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[March 14, 2014]
Gadget sales trigger retailer vs e-tailer war [DNA : Daily News & Analysis (India)]
(DNA : Daily News & Analysis (India) Via Acquire Media NewsEdge) Bangalore: You may soon find no heavy discounts on electronic gadgets or mobile phones on your favourite online shopping portal if offline electronic sellers and vendors have their way.
Offline retailers and vendors in the country have called an 'emergency meeting' with some electronics majors to tackle what they say "unfair trade practices of online players".
They are accusing some of the online players of not respecting the minimum operating price (a practice followed among retailers), and thus giving heavy discounts to customers.
Though ecommerce accounts for less than 1% of the total retail market in the country, offline vendors are experiencing a shift of their customers' choice towards online. "Our customers are typically the ones who shop heavily online as well. I am not talking about a customer who purchases a feature phone of Rs2,000. They anyway form a very small part of our customer base. However, we see a shift towards online by customers purchasing smartphones worth Rs 10,000 and above," says a manager of Croma store in the city. In fact, during festive season last year, many offline players saw a major dip in their revenue.
Many offline players like Mobile Store, Croma and Vivek are not able to match the prices offered by online portals. "Most brands derive 95% of their business from offline players. However, if they allow online players to give heavy discounts, we are at a loss. This is unfair and something needs to be done," says Anwar Shirpurwala, executive director, Manufacturers' Association for Information Technology (MAIT).
Traditionally, offline players operate for profits whereas online players focus on sales. Hence, for many online players "price is the easiest way to attract customers". "If you see, none of the ecommerce players in the country is running on profitability. Ecommerce sites have always given discounts. However, it is only now that offline players are realising the threat," says K Vaitheeswaran, founder and COO, Indiaplaza.
In the past few months, companies such as Lenovo, Toshiba, Nikon and Canon have removed their online partners. Lenovo even deauthorised Flipkart, Snapdeal and Amazon and said that customers may not be eligible for warranty on these products. However, Flipkart replied by saying "we can assure our customers buying Lenovo products on Flipkart.com that they are genuine. Customers will continue to enjoy the warranty and services extended to all original Lenovo products as always".
Also, in India a brand value is often associated with its price. Hence a brand too low a price affects its credibility. "If a product is sold at a price that is way to less than what is available in the market, brands fear losing their image. A brand is meant for a particular segment of audience, and more often than not they would not like to be associated with the masses," says Rachna Nath, a retail leader at PwC.
The way forward Online firms have to devise ways to expand their business beyond just providing discounts. "There are other advantages of shopping online which retailers need to highlight. For instance, the assortment of products available online is far more than offline. A customer may not find all brands available at a particular store. But the same is not true for online players," says Paritosh Bindra, COO, Homeneedsonline.com.
Also, online purchasing is convenient as one does not have to stand in a queue or face the traffic. "I don't think people will stop purchasing online. May be sales will go up during the discount season, as it happens in offline stores. But ecommerce is here to stay," says Nath of PwC.
Credit:Suparna Goswami Bhattacharya (c) 2014 @ 2014 DILIGENT MEDIA CORPORATION LTD. ALL RIGHTS RESERVED
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