In a world of democratized hardware, ecosystems are the next big frontier. From Apple to Xiaomi, some of the biggest players today have built products and established services that work together in a friction-free manner and encourage buyers to stick with their chosen brand.
Realme is the latest example of a company that has been quickly ramping up its ecosystem portfolio, specifically in India. The brand's rapid-fire smartphone release strategy led to its meteoric rise, with the company clocking an 88% year-on-year increase in sales in Q1 2020.
In many ways, Realme has replicated Xiaomi's strategy of offering top-notch hardware for throwaway prices. In fact, Realme often manages to undercut Xiaomi and that has been instrumental in the company's market growth.
Now, Realme has its eyes set on Xiaomi's ecosystem play in India. The company has announced its plans for a "1+4+N" strategy that appears to take a leaf out of Huawei's book. The premise is straightforward. The smartphone is the epicenter of your digital universe, Realme wants to sell you a world of products that interface directly with it.
What started with phone accessories like power banks, now includes fitness, audio products and even televisions. It makes sense too. A broad portfolio of products is a prime opportunity for higher profit margins and helps facilitate customer loyalty. However, it only works when the products deliver on their promises. Unfortunately, Realme's first few attempts have reinforced the importance of learning to walk before you run.
Be it the Realme Band or the Realme Watch or even the Realme Buds, the company's strategy of "move fast and break things" isn't entirely appropriate in markets that don't just present quality hardware options, but also have the advantage of ecosystem tie-ins.
Every single one of these devices has been fraught with issues at launch and has gone through subsequent updates, or sometimes completely renewed product launches. This isn't just a disservice to the customer but also paints the brand in a bad light. As it stands, the fast release cycle of less-than-perfect hardware doesn't make for an ecosystem. In fact, it is all the more likely to turn customers away — once bitten, twice shy.
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The commoditization of smartphones comes with the side-effect of rock-bottom prices. Key players like Xiaomi and Realme are constantly undercutting each other while offering ever more hardware for the price. However, as market saturation and the law of diminishing returns kicks in, the playing field is shifting. Ecosystems are no longer just a buzzword and are instead a key part of a company's long-term growth strategy.
Few companies have been able to successfully build out an Internet-of-Things (IoT) empire the way Xiaomi has, but the original ecosystem champion was, of course, Apple. The beauty of the iPhone is how seamlessly it integrates with the company's extensive portfolio of products. From the Apple Watch to AirPods, iPad to MacBook, Apple's devices are category leaders and the company smartly uses exclusive cross-platform software features to lock consumers into its tight-knit ecosystem.
Fast release cycles of imperfect hardware can turn away potential buyers.
That tight-knit integration has led to conveniences like the ability to use an iPad as a second screen with your Mac with almost zero latency. AirDrop, Apple's wireless file-sharing system lets you easily drop images, documents, and more directly from your computer to your phone without any friction. The list of cross-platform features goes even deeper too, like the ability to shoot an image using your phone and drop it directly into a document.
Meanwhile, hardware enhancements like the W1 chip in the AirPods have ensured that the true-wireless earphones have been some of the best in the business, at least as far as connectivity is concerned. Apple's ecosystem integration has been hugely important for growing its business as a whole.
Xiaomi took a page out of Apple's book for its own ecosystem empire, only on a much broader scale by cashing in on the IoT boom. The global IoT market is estimated to reach $1.6 trillion by 2025 and Xiaomi has established itself as a big player in the sector.
Xiaomi's success also involved critical investments and key acquisitions. The company has backed over 300 companies so far to spur a portfolio of products as wide-ranging as smart scales, kitchenware, and more, that works seamlessly within its ecosystem. In January 2019, the company announced a $1.5 billion investment in AI and IoT devices and has partnered with majors like Ikea to spur growth. Already, Xiaomi's IoT revenue accounted for $1.7 billion in Q1 2019.
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Xiaomi has a diverse portfolio of products that stretches all the way from connected air-purifiers to security cameras, automated soap dispensers, hair trimmers, and even water purifiers. The Mi Home app serves as a one-stop-shop to keep an eye on home security, track filtration levels, and even control devices like smart lights and switches. That once again demonstrates the advantages of building an ecosystem that lets you control everything from a single point.
That strength is critical for building traction towards a unified ecosystem. Xiaomi, of course, does not develop all of the products. In fact, its popular smart lights are manufactured by ecosystem partners, Yeelight, but are sold under the Xiaomi label. Even with a different manufacturer, that kind of vertical integration is an easy upsell to buyers and makes perfect business sense.
Beyond customer lock-in, ecosystems also afford the possibility of extra revenue streams. A $200 phone might have razor-thin margins, but you can be sure that $50 pair of Bluetooth headphones does not. By up-selling, the benefits of a product that works closely with companion hardware, be it through features like fast-pairing, better sound quality, or even a charging solution that works only with a specific phone, it becomes much easier to generate additional revenue.
Huawei too is making moves in a similar direction with its "1+8+N" strategy. In Huawei's model, the phone becomes the center of your connected ecosystem with everything from your PC, tablet, TV, connected wearables, and more revolving around it. Hardware is only as good as the software that supports it and synergy between the two is key to creating a successful product ecosystem. That's why Huawei is making so much noise about the versatility of its Harmony OS platform. Like Xiaomi, Huawei is taking a wider approach towards building out an ecosystem. Instead of building every product in-house, the company is opening access to its IoT-centric OS, which should let products from a vast variety of manufacturers live together in… harmony.
Ecosystem authority comes with quality and there's no rushing that.
However, these kinds of strategies from Apple, Xiaomi, and Huawei only work when the products can stand up on their own merits. Few companies get a second chance in the fast-moving world of tech and word of mouth travels fast. This brings us back to Realme. Recently, the disruptive brand has been churning out a variety of fitness and audio products to kit out its connected ecosystem, pitting it directly against Xiaomi's wearables such as the ever-popular Mi Band series.
The company's latest product, the Realme Watch (above) tellingly looks a whole lot like a certain watch from a certain Cupertino giant. And while it sports cutting-edge hardware, the software implementation falls flat, with features that either don't work reliably or are inaccurate. Check out our Realme Watch review for a full breakdown, but the bigger picture is that the cheap wearable marks a poor start for Realme's ecosystem ambitions.
A single bad product can make buyers question their decision to stick to a brand. Realme, with its slate of less than perfect hardware, risks backing itself into a corner that it might find very hard to dig itself out of.
Now is the time for a concerted effort towards building products that work reliably and offer a consistent experience over rushing to the market. Rushed products might help Realme gain some quick sales, but authority comes with quality and there's no rushing that.
Imitation might be the best form of flattery, but Realme needs to forge a unique identity.
Going forward, Realme is going to need much more than quick-fix strategies to carry forward its ecosystem plans. It needs an up-sell, a creative advantage of its own to forge a unique presence in the market.
Realme smartphones have been well received on the back of hardware that works and a focus on design. That, however, isn't the case with portfolio products and it is high time that Realme crafted its own distinctive presence over cribbing bits and pieces from Huawei, Xiaomi's partner-driven approach or even Apple's tight vertical integration.
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