Apple's biggest rival in China throws its fans parties in expensive nightclubs

Xiaomi is often referred to as the "Apple of China," and not just because of the similarities some of its products bear to the Cupertino company's. Like Apple, the red-hot Chinese startup has been able to instill an almost rabid loyalty in its fans.

The Wall Street Journal reports on one particularly unusual way the company maintains its devoted userbase: By throwing them parties in exclusive nightclubs.

These parties, for a few hundred fans at a time, are held every few weeks across China in only the "flashiest nightclubs." The lucky few chosen to attend are the "VIP guest[s] of Xiaomi corp," a reward for their support for the company.

"What is the secret to the Xiaomi brand?" asks co-founder Wanqiang Li. "My answer is customer participation. Xiaomi isn't selling a product, but the desire to be a part of something." Industry analyst Ben Thompson says that what Xiaomi is ultimately selling isn't electronics - it's a "lifestyle."

This support isn't just the product of heavy marketing - it's smart marketing. According to a report from Bernstein Research, Xiaomi spends just 3.2 percent of its revenue on sales and marketing expenses, compared to eight percent from competitor Samsung. Alongside the parties, the company also holds festivals, engages heavily with "mi-fans" (as they call themselves) on social media, and offers discounts to particularly devoted supporters.

The strategy clearly works: With a $45 billion valuation, it's the worlds most startup, despite being just five years old. And in February, it overtook Samsung as China's biggest smartphone seller.

Xiaomi pursues a very different business model to Apple, selling high-spec smartphones for low prices. The average price of Android devices are dropping around the globe - but Xiaomi handsets retail for even less than that average. And despite this, reviews suggest that its products may actually be technically superior to Apple's.

Xiaomi executive Hugo Barra says the company doesn't intend to move into Western markets for "a few years." But the market in China is growing rapidly, and Apple is doubling down on its retail presence in the country. Following the runaway success of the iPhone 6 and 6 Plus, the Cupertino company needs to find new avenues for significant growth.

This is why Xiaomi's success is a big deal: For perhaps the first time, an Android manufacturer has been able to develop both a incredibly devoted fan base, and a line of products that can go toe-to-toe with the iPhone.

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