Demand ‘same product, same time and same price’ for all handsets.
Brick-and-mortar retailers have urged the government to curb the practice of etailers forging exclusive tie-ups with smartphone makers and offering lower prices, saying, ahead of the critical festive season, the buildup of inventory owing to “predatory online pricing” would sound the death knell for offline sellers and lead to huge job losses.
The All India Mobile Retailers Association (AIMRA), which represents thousands of brick-and-mortar stores across the country, has shot off letters to the commerce ministry, the Competition Commission of India and the Department for Promotion of Industry & Internal Trade (DPIIT).
“The predatory online pricing and exclusivity has damaged the ecosystem of the trade beyond repair,” the association said in one of the letters, which has been seen by ET, without naming any specific etailer. “More than 30,000 mobile phone retail outlets have been shut down in the past one year.”
Exhorting the government to ensure a level playing field, the association said, “Same product, same time and the same price is the need of the hour.”
The allegations against online retailers come despite the government’s move last year to change foreign direct investment (FDI) rules for the ecommerce segment.
‘Cos working around rules’
The new rules were aimed at ensuring a better pricing balance between online and offline sellers and at forcing handset makers to expand their presence in the bricks-and-mortar segment as well.
At that time, the government had barred online marketplaces from signing exclusive deals for products on their platforms and also directed that a single vendor could sell a maximum of 25% of its inventory on an ecommerce platform.
However, AIMRA president Arvinder Khurana alleged that ecommerce players have been working around the rules.
“Online channels are provided with the new models first and only once the sales start dwindling after a couple of months, they are released to offline retailers… that are left with a huge inventory and only a few leftover customers who missed the online deals,” he told ET.
He said the enormity of the issue is magnified ahead of the festive season — which is considered a make-or-break period for much of the retail industry — since online sellers can potentially take away a large chunk of customers before offline retailers even begin to offer discounts to customers.
The comments come ahead of Amazon and Flipkart’s annual festive sales and promotions across categories from September 29 till October 4. According to global market research firm Forrester, this period will account for 80% of the $4.8-billion revenue expected in the festive season from September 25 to October 29.
“More than 56% of the ecommerce business is related to the mobile industry,” the association said in the letter cited earlier. Eliminating the practice of smartphone makers giving exclusive models to ecommerce platforms is “imperative for the survival of domestic trade”, it said.
The AIMRA also alleged that some unregistered retailers were resorting to the illegal practice of buying online-exclusive models in bulk, at discounted rates, during the online sales period, and reselling them later in the offline market at higher prices. It said that handset makers and etailers were aware of this practice, but again it did not name anyone in particular.
Such retailers don’t pay the goods and services tax (GST), leading to revenue loss for the government, the association said in the letter.
This, it said, was on top of the low GST that the government was getting on the low-priced smartphones that many manufacturers were offering by cutting down on distribution margins.