Phone cos press crackdown button on online discounts

Smartphone brands such as Xiaomi and Realme are cracking down against scalper retailers looking to make a quick buck by selling devices cheaper on online platforms as the companies bet big on the offline channel to boost growth in the world’s second largest smartphone market.

After complaints from retailer associations, brands including Xiaomi and Realme are repurchasing stocks selling at lower prices to trace back the retailer and distributor and penalise them, according to correspondence between the two parties ET has seen.

For now, brands are letting retailers go with a warning, making them sign an undertaking that prohibits them from selling their products outside the authorised channels to avoid higher liquidation damage and loss of business.

ET has seen multiple instances of such undertakings signed by retailers in Jammu, West Bengal, Haryana and Tamil Nadu, among others, indicating that brands are now cracking down upon this discriminatory practice.

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The action comes after several complaints from state units of the All India Mobile Retailers Association (AIMRA) that represents 1.5 lakh mobile phone retailers in the country.

The association has seen over a dozen products from brands such as Xiaomi, Realme and Samsung being sold at prices on online channels that are around Rs 1000-2000 lower than their minimum operating prices (MOP).

“This is a real alarming situation to hear that a brand has allowed the ecommerce platforms to register retailers online, majorly wholesalers, to sell their products just to gain shares but actually losing the ground and faith of the mainline retailers who have been putting hard efforts to sell product to the consumers with best of their abilities,” the retailer association said in a letter to Realme on March 26.

“A strenuous action backtracking the root cause of concern lies in the brand’s own control and should be taken up for the best continued constructive outcomes for the brand in the long term,” the letter added.

Similar letters have also been sent to Xiaomi, a copy of which ET has seen. In response, a Xiaomi representative promised action saying “These are the stocks being uploaded online by scalper retail partners after reducing all schemes. We are purchasing the stocks to find the source and fix it with heavy penalties.”

Xiaomi and Realme did not respond to emails seeking comment.

This comes at a time when the contribution of sales from retail stores have outstripped that from online platforms. IDC India estimated online platforms (Amazon and Flipkart) are now contributing 48% of the total sales in the January-February period, down from 49% in 2023 when shipments to online channels dropped 6% on-year.

That said, retailers have blamed brands for imposing steep sales targets which they are unable to achieve with selling from their brick-and-mortar stores.

“The January to March period is usually slower in terms of sales. With such hefty targets on us, we have no choice but to liquidate stocks through other means, sometimes even registering on online platforms using different names and selling them at a discount,” a Delhi-based retailer told ET, asking not to be identified.

For the brands, listing and selling their products online has lesser overhead costs as compared to selling through retail stores where multiple layers of distributors and retailer margins must be taken into account when pricing.

“This is a reason why some products are only sold through online channels at aggressive prices, while some are kept exclusive to retail stores. Some products are also exclusively sold in either Amazon or Flipkart, which is when retailers list their products on rival platforms to meet their sales targets,” the Delhi-based retailer said.

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