xiaomi fans owning more than 5 Xiaomi products (excluding smartphones and laptops) exceeds 1.4 million. As of the end of the first quarter this year, the MIUI Forum has received about 250 million posts.

With these factors in mind, Xiaomi must take Xiaomi fans into consideration when considering where to open outlets so as to target the company's main target group. Xiaomi Store Product Manager Han Qianyuan once wrote, that the siting of Xiaomi stores will be based on big data indicators of existing MIUI users and Internet of Things equipment, and that Xiaomi stores will be preferentially located in areas where Xiaomi fans are more concentrated.

Internet data analysis company Jiguang found that Xiaomi fans mainly live in big cities such as Beijing, Shanghai, Guangzhou, and Shenzhen. A ranking of cities by the number of Xiaomi stores shows that the number of Xiaomi stores in a given city is proportionate to the number of Xiaomi fans in that city.

Some 34 months have passed since Xiaomi's first store opened in September 2015, and the number of Xiaomi stores has been growing at an average monthly pace of over 10 stores. Of Xiaomi's 394 offline stores, 81 are located in Beijing, Shanghai, and Guangdong. Xiaomi fans nationwide can find at least one store in each provincial capital or municipality under the direct governance of the central government, except for Qinghai, Tibet, and Macao.

The site selection of Xiaomi stores is determined by the locations of Xiaomi fans. In this way, Xiaomi stores can attract more customers, but tapping into the value of only existing users is far from enough.

Over the past few years, Xiaomi has tried to situate its stores in various locations, including popular commercial areas, urban landmark areas, and airports, in an effort to reach more people and convert them into customers at its offline stores.

Zhang Jianhui, who takes charge of Xiaomi stores, said that currently, Xiaomi stores are mainly sited in shopping centers within the core commercial areas of first and second-tier cities, and well-known real estate developers are Xiaomi stores' priority cooperation partners. "Xiaomi stores are mainly situated in medium- and high-end shopping malls in the core commercial areas of cities," he said.

A survey on the 394 existing Xiaomi stores found that 84 stores are located in Wanda Plazas, far more than in any other commercial area owned by other brands. Other popular commercial mall partner brands rank behind Wanda.

Xiaomi's vice president Liu De once said that the distribution of Xiaomi fans to be highly overlapping with that of Uniqlo, Starbucks, and Muji customers, Xiaomi decided to adopt the strategy of opening its stores near these brands to increase footfall.

Partnerships in Third and Fourth-Tier Cities

Big data and visitor volume analysis can help Xiaomi find potential sites but cannot directly help it to reach the target of opening 1,000 stores. The company's partners are very important in this aspect.

Xiaomi stores fall into two types, namely, self-operated stores and specialty stores. Self-operated stores are established and operated by Xiaomi, while specialty stores are established by Xiaomi's partners. Public data show that of the 394 stores, 205 are specialty stores.

Xiaomi relies more on specialty stores to rapidly expand the number of its stores in inland provinces, and the only Xiaomi stores in relatively remote Xinjiang and Hainan are also specialty store.

Data show that of the 189 Xiaomi self-operated stores, 117 are located in first and second-tier cities, accounting for 62 percent. Of the 205 Xiaomi specialty stores, 34 are located in first and second-tier cities, making up a mere 17 percent.

A partner for Xiaomi is Wanda Group. Last September, Lei Jun and Zhang Jianhui, head of Xiaomi store, visited Wang Jianlin in Wanda Group's headquarters amid speculation that there were discussions on Xiaomi store cooperation.

Based on Jones Lang LaSalle's standard of division for cities, Xiaomi only opened stores in 19 Wanda plazas in super first-tier and first and second-tier cities. That means that Wanda and Xiaomi's cooperation focuses on third and fourth-tier cities.

Editor: William Clegg