A recent ad for Xiaomi’s running shoes made us take a closer look at the mechanisms of product extension and brand diversification.
If Raymond launched a range of mattresses, would you find it weird? If Skullcandy launched chocolates, would you eat them? How strange would Lenovo denims be? What about Saffola smartwatches? Or Oyo mint?
These are the kind of questions we humoured ourselves with, when we spotted an ad film for Xiaomi’s “feature-packed” running shoes – labelled so by Xiaomi’s senior marketing manager Sandeep Sarma in the video – earlier this month. Maybe shoes have been part of the company’s portfolio for some time, but marketing efforts appear to have picked up now, at least in India.
Most readily brought to mind as a ‘Chinese mobile phone brand’, Xiaomi has diversified into products close to smartphones, like laptops, smart TVs, power banks, security cameras, fitness bands, etc., as well as products slightly farther away from the world of phones, like air purifiers, electric toothbrushes, luggage, beard trimmers, sunglasses, apparel and backpacks, among others. But Xiaomi’s shoes stand out as one of the more outlandish diversifications of recent times.
Sure, large companies like Amazon and Google – notwithstanding the argument that they are ‘places’ more than brands – have come a long way from the products they started out with. And if one goes looking, similar examples, of variously sized companies, are everywhere.
So, while it’s not diversification per se that’s odd, Xiaomi’s shoes have led us to two questions – How far is too far? And have the rules of engagement changed?
More specifically, in the context of product diversification, does heritage matter less today than it did in the past? Does the classical theory of association no longer apply? Are brands not as strongly defined by their categories today as they used to be? Or is the game no longer about diversification, but more about creating a ‘house of brands’?
Alternatively, could Xiaomi’s foray into shoes be appraised as a merchandising play designed to delight buyers of its core product – phones? Like a Royal Enfield launching jackets or a luxury brand extending its halo to accessories, perhaps?
We spoke to some branding experts and concocted some theories.
Shoes or Smart Shoes?
The first thing that comes to mind is – are the shoes tech-enabled? If yes, the adjacency is more acceptable. The promotional video did position the shoes in a ‘gadgety’ manner, and it helps that the range was introduced at ‘Smarter Living’, the company’s annual ‘launch event’ for devices.
Extensions in the IoT space make sense because they’re part of Xiaomi’s mobile ecosystem. In an Alexa era, consumers easily accept diversification within the interconnected world of devices. Can shoes be positioned as ‘wearables’, like smartwatches, though?
In 2017, Xiaomi launched Intel chip-enabled smart sneakers in its home market, China, under the MiJia brand; the sensors collect data (steps, calories, etc), similar to Nike’s Adapt app that collects data from the user’s Nike shoes.
Among products marketed by Xiaomi in China are tech-enabled pet products like smart fish tanks, litter pots and water dispensers for cats, dog leashes and ‘pet cases’ to keep animals in on flights.
Of course, product extensions that work in a company’s home market may not necessarily work globally. For instance, a Korean company’s line extensions may be rooted in the dynastic and whimsical chaebol culture in its home market, but may not make sense elsewhere.
The China Effect
Atishi Pradhan, brand planner, Wunderman Thompson, says, “Chinese brands work to their own rules, and have broken the classical rules of brand strategy.” Citing companies like Alibaba and Xiaomi as examples, she explains that constantly adding services to the offering is a practice rooted in corporate China. “It’s the ‘superapp’ phenomenon,” she says, referring to the way different types of apps – say, the equivalent of a WhatsApp, a Paytm, an Uber and a Facebook – are all rolled into one app in China, because, conceptually, integration of different types of products into one brand is common there. “In India, Jio is trying to do that,” she says.
"Chinese brands work to their own rules, and have broken the classical rules of brand strategy"Atishi Pradhan, brand planner and strategy expert
Western companies, in contrast, prefer developing strong individual brands; though Facebook owns Instagram and WhatsApp, they’re still separate apps. In the old framework, before Chinese brands entered the scene in a big way, the only Western brand that pushed for this sort of diversification was, Pradhan points out, Richard Branson’s Virgin, with interests across over 10 starkly different categories, including airlines, mobile, cosmetics, music, banking, electronics, healthcare, etc.
