Exclusive online-only drops for smartphones are common. Most major brands do it on their own websites or have a tie-up with Amazon or Flipkart for the same. Amazon’s last Great Indian Festival saw sales worth Rs 750 crore from OnePlus, Apple and Samsung in just 36 hours. Similarly, some of India’s top-selling mobile brands such as Oppo, Vivo and Realme also have tie-ups with Flipkart and Amazon.
But while this has been beneficial for customers in getting good deals, it has seen offline retailers take a hit in the last few years, coinciding with the meteoric rise of e-commerce platforms, for whom smartphones are one of the biggest products. Earlier this week, the Competition Commission of India (CCI) launched an antitrust probe into Amazon and Flipkart in a complaint filed by the Delhi Vyapar Mahasangh.
In its order directing a probe, the CCI said that the exclusive arrangements between phone brands and e-commerce platforms and select sellers, along with the allegation of linkages between these preferred sellers and e-commerce players – as alleged by the Mahasangh – needed to be investigated.
“It needs to be investigated whether the alleged exclusive arrangements, deep discounting and preferential listing by the Ops (Amazon, Flipkart) are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition contravening the provisions of Section 3 (1) read with Section 3(4) of the Competition Act,” the CCI said.
According to the complaint filed with the CCI, Flipkart launched 67 mobile phones while Amazon launched 45 exclusively on their platforms in 2018.
However, this CCI probe also comes amidst a strike by traders and retailers, and mobile phone retailers threatening to boycott brands that do exclusive launches for products online.
The All India Mobile Phone Retailers Association (AIMRA) says that over 50,000 brick and mortar retail stores have shut in the last year-and-a-half alone, leaving them in dire straits, with a large number of people left without jobs. In terms of sales, he claims that sales for offline retailers have decreased by over 50% in the past five years.
“The pattern between the online platform and the manufacturer is that they launch exclusively online with better specs and new innovations and at a lower price. They don’t let offline retailers have the handset. The customer will go where the technology and innovation is,” pointed out Arvinder Khurana, AIMRA head.
Arvinder told TNM that there is deep discounting and predatory pricing online, and for this reason as well as delay in receiving the products, the consumer would never choose offline retailers.
This led to AIMRA giving the phone companies an ultimatum — give us the products too or face boycott.
In a letter to mobile phone companies, AIMRA wrote: “Brand’s vested interests in online sales is very clear at the cost of livelihood of lakhs of retailers. Brands are unmistakably responsible for the plight of the retailers today.”
“The mobile industry is totally driven by brands; both offline and online channels. We understand the severe competition for driving sales and capturing major market share. It still does not take away from the fact that the moral duty of brands towards the trade and their channel partners is to maintain a healthy balance and harmony,” it added.
This comes at a time when AIMRA, in association with the Confederation of All India Traders (CAIT), is holding protests nationwide against Flipkart and Amazon, and even held protests on Wednesday during Amazon CEO Jeff Bezos’s visit to India.
CAIT’s protest against the e-commerce giants is also against deep discounting and predatory pricing, and that they are in violation of Indian laws, leading to huge tax loss for the government.
Praveen Khandelwal, the General Secretary of CAIT, said that Amazon and Flipkart report huge losses, but still continue to subsidise products, which needs to be investigated.
“Say there is a mobile that costs Rs 10,000. The offline trader charges GST at 12%, which would be Rs 1,200. On an e-commerce site, the phone is sold at an artificially lowered price of Rs 3000, and on the sale of that product, only Rs 360 is paid as GST,” he explained.
He alleged that they can sell the product at the price they wish, but GST has to be paid on the market value but it is instead being paid on the discounted price. “That way, they’re avoiding the tax liability to a great extent and causing huge losses not only to union government, but also to all state governments,” he said.
CAIT has also sought a meeting with Finance Minister Nirmala Sitharaman regarding the matter.
“Our marketplace is a market-based model, but they are running it like an inventory-based model,” Arvinder said.
AIMRA’s demands, at least for now, seem to be working.
Both Xiaomi and Samsung have reportedly agreed to bring parity between online and offline launches and prices. When TNM contacted Samsung, they declined to comment. Queries to Xiaomi, OnePlus and Oppo went unanswered; this copy will be updated if they respond.
Vivo, Oppo and Realme had both earlier said that they would be doing away with online-only launches in 2020, but it remains to be seen if this will be put into practice. Arvinder too said that Oppo and Vivo have decided to give online and offline retailers a level playing field in their 2020 strategies.
Xiaomi, Arvinder claims, has given retailers an oral assurance that they will launch smartphones in offline markets at the same time they launch online.
Xiaomi India’s director for offline sales operations Sunil Baby earlier told Economic Times that the company gives the same prices for online and offline channels.
In December 2019, the CCI, in a report titled ‘Market Study on E-commerce in India: Key Findings and Observations’, asked e-commerce companies to keep an eye out on discounting, the collection, use and sharing of data, and other aspects.
For offline retailers, it is now wait and watch. Arvinder says that while it is in continuous communication with brands and the government over the issue, they are now waiting to see if brands live up to their promises of giving them a level playing field when they launch their next smartphones.