According to Arun Raman, chief intelligence officer, GREY Group India, because Xiaomi has a ‘collective’ philosophy going for it – fans, community, network – diversification works so long as it allows users to flaunt their brand patronage. This also negates the need for a separate sub-brand for each new category it enters.
“Tata went from steel (TISCO, Jamshedpur) to hotels (Taj brand) over many years. But today the gestation period for extensions is very short,” he says, going on to caution, “If they don’t get it right, it can be a disaster. They must define and exhibit the core brand properly, like Samsung did when it redefined itself from ‘white goods for home consumption’, like fridges, to ‘gadgets for individual usage’, like handsets.”
Some experts feel it’s not about categories at all, at least not in India. Noor Samra, associate vice president – strategy, Leo Burnett, says, “Indians are quite used to shopping from one brand. Think of businesses like Tata, Birla, Godrej and even Amazon. We are willing to buy salt and pulses to cars and jewellery from Tata, because it's a trusted name. This is because India buys through trust, not categories. If your brand or business has trust associated with it and if you play your cards right, branching out and succeeding in new categories is possible. Whether India trusts Xiaomi enough to bless its foray into another category, only time will tell.”
Another aspect to this is e-commerce. Does online distribution have something to do with the acceptance of shoes sold by a handset company? Very likely, not least because online shopping has impulse going for it. Consumers won’t think too hard about heritage and such before punching in their shoe size and placing an order. Moreover, in the world of online buying, the rules are loosening up in general, given the variety of categories one can purchase on a single platform.
Nikhil Narayanan, senior creative director, Ogilvy India, surmises that Xiaomi is probably eyeing market share not from “experts” like Adidas and Puma that are “closer to the category”, but from second or third rung brands that it can easily outspend. “Xiaomi has marketing muscle,” he says. Pricing will matter too, he reminds. As per the brand’s India website, classified as an athleisure product, a pair costs between Rs.2,999 and Rs.3,999, before discounts.
Shefali Takalkar, executive creative director – content, MagicCircle Communications, feels online distribution makes things easier for this sort of diversification, because the “TG is experimentative and open to new, even bizarre, ideas.” That it’s easy to return, always helps.
As for the horizontal expansion itself, she opines, “There’s no easy answer to whether heritage matters. But baggage, or the lack of it, matters.” An example of negative baggage is the kind Maggi lugs around; “I’ve worked on Maggi in the past and know that brand has struggled to diversify into masalas, or even a new variant. It’s so hard to dis-associate from the core. But say, Apple were to foray into bikes or apparel, I think there’d be positive baggage,” says Takalkar.
And what about Xiaomi and shoes? “There’s no baggage,” she says, in part because it’s easier for tech-strong brands to convince people about diversifications. “Xiaomi is less of a ‘brand’ and more of a ‘consumable’,” she says.
“Xiaomi is less of a ‘brand’ and more of a ‘consumable’”Shefali Takalkar, consumer insights expert
“In an influencer-driven world,” agrees Devendra Deshpande, head, business and growth, Friday Filmworks, and former head, Content Plus, Mindshare, “Heritage is not of immense significance when it comes to new products, including niche and sports brands, from bike and car accessories to jackets and even shoes.”
Purpose Versus Features
Rajeev Sharma, brand consultant and former CSO, Leo Burnett, feels Xiaomi's diversification into shoes is a bit of a stretch. "Today, given media fragmentation, media costs and product proliferation, creating a new brand has become extremely difficult. So, I understand the temptation to diversify. And they might even succeed initially - till history catches up, and till category specialists catch up."
It shouldn't be a play on features, he feels. "Consumers give brands permission to play in different categories when the purpose is clear," he reasons. And purpose can't be an afterthought. It has to be stated before the first diversification. He gives the example of American adventure gear brand Patagonia, that stands for sustainability, a purpose that unites its products across diverse categories, like camping gear, workwear, books, etc.
"Consumers give brands permission to play in different categories when the purpose is clear"Rajeev Sharma, brand consultant
Earlier this year, Xiaomi announced that it is commencing operations in the electric vehicles segment, in China. It would be interesting to see how this diversification plays out for the brand, and whether it can ascribe purpose and meaning to this crackling new foray